Which areas in England do not have article 4 HMO Restrictions?

Introduction

HMOs have become an essential part of the UK housing supply. We desperately need more homes and more energy efficient homes, but even if they were built tomorrow can the average Joe in the UK afford to buy or rent their own place? The fact is they can’t for a variety of reasons, and with the impact of inflation and currency debasement exacerbated by the mis management of our currency in Covid then the percentage of the population that require economical housing is set to increase.

Just look at the US by way of an example – the number of people in mortgage arrears has just hit a 20 year high and climbing. The average citizens can not keep pace with the cost of living if real wages do not keep up – we saw this after 2008 and we are seeing it again post Covid. Ultimately it comes down to a lack of productivity, every country on the planet is producing less per capita. Time for AI, Universal Basic Income and Quantitative Easing? That’s another blog!

Well, the short and curlies is that HMOs are going nowhere and could be on the verge of a significant boom nationally. But many major cities in the UK are not blanket covered with article 4 restrictions which removes permitted development rights to convert C3 residential houses to C4 HMOs (up to 6 bedrooms or persons).

Article 4 has been around for a long time and has been active in some cities longer than others. Coventry introduced theirs in Sept 2023, Derby is set to introduce theirs in May 2025, whilst other cities like Manchester have had active article 4 restrictions for a very long time.

Article 4 and Planning

Anything above 7 bedrooms and more requires a planning application to obtain Sui Generis planning status for the HMO. This is a great for commercial valuations so it is worth the time and money to obtain it, let alone for legal compliance.

Article 4 restrictions are imposed by local authorities because they want to limit the number of HMOs in an area because of saturation, but if there is a genuine need for a new HMO, it fits with the local plan produced by the local authority, and does not breach thresholds that councils have for HMO rooms within a certain area, it is possible to obtain planning permission even in an article 4 area. This is where a good planning consultant earns their bacon and proves their salt. Salty bacon, yum…

Identifying Areas for HMO investments

The main investor strategy is “Strategy-Area-Property”. So this may be HMOs in Leicester in a 2 storey 4 bed house, or HMOs in Scarborough in 4 storey 6 bed houses.

But floor plates for HMO differ across the UK. For example, whilst the underlying economic make up for HMOs in Carlisle is perfect, the layout of the general housing stock makes it difficult to find suitable houses that don’t break the bank for conversions costs.

The three main reasons to invest in HMOs are:

1. Location – why invest in that city or town? What is the underlying drivers for higher population growth and why that will impact HMO demand long term, and in turn the equity potential of the house
2. Yield – what is the gross and net returns on the cost (purchase and refurb) for this HMO, or on the purchase price of the HMO?
3. Sustainability of income – is there demand currently, and long term, for professionals, students and/or social housing?

Areas in England without Article 4

Developing HMOs in areas without article 4 could be a great opportunity now to get in and develop before the councils introduce it.

We’ve compiled an internal list of these areas which we are today sharing publicly. So here it is, in order of population size:

Conclusion

Have we got all the areas in our list? If not, what have we missed?

These areas present the best opportunity for us to develop HMOs in not article 4 restricted areas.