Photo by WJF Developments
Investing in HMOs within Article 4 areas can feel very arduous, particularly if you’re new to this kind of investment. However, with the right strategy and due diligence, you can turn these challenges into incredibly rewarding investment opportunities.
There’s also a lot of misinformation around Article 4 directions… So, let’s talk about what these are, how they operate and impact HMO investment and ways you can even utilise it to your advantage. Let’s get stuck in!
What Is an Article 4 Direction?
Generally speaking, we’re allowed to create a small HMO with up to six bedrooms without having to apply for any planning permission. However, this can be removed through Article 4 directions, which is a piece of legislation that allows local planning authorities or the Secretary of State to withdraw certain permitted development rights in a specific area.
Permitted development rights allow you to perform certain types of work without needing to apply for planning permission. These rights are granted by the Town and Country Planning (General Permitted Development) Order 1985.
While people will often think about the permissions they need to undertake certain developments, planning permission also controls when we can and can’t change the use of a building.
Article 4 directions have been brought in for numerous locations across the country to remove the permitted development for certain things, such as the right to convert a dwelling (C3) into a small HMO (C4).
Why Are Article 4 Directions Put in Place?
Article 4 directions are sometimes used as a means of protecting the character of an area and providing the local planning authority with more control over the types of development that take place in the local area.
When an Article 4 direction is in place, the local planning authority will then consider applications and decide whether or not to grand permission on a case-by-case basis. Utilising Article 4 directions in relation to HMOs has been controversial. Some argue that this restricts housing supply and makes it more difficult for landlords to provide affordable housing.
However, others argue that these are necessary to prevent the oversaturation of HMOs in certain areas, which some believe lead to problems with noise and disturbance, parking issues, and increased pressure on local services and infrastructure.
In some areas, just because there is an Article 4 direction in place for HMOs, this doesn’t mean that you won’t be granted permission to turn a home into a HMO, but there are things you need to consider to increase your chance of success.
How Article 4 Areas Impact HMO Investment
There are a number of things to consider before investing in a property you’d like to convert into a HMO in an Article 4 area. For starters, you’ll need to factor in the associated costs of planning applications and how this will impact your timelines. This part of HMO investment can be extremely challenging to manage and navigate, especially as so much of the planning process is out of your control.
Make sure you fully understand the risks that come with this, because you can follow the rules and still get nowhere! This can impact whether a HMO could even be profitable in a location to begin with and how complex (and also expensive) it is to create and run a HMO there.
To help you manage the additional risk of this, put contingencies in place. If you’re considering purchasing a property without planning permission, think about what would happen if you don’t end up being able to secure this or don’t get the exact permissions that you wanted.
While there can be more complexities with investing in an Article 4 direction, there can also be large rewards. If you can get this right, there are a number of ways you can utilise Article 4 areas to financially benefit you and your growing HMO business. So, spend time thinking about how this legislation can impact your HMO investment.
Sometimes it can be worth facing the short-term sting in having to buy a HMO with the appropriate permission in an Article 4 area at a slightly higher price. In the long term, this could allow your property to be more profitable because you immediately have one with a limited supply locally. But this very much depends on your circumstances and the local area.
When it’s harder to increase the supply of HMOs, that means there is a limited supply. Paired with a growing demand, you can often then command higher room rates and reduce void periods.
However, Article 4 areas are not all equal. Every local authority can be different. Some are stricter than others, and they can individually focus on different things. In certain locations, you won’t be able to turn a house into a HMO, unless you can prove prior use.
And remember that Article 4 directions don’t only apply to HMOs, so you might also see certain areas with this in place for things like office conversions but not necessarily HMOs. Because of that, don’t write off a location just because you see an Article 4 direction is in place.
Utilising Article 4’s to Your Advantage
As gaining planning permission in an Article 4 area can still be possible in certain locations, there are ways you can utilise this to your advantage. But this will need careful planning and due diligence, so here are some of my top pieces of advice!
- Do your research.
One of the most common mistakes investors make is not fully understanding local planning policies before submitting an application or making decisions about purchasing a property to convert into a HMO.
Conduct your own due diligence and understand the requirements and landscape in your local area, including what rights are affected and what area it covers. There is no uniformity across the nation in how local authorities apply and rationalise Article 4 directions, so you need to be prepared for that.
Look at the local planning portal and see what other HMO schemes are being approved. Speak to other people operating in the area to help you try to understand what does and doesn’t work in that location. But make sure you still do your own research and due diligence.
