One of the key pledges of the new Labour government in July 2024 was to build 1.5 million new homes in England over the next five years. Much of the public focus on this is newly built property developments but there is also an expanding market for transforming large urban properties into Houses of Multiple Occupation (HMOs). HMOs have already become popular in London and other urban areas as accommodation for students, young professionals, and small families. They are a lucrative investment opportunity for property developers refitting HMOs, both for sale and for the rental market.
There are strict rules to follow in England and Wales when converting a property into an HMO, particularly if the area is subject to an Article 4 Direction. In general, when a single dwelling house (Class C3) is converted into a larger HMO, planning permission is required, but some conversions are covered under permitted development.
However, Article 4 Directions are regulatory measures that allow local councils or planning authorities to remove or restrict permitted development rights, so that planning permission is required for certain changes that would normally be allowed without it.
The purpose of Article 4 Directions is to control the number and quality of HMOs in specific areas, e.g. in built-up areas where large townhouses have been converted into high occupancy HMOs for students.
All houses of multiple occupations considered as large, in England, must be licensed by the local council, under the Housing Act 2004. A property would fall into this category if it is rented to five or more people from different households, some or all the tenants are sharing facilities, and at least one of the tenants pays rent. For this license to be granted, the landlord needs to ensure that the property meets the required fire safety, health & sanitation, sound insulation, space requirements, and electrical safety standards under the HMO Building Regulations. Local authorities can inspect properties to verify compliance with Building Regulations and can issue fines for non-compliance.
The rules that apply to Article 4 Direction areas vary between councils, and different councils may have specific requirements and designated areas where the rules apply. Salford City Council, in Manchester, for example, recently extended the amount of wards to which the Article 4 Directions apply.
Property developers should check local regulations carefully to verify if the property in question is covered by Article 4, and contact the local council planning department if unsure. Article 4 directions are typically listed on the local authority’s website.
Converting a property into an HMO involves more than simply changing the interior layout of the building. Extensions and changes to the roof to create more space are commonplace, and many buildings also require adaptations to meet HMO Building Regulations. It is also important to understand the customer that your HMO is marketed to, as this will influence the conversion process. For example, professional tenants and buyers usually expect higher quality standards and attention to detail from a property than a temporary student tenant.