The Article 4 Direction is a ruling passed by government which effectively requires special planning permission to be granted on the conversion of a single family home into a rental property of three or more unrelated tenants.
In cities like Nottingham, Leicester and Newcastle family homes were rapidly being converted to student property, because they were generating higher rental returns than renting to families.
These City Councils have adopted the Article 4 Direction in order to protect the number of single family homes by requiring that planning permission is obtained before converting a single family home into a rental property of three or more unrelated tenants. The impact could see a drop in supply of houses rented as student property and while demand continues to grow it will lead to increases in rental income and low vacancy rates.
The Residential Landlord Association (RLA) Members have vehemently opposed the implementation of the Article 4 Direction in Nottingham, Leeds and Leicester.
RLA members stance is that landlords have been making intensive use of the existing stock in place where it might otherwise be under-utilised and poorly maintained and that councils have enough legislative power to protect housing stock.
Whatever landlords may feel, this ruling is being adopted in a number of cities across the country. Some investors are seeing it as an opportunity to take advantage of the situation. In cities, like Leicester, there are over 38000 students and two top ranked Universities. The limitation of supply of houses means that landlords are opening their eyes to the potential of city centre studio apartments.
One developer is building a development of luxury studios located only 160 metres from the university campus. The investment summary is:
• 5% Interest on deposit – paid monthly
• 8% NET rental income
• Assured for 5 years
• Exclusive New Development
• Fully-furnished apartments
• Hands-off investment managed
• Highly experienced student management company
• In the heart of Leicester City Centre
• Leicester has 38,000 students
• Located 160m from De Montfort University Campus
• Priced from £65000
• Self-contained studios
• University of Leicester only 800m
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