Valuation of Houses in Multiple Occupation (HMO)
Our experienced team undertake valuations of Houses in Multiple Occupation (HMO) for secured and non-secured lending purposes, including providing advice when development is anticipated.
HMO Valuations for the South West
HMOs are a specialist property type and valuers undertaking valuations of these assets should have a detailed knowledge of residential rental and capital values and be fully conversant with the buy-to-let market in the locality of the property, in addition to having a thorough understanding of the regulations affecting the HMO sector.
The private rented sector is the UK’s second largest housing tenure with the buy-to-let market playing a crucial role in its development. Since the mid 1990s the market has evolved, as has the popularity of HMOs due to changing demographics, rising housing costs and the increasing demand for flexible living arrangements.
The concept of HMOs dates to the late 19th century when urbanisation and industrialisation led to an influx of workers into cities. To address the growing demand for affordable accommodation, large Victorian houses were converted and divided into bedsits or small self-contained flats – multiple units accommodating several households under one roof and providing cost-effective housing solutions for the working class.
Following concerns about overcrowding, poor living conditions and inadequate safety standards, the first legislation specifically addressing HMOs was passed in 1961. The Housing Act 2004 introduced mandatory licencing for larger HMOs, aimed at improving the quality of accommodation, tenant’s rights and HMO management. Local authorities are frequently extending their level of control as permitted by legislation and taking enforcement action where appropriate.
Valuers undertaking valuations of HMOs not only need to have a detailed understanding of the market, but also the legislation and regulation around these types of assets. With offices in Truro, Plymouth, Exeter and Bristol, our team have excellent local and regional knowledge of residential rental and capital values and are fully conversant with the buy-to-let market. Our RICS Chartered Surveyors and Registered Valuers have a thorough understanding of the law and regulations affecting the HMO sector of the market and understand the Local Authority’s policy requirements for their local area.
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Valuation FAQs
What is a House in Multiple Occupation?
A property is a House in Multiple Occupation (HMO) if at least three tenants, or five to be classified as a large HMO, forming one or more households live there, and those tenants share either a toilet, bathroom or kitchen. The term ‘household’ applies to a family, a cohabiting couple or a separate individual.
What Use Class is an HMO?
Use Class C4 relates to a small HMO for use by up to six occupants. HMOs with seven or more occupants are considered large HMOs and are classified as Sui Generis, subject to additional regulations including requirements for good acoustics and a robust fire compliance strategy.
What is an Article 4 Direction?
An Article 4 Direction is a special planning regulation that gives a Local Planning Authority (LPA) extra planning control in a chosen area. The LPA may remove an areas’ permitted development rights by issuing an ‘Article 4’ Direction.
Do I Need Planning Permission to Change the Use of my House (C3) to an HMO?
The change of use of a property from Use Class C3 to C4 is accepted under permitted development. In areas where an Article 4 direction is in place, a formal planning application is required. The change of use from C3 to Sui Generis also requires a formal planning application.
How do you Value an HMO?
HMOs can be particularly complex to value. Large HMOs with Sui Generis use class are typically valued on an investment basis. However, where transactional evidence is available, it may also be possible to compare the outcome of the investment calculation with the value of the property as a large house with vacant possession. For properties in mixed investment/owner-occupied areas, any valuation would be expected to fit in with the tone of values in the area, subject to reasonable and appropriate adjustments for adaptations and extra facilities, having regard to demand at the date of valuation. Where a property is in an area subject to an article 4 direction, scarcity value may apply if the HMO has established use/consent, is licenced as necessary and fully compliant.
What Purposes do you Value HMOs for?
Vickery Holman value HMOs for a variety of purposes including secured lending, acquisition and disposal, tax and portfolio management. We also provide advice where conversion works are anticipated.
