Article 4 legislation likely to be introduced in Canterbury
21 Oct 2015
Delegated legislation will likely see Article 4 directions (A4D) introduced in Canterbury as early as 25 February 2016.
Most areas of Canterbury will be caught by the new rules which would mean that any application to rent a House of Multiple Occupancy (HMO) is likely to be declined by Canterbury City Council if HMOs exceed 10% concentrations within 100m of other HMOs .
A small HMO is any property rented to 3 or more unrelated people sharing some amenities.
A large HMO is any property rented to 5 or more unrelated people sharing some amenities s over 3 or more storeys.
HMO properties with more than 6 people (Sui Generous) require planning permission regardless of the number of storeys.
I originally successfully campaigned against A4D for the following reasons:
- Students choice would be restricted. In reality this fear is now unfounded – following the construction of on-campus purpose built student blocks, local landlord student homes have suffered numerous void student rooms and even whole houses – one month after the start of the academic year 2015-16.
- Not all local long term residents are pillars of the community – some areas now enjoy improved locations by displacement of alleged local problem-families and now occupied by responsible students, albeit whose lifestyle is different – but not necessarily problematic.
- Landlords evincing pre-existing HMO status will be permitted to continue renting as an HMO. Landlords could lose their long held HMO status – even for existing exempt properties, following a change of use from class C3 to class C4. In order to pay their mortgages, landlords may have to accept non-HMO tenants, resulting in an automatic change of use. Ironically if the property is left void there is no change of use. Once changed landlords cannot revert back to HMO status without permission. This is perhaps the most devastating loss for compliant landlords who, in order to comply with legislation, conducted costly modifications and provided additional amenities: showers, toilets, sinks, fire safety doors, fire egress door furniture, electrical rewiring, structural alterations, detectors for: smoke, heat, carbon monoxide and gas costing tens of thousands of pounds. Following change of use such costs are unlikely to be reflected favourably in the sale price without HMO status. It is unjust to demand such best practice and then to penalize compliant landlords for so doing because the property endured a void leading to acceptance of non HMO tenants.
- Lost HMO status requires planning permission to restore HMO status , And this is unlikely to be granted if communities could be restored by revoking HMO stauts. However, in areas with high concentrations of students, e.g. St Stephens in Canterbury, seen as a ‘lost cause’, if there is already over 80% HMO status, then HMO permission would probably be granted. To decline, might paradoxically penalize local home owners “protected” by the legislation, if unable to sell their homes, to other than Buy-To-Let investors.
- House prices will be affected. HMO values will rise and non HMO values will fall. The differential could be 30%. Therefore, losing HMO status has far reaching consequences. Landlords could suffer devastating losses of rent revenue followed by loss of Capital value. These are really big numbers likely to lead to landlord properties being sold below market value. When such properties are sold landlords will then be obliged to pay capital gains tax. Forced to sell more than one property in any financial year would result in reduced capital allowances, amounting to additional losses.
- Extending an existing HMO could require planning permission, and will not likely be granted e.g. a garage extensions will no longer be within permitted development.
- There is a long standing precedent that any legislation is certain and not retrospective. The effect of the change of use of A4Ds contravenes this convention.
- Additional Licensing generally follows A4D. This requires massive fees producing little benefit resulting in higher rents.
- Couple these measures with George Osborne’s Budget bombshell, reducing Mortgage interest relief (MIR) by half, and the property industry looks very depressing.
- Meanwhile the government demands higher housing standards from landlords who could actually be taxed on losses. So more landlords are unlikely to afford to comply.
- One could hardly contrive a more effective means to decimate the housing market. Prior to 1987 regulation strangled the property market, resulting in a housing crisis until reformed. Future generations will look back incredulously at today’s political madness and injustice.
The following are reasons favouring A4D:
- To summarize the issues, I coined the acronym CRING:
- Communities lost – local residents want to protect what remains of their depleting local communities.
- Rubbish issues – locals suffer unsightly rubbish attracting rodents when students neglect to observe bin day collection days and associated rules
- Insomnia – residents are unable to sleep when disturbed by noise
- Nuisance – resident vehicles and gardens are damaged by HMO tenants
- Gardens unkempt – long grass and overgrown trees lower the tone of any neighbourhood.
- A4Ds will not stop, but it will stem, erosion of communities and the increase of problems.
- Many landlords originally opposed to A4D, ironically, now welcome the restrictions as a by-product, preventing super saturation of the student market.
- Many landlords value local community residents as they alert agents and landlords to local issues: damage, break-ins, rubbish, noise, etc. particularly during “ghostification” vacations.
Canterbury landlords, students and residents – what are your thoughts on of Article 4 How will you be affected?
Let us know in the comments below.