Norwich’s Student Market: PBSA, HMOs & Article 4

The introduction of Article 4 prevents change of use, C3 / C4, SPD Norwich, though what is the effect on existing HMO’s and student demand? Is this Norwich council’s objective attempt to reduce student numbers and encourage communities to rebuild? How could student numbers be affected? Norwich has seen UCAS application grow though what is the affect of recent planning applications and encouragement of PBSA? Is now a good time to invest in Norwich?

Shared Houses, Houses of Multiple Occupancy (HMO), provide affordable houses across the city; with students predominantly living in the Golden Triangle and Earlham. As it stands houses can be can be used for any residential purpose, which is either C3 (Dwelling) or C4 (shared max 6 people) class usage; Norwich City Council are set to change this, introducing Article 4 effectively stops people sharing any house that isn’t already being shared – an HMO.

So is Article 4 a good idea for Norwich?

Residents and Councillors have backed Article 4, believing it’ll help stop the blight of students and improve the communities’ situation; only allowing new HMOs where there is less than 30% in the area. Financially this puts landlords in good stead; as University student numbers and associated demand increase with a limited student house stock it’s likely both increases in value and monthly rent would be seen.

Over the last 5 – 10 years, Unthank Road has regenerated with pubs offerings local beer, restaurants and cafés offering a delightful selection, with students becoming a part of the community. And taking a brief look at the numbers supports Norwich’s Students – each of the 12,000 UEA and NUA students spending around £6,000pa in Norwich that’s a contribution of £72million to the local economy.  

Whilst residents and councillors may argue students have been detrimental to the Golden Triangle do the financial benefits of what appears to be poor HMO management outweigh the pros’, or perhaps the council has a couple other cards up their sleeves that other student towns and cities have adopted?

Until late Norwich has attracted little external investment in to Purpose Build Student Accommodation (PBSA) – with both UEA and NUA focusing on on-campus developments. Typically PBSA is offered to first year and international students; then moving in to the HMO’s for subsequent years; though this appears to be changing, as per many other cities, with planning permission being granted on brownfield such as Mecca Bingo, next to the Bus Station and previous Fat Face site.

Is this a move by Norwich’s councillors to encourage students out of the Golden Triangle and in to the city centre? It’s certainly tempting for students as new PBSA are typically of high standard, offering large communal areas, double ensuite bedrooms, occasionally gym’s and cinemas. Whilst for the council a long term plan such as this would move associated noise pollution away from residential areas and control reported waste issues.

In prior discussion Norwich’s Councillors have suggested introducing additional HMO licencing – allowing all shared houses to be overseen and standards managed. Typically additional licencing has been introduced alongside Article 4 though this could be a good option without; as it would ensure  all HMO’s in the predominant wards are well maintained, tenants are both looked after and kept in line. This option would keep the student house market competitive for tenants whilst standards for both them and surrounding residents improve. For landlords and students alike the likelihood of this being implemented alone is slim as other major student areas (Southampton, Lincoln, Notting, etc) have enforced article 4 and additional HMO licencing at the same time.

What does this mean for you?

Students / Shared Houses

• Article 4 alone is likely to see shared house price rents increase, as stock is limited.
• Additional HMO licencing without Article 4, rents stay around the same whilst standards improve.
• Article 4 & HMO licencing, rent increase, standards increase.
• PBSA Development, stunning flats would be erected in great locations although typically at a premium other cities average around £140pw whilst Norwich’s average is £87pw.

Landlords

• Article 4 introduction, invest and buy before introduction as the house values will rise and so will associated rents; tenants typically enjoy having a house, garden, living room and the shared experience.
• Additional HMO licencing will require a licence, fire doors throughout high risk / escape routes, interlinked smoke detectors, etc. A relatively expensive one off investment, followed by 5 yearly HMO licence renewals.
• PBSA Development is usually detrimental to low quality properties, as students looking for emergency accommodation at the start of a new academic year can easily be found. Low quality properties will need to be renovated or returned to the residential sector to remain competitive.

PBSA Developers and Investors

• Norwich Councillors and planning policy appears to offer open welcoming arms to brownfield sites throughout the city as they would like to improve overall standards and regenerate parts of the city.
• Student numbers, whilst comparatively low to other cities, appear to have remained relatively steady though recent agreements between developers and NUA would suggest these are likely to increase thus more rooms are needed.

To round up:-

Norwich Council have numerous options available at the moment, though based on current planning and previous consultations – it appears most likely Article 4 and Additional licensing will be introduced whilst PBSA development will be encouraged.

Update:

Norwich Council decided against introducing an Article 4 direction to limit the number of HMOs and student properties citing the income benefit of those residents moving to and living in Norwich.

ZebraInvest see this as a positive move, as with Norwich being a beautiful city those people move to the area tend to stay – bringing skills and knowledge required by employers for the long term.

Who are ZebraInvest, and why the interest:

As a student property investor from Norwich with a track record of purchasing and developing HMOs, and a keen interest in the PBSA sector, numerous investors have approached myself to analyse the market and what’s likely to be instore. Needless to say with Norwich’s large and varied property market ZebraInvest are keen to see how the future market shapes. Please do contact myself, Tristan Gordon, if you have any questions or are seeking advice.