By Robert Jones from Property Investments UK
I’m sure anyone reading this knows something about A4Ds already but despite that and before we get into it, we need to cover the basics. An Article 4 Direction is an order made by a local authority to remove certain permitted development rights in a specific area. Simply put, this means planning permission that would not ordinarily be required for certain kinds of property development or change of use, becomes required.
This can happen in a number of scenarios and for different reasons. For instance, a lot of urban environments contain conservation areas, designated to protect the special architectural and historic interest of the place—in other words, the features that make it unique and distinctive. In these areas, Article 4 Directions will be used to place controls on what property owners can do to change the shape or outward appearance of their buildings.
In another example, some areas of the country such as in London enjoy permitted development rights that allow for the conversion of Class E buildings (commercial, retail and business) into Class C3 (residential) without the need for planning permission. However, local authorities will sometimes remove such rights using Article 4 Directions when they feel that such changes of building use might be inappropriate for certain areas, meaning planning permission will be needed after all.
(It should go without saying that planning law can be very complicated and you should always seek the advice of an expert before proceeding with any development project.)
It all makes sense, right? Of course councils need to be able to have a say in building works when there is a danger that such works could harm the historical aesthetics of an area or otherwise hurt or disadvantage the local community. It seems very reasonable and sensible that they have the necessary instruments and mechanisms to maintain a level of control over development in an area when it becomes required
There are, however, problems with the Article 4 Direction system: from its bluntness as a legal instrument, to the real reasons A4Ds are sometimes used, to how councils consult on and apply them in their various jurisdictions. And most controversially, they are used most frequently, to limit the number of HMOs that are allowed in a given area.
This use of A4Ds is more politically charged than when they’re deployed to protect historic or cultural character. While both examples represent a limit on what can be done with a building, a limit on HMOs also represents a limit on the types of people that are able to live in an area, with HMO tenants almost exclusively being young, possibly at university or college and certainly, living with limited means.
Article 4 Directions and HMOs: Practicalities
HMOs or Houses in Multiple Occupation don’t have a single definition but for the purposes of thinking about Article 4 Directions, they are usually defined as a house with 3-6 occupants, who are of at least 2 different households (which is to say, at least two ‘sets’ of people who would fall outside of what could reasonably thought of as a singular household, such as an extended family), who share facilities such as a kitchen or bathroom.
Under planning definitions, this is a C4 Class house or ‘small HMO’. For properties that house more than 7 people there is a different, higher classification or C-Class but for our purposes here, I’ll talk only about C4 Class homes.
So, let’s say you own a 4-bedroom house that has been occupied by a family but after they move on, you decide you want to rent it out to 4 separate tenants. This involves a change of use. The family home, under planning definitions, is a C3 house, the HMO is a C4. Now, under normal circumstances, this change would not require planning permission. However, if there is an HMO Article 4 Direction in place, planning permission will be required and can be refused.
More than this, after securing your planning permission for changing your C3 to a C4 and managing your property as a small HMO, should you ever rent the property back out to a single family again, the property will automatically revert back to a C3 classification. This will mean a return to step one and a new application, should you ever want to once-more double back to a mixed-household model.
Impact, Transparency and Politics
It is understandable that traditional homeowners, living in areas that are popular amongst young people and students, could become frustrated with a proliferation of HMOs and as such, equally understandable for a local authority to want to remain in control of planning permission for those same areas, to stop things getting out of hand.
However the process, by default and design, limits affordable housing options for young people and students, which, especially in larger cities, pushes these tenants towards sky rises and purpose-built student accommodation in the city centres. And this is not necessarily a bad thing. Increasingly, there is a strong preference among this demographic for the lifestyle such developments offer, over and above shared housing.
But it is more expensive and in a housing crisis and cost-of-living crisis one can (if you’re a more cynical type) only wonder at some of the motives behind intentionally limiting affordable housing stock and pushing less-monied tenants towards more costly options.
A less suspicious take, however, would be to just to put it all down to politics. Councils want to be able to look at housing stock, demographics and resident satisfaction in an area and be able to affect some positive change. However, to make change, they often look for the bluntest option at their disposal.
And councils are seldom good at their communication. When A4Ds are introduced into an area they are seldomly sufficiently consulted on, hardly explained; they seldom have any flexibility and are never designed to be responsive to changing market conditions.
My Take
As property investors, we have to work within and understand the systems we are presented with. Admittedly, the way councils use Article 4 Directions, in most cases, make a great deal of sense. Conservation areas, commercial to residential change of use and popular HMO areas all need controlling and planning is the area in which this can be done.
The system could however be of a lighter touch and more dynamic. Decisions about planning could involve the community much more than they do and could be more responsive to local housing needs. Temporary or time-limited Directions could be used to solve issues that are in the moment, without unnecessarily blocking permitted development rights for an area, far into the future. They could also, as they were intended, apply to smaller areas than they do.
The Councils could be more open about their decision making and more open to dialogue and challenges. We have a housing crisis right now that will be solved, only if we innovate. Planning regulations are at the heart of that puzzle.
Investing in HMOs
I want to finish on something more practical. The takeaway from this article should be, if you are looking at investing in an HMO or in a property that you want to convert into an HMO, you need to understand planning regs and what your local authority is going to require of you.
You also need to understand how the local property market works and at how tenant decisions are incentivised. If you buy a HMO to rent out to students and find that students prefer Purpose-Built Student Accommodation and have those options available, then your investment will underperform.
Thorough market research is key (for that I recommend property.xyz as a platform) and you need to keep abreast of legislation through websites like the one you are reading here (with thanks to Yuno). Further, if you’d like personalised help in finding the right property investment for you, then we can offer exactly that at Property Investments UK.