Once you’ve identified an area that could be suitable, you can usually then find a list of requirements the local council wants HMOs to have. This will help you see how the council enforce Article 4 directions, which will mean you are less likely to make any big mistakes.
- Become an expert on planning & PD rights.
It’s helpful to understand Permitted Development Rights and how they work, along with how the planning application process works, what you will need to provide and the expected timelines.
PD rights are based on the property type, location and the specific change of use or development you’re proposing. Keep in mind that you can’t rely on PD Rights in conservation areas, national parks, Areas of Outstanding Natural Beauty, listed buildings and some Article 4 Direction zones (where councils restrict PD rights).
Before making investment decisions, always check whether the property falls under any of these restrictions and if you’ll need planning permission for any work you’re planning to do on the property.
- Construct a robust case.
Planning applications to change a dwelling into a HMO can be contentious. So, you need to be able to construct a really robust case for why the change of use should be allowed and demonstrate that it won’t detriment the local area.
If there is an Article 4 direction in place, it can at least sometimes help you establish that there is a HMO market there in the first place. But also check how many HMOs are currently in the area. Is it oversaturated? This is often why local planning authorities want Article 4 directions in place to begin with.
Consider getting pre-application advice as most councils offer this. Investors often skip this step in an effort to save time or fees. However, this can be a costly oversight. Pre-app discussions allow planners to highlight concerns, recommend changes and clarify expectations before a formal application is submitted.
This feedback can significantly improve the chances of approval and reduce delays. While pre-application advice naturally doesn’t guarantee approval, it provides valuable insight into how a proposal is expected to be received.
- Work with professionals and key stakeholders.
Estate agents often love giving opinions on Article 4 directions and will say you definitely can or can’t do something, but don’t take what they say for gospel. Instead take advice and work with people who specialise in the field like planning consultants and architects.
Experts in these fields can be in huge demand, so make sure you line them up early. This can help you identify potential obstacles before they become costly problems. Working with a good planning consultant and architects who has experience of similar projects to yours is highly recommended to navigate the challenges of the planning system.
Local planning officers, councillors and residents all play a role in the planning process. Ignoring concerns or failing to communicate clearly can lead to objections that slow down or could even fully derail an application. Engaging with key stakeholders early can help address concerns before they escalate.
- Have a back-up plan.
Buying a property without relevant planning permission can feel risky. Not having the right planning in place can create uncertainty, but buying a property without planning permission doesn’t always mean walking away from the deal.
With the right structure, a strong back-up option and the correct funding strategy, it can still be a viable and even profitable move. There are several possible approaches when a property doesn’t have the right planning permission for your plans, and while some are easier to navigate than others, there are solutions available.
With a change of use that requires planning, ensure the property could work without being granted that. If the property is in an Article 4 area, the back-up plan would need to be as a single let or holiday let, so that no planning is required. The key is ensuring that you’re genuinely comfortable with the alternative. If you’re not, you’ll want more certainty before proceeding with the purchase.
Navigate the Planning & Legislative Environment
Article 4 directions will likely tighten even further in the future, so this is something you need to be aware of before investing and understand the ins and outs of how it will impact you. So, make sure you research whether any changes could come into effect in the area in the near future, and you’ll need to continuously keep up with any changes nationally or locally.
If there could be any changes afoot, this should be factored into your investment plans and decision making on what location will work for you to invest in. Successful change of uses and HMO developments depend on careful preparation, thoughtful design and a clear understanding of local and national planning requirements and amenity standards.
By researching local and national policies, seeking pre-app advice when necessary, prioritising good design, preparing the necessary reports, engaging with key stakeholders early on and working with the right experts, HMO investors can dramatically improve their chances of success at planning.
In an increasingly complex planning and legislative environment, ensure you are fully prepared for any processes you’ll need to go through when investing in HMOs, whether you’re just getting started or scaling your portfolio.
For more helpful resources, guides and advice regarding HMO legislation, planning laws and your legal obligations, become a member of The HMO Roadmap! And if you’d like to ask veteran HMO investors any questions, join us over in our free Facebook Group The HMO Community.
About the Author:
Andy Graham is the founder and the lead trainer at The HMO Roadmap! He writes as a regular columnist in different magazines about a variety of HMO topics and is the host of The HMO Podcast! Follow Andy on Instagram!