The Term HMO stands for Houses in Multiple Occupation , this essentially means residential accommodation with shared facilities such as kitchens , drying facilities etc.
They are important, as they provide an affordable option for student accommodation, or short term letting needs,
What is it? Why is it important ?
From a developers perspective, they provide possibilities to gain additional rental units from a building, where this might not have been possible with say self contained flats.
We have found at the networking events we attend, such as Essex PINS (Property Investors Network) owned by Simon Zutshi , or EPN (Essex Property Networking) , that developers are favouring the HMO route at the moment ,as there are sometimes grants available at Local Authority level, under the heading of “Regeneration” to assist to a degree.
They also like the fact that banks seem to take a commercial view on HMO’s more so than standard residential development, given that , we suspect they see it as lower risk , due to their repayments being “Built in” to the rental roll for the property.
In other words a model which with a robust business plan, is more befitting of a commercial loan as the risk is more easily definable in the banks eyes.
Given that banks have been stating that they have no “lending appetite” for residential development for a long time, this has become a niche, for small developers looking to build up a portfolio of rental income properties.
It can sometimes work well where there are large empty commercial properties in relatively good trading areas , which have been on the market a long time due to them being so large, that businesses cannot justify the business rates and cannot claim small business rate relief.
In these circumstances it can potentially be possible to retain the shop front, so that from a council zoning perspective, there is still an element of commercial still at the property (but more at a level whereby SME’s can utilise it and gain some small business rates relief), whist applying the HMO rationale to the upper floors making the premises mixed use.
This is good for the developer , as they can sign leases for the commercial part and gain short hold rental income on yearly contracts , for the residential units above.
There have been recent changes to the planning position for HMO’s with interim arrangements for the GPDO (Permitted development order) covering commercial conversion to HMO’s and the change from existing residential use for dwelling houses to HMO’s , which make HMO’s even more of an interesting proposition to developers.
If changing from an existing house to HMO status, it is normally allowed up to 6 persons sharing, thereafter formal planning applications are required. However as professionals we must always advise that it is prudent whether allowable under PD rights or not to apply for and gain a certificate of lawfulness from the council , ideally before converting or marketing the property.
Here is a link to some information on HMO’s on the governments planning portal website :
http://www.planningportal.gov.uk/general/news/stories/2010/september2010/9September2010/090910_1
Despite the planning position sometimes falling within PD , the building regulations must still be achieved and it is also essential in our view to consult with environmental health officers at an early stage in the design to prevent potential problems occurring , particularly with conversions.
How we can help, please give us a call
We have experience in architecturally designing HMO’s either new build or conversions from existing commercial premises or from houses into HMo’s.
We are familiar with the building regulations aspects and in particular Part E sound resistance and Part B fire resistance are very important aspects which we have experience of.
Our M&E partners are able to in liaison with us, provide comprehensive advice on fire precautions , extinguishers , signage etc.
We can provide the on-construction EPC’s required prior to letting.
If you wish to talk more with us about HMO’s ask for Mike Brebner himself on 01268 856154.
Licencing HMO’s and landlords responsibility link
The above link goes through the criteria for when an HMO has to be Licenced and the various landlords responsibilities with an HMO, Gas checks etc.
