Planning refusals for houses in multiple occupation (HMOs) have surged, more than doubling since 2021. This significant increase in refusals, driven by stricter council regulations, could have lasting implications for the mortgage market, particularly for landlords and investors seeking to expand their portfolios.
Why Are HMO Refusals Increasing?
Research indicates that the number of HMO applications refused has surged as councils implement more stringent regulations. The analysis covered 144 English councils and revealed that the total number of decided HMO applications increased by 87%, from 1,848 in 2021 to 3,454 in 2025. However, the approval rate has declined from around 68% to just 63% in early 2026, highlighting the tightening of the approval process.
What Are Article 4 Directions?
Many councils are now employing Article 4 directions, which remove permitted development rights for converting family homes into small HMOs. This means landlords must seek planning permission, which can be a lengthy and uncertain process. While there is no central register of these directions, estimates suggest that between 75 and 80 local authorities in England have adopted them, further complicating the market for potential landlords.
What This Means for the Mortgage Market
The rise in planning refusals and the introduction of Article 4 directions may significantly impact landlords and investors in the HMO sector. As the supply of legally approved HMOs diminishes, there is a risk that tenants may turn to informal or unregulated accommodation options. This shift could lead to a decline in the quality and safety of housing available to renters, while also limiting the options for landlords looking to provide well-managed shared housing. Investors should monitor these changes closely as they may affect current mortgage rates and investment strategies.
Frequently asked questions
How can landlords navigate the new HMO regulations?
Landlords should stay informed about local council regulations and consider seeking professional advice when applying for HMO planning permissions to improve their chances of approval.
What are the implications for the mortgage market?
The tightening of HMO approvals may lead to a decrease in investment opportunities for landlords, potentially impacting mortgage demand and rates in the HMO sector.