HMO restrictions are hitting local rent markets, government admits

New planning restrictions on Houses in Multiple Occupation are having an adverse effect on local rental markets, the Government has admitted.

Under the coalition government, local councils can use Article 4 Directions to control HMOs.

It means that they require planning permission, which is not necessarily granted, whenever a landlord wants to change a property from a single-household unit into a small HMO – for example, when a rental property that has been occupied by a family is let to three or four sharers instead.

Now a report commissioned by the Department of Work and Pensions has confirmed that the introduction of Article 4 Directions has obstructed the provision of affordable housing in the private rental sector.

The DWP report specifically monitors the impact of changes to Local Housing Allowance, which is paid to tenants on housing benefit who live in the private sector. Caps on LHA mean that a number of benefit tenants need cheaper accommodation, while those under 35 now only get benefit to entitle them to live in shared accommodation, not a place of their own.

The report states that landlords are reluctant to develop their HMO portfolios due to the impact of Article 4 planning restrictions in some areas.

Richard Lambert, chief executive officer of the National Landlords Association, said he was not surprised by the finding.

He said: “We have seen many local authorities, including Hull, Brighton and Manchester, consult on and implement Article 4 Directions to restrict the proportion of HMOs in an area.

“Their justification is that controlling the number of HMOs will help to tackle anti-social behaviour, noise nuisance, untidy neighbourhoods and rogue landlords. 

“However, the NLA firmly believes that, far from resolving these social issues, it will merely displace them.

“The NLA has consistently raised concerns that there is a growing conflict between planning and benefits policies. Using Article 4 Directions to restrict the provision of shared housing will limit the supply of affordable accommodation for low income households and LHA tenants at a time when welfare policy is driving them towards it.  This report shows our concerns are fully justified.

“Local authorities must consider the practical implications of welfare reform and consider the needs of the whole community rather than accepting the views of a vocal minority. 

“While the true consequences of the welfare reforms are still emerging, now is not the time to restrict affordable shared housing.”