In the current landscape, increasing portfolio yields is an important focus for many landlords. There are a number of options to consider, including investing in a range of property types in order to diversify your portfolio. Houses of Multiple Occupation (HMOs) are generally viewed as an attractive alternative to standard buy to lets and so it’s not uncommon to find landlords looking to convert properties from single family buy to lets into a house of multiple occupancy (HMO) to get the most out of their investment.
When considering such a change, landlords must take heed of an important piece of legislation introduced in 2015 called The Town and Country Planning (General Permitted Development) (England) Order 2015. This legislation is designed to restrict the scope of permitted development rights and control works that could threaten the character of an area of acknowledged importance, such as a conservation area.
For many properties already owned as buy to let properties, the permitted development rights would allow a landlord to change the class of property from C3 (which covers single homes/households) to C4 (which classifies a property as an HMO). However, Article 4 restricts these rights meaning that if a property is in an Article 4 area then approval would be needed from the local council for such a change to be made.
Birmingham, one of the largest cities in the UK, introduced a city-wide Article 4 Direction relating to HMOs which came into force on 8th June 2020. The Direction means that throughout the city a planning application must be submitted for proposals to convert family houses (C3 use class) to small Houses in Multiple Occupation (HMOs) accommodating between three and six people (C4 use class). London and Manchester have similar restrictions.
So, if you are thinking of purchasing a buy to let property and converting it into an HMO, it is absolutely crucial that you do your research and carry out a thorough Article 4 assessment of the area. Nearly all local authority websites include an ‘Article 4 map’ where you can see which streets or boroughs fall under Article 4 restrictions.
Diversifying property portfolios can bring many benefits. However, Article 4 restrictions are another reason why carrying out thorough due diligence on both the property and the local area is essential and could make all the difference to future profit margins.
The Town and Country Planning (General Permitted Development) (England) Order 2015: https://www.legislation.gov.uk/uksi/2015/596/contents/made
Historic England guidance on the General Permitted Development Order: https://historicengland.org.uk/advice/hpg/historic-environment/article4directions/
Birmingham City Council Article 4 Direction relating to Houses in Multiple Occupation (HMOs): https://www.birmingham.gov.uk/info/20054/local_plan_documents/1933/city-wide_article_4_direction_relating_to_houses_in_multiple_occupation_hmos