HMOs remain an attractive investment vehicle for many developers and, in some parts of the UK, the strength of rental values and the local market for student- or professional-lets compounds this attraction and outperforms build-to-sell strategies or self-contained flats.

In looking for such opportunities, it is important to be mindful of the planning issues and opportunities often engaged. Therefore, this article offers a reminder of these points from our experience.

HMOs: Big or small and planning risk
HMOs (houses or flats occupied by more than 3 unrelated individuals sharing amenities) are not often popular with councils, especially ‘large HMOs’ (i.e. 7 or more people sharing, or known as ‘Sui Generis’ use). Any change of use to large HMOs (including from an HMO of 6 or fewer tenants, known as a small HMO or ‘Class C4 Use’) requires planning permission, as does a change to Class C4 use in an Article 4 Area.

Despite the attraction in investment terms to many developers, especially once the property is set-up, properly managed and cash-flowing, the planning risks are often casually-underplayed by some, in particular some property education courses, that give the impression of such assets as ‘easy money’. This often overlooks the policy approach and local stigma in terms of local environment and conflicts with the character of a local area that have arisen from poorly-run HMOs and led to councils forming policies to address these concerns.

Councils are concerned about increased traffic and parking, ‘noisy neighbours’ and more comings and goings, and refuse and litter. Internal space standards can be poor as well. In addition, in some towns, in certain parts, councillors prefer longer term residents and families, instead of students and single professionals, particularly if they might be within a certain demographic perceived as more likely to vote for a councillor’s political party.