HMOs: A resilient response to a challenging operating environment

In a market that has become increasingly complex and demanding, with regulation tightening and margins under pressure, one property type continues to stand out for those who still see buy‑to‑let as a sound long‑term investment: HMOs. 

While headlines frequently focus on landlords leaving the sector, the picture on the ground is more nuanced.  

Our customer research suggests that any contraction is being driven largely by smaller, less established investors, while experienced landlords are adapting their strategies rather than stepping away, with HMOs continuing to play an important role in that adjustment. 

A survey we carried out reveals that the idea of a widespread landlord exodus does not reflect what HMO landlords themselves are telling us.  

Almost three‑quarters of respondents have been letting property for more than ten years, with nearly a third active in the sector for over two decades. Many also operate sizeable portfolios, underlining that HMOs are typically owned by career landlords rather than casual participants.  

This depth of experience brings a degree of resilience. Navigating licensing regimes, evolving regulation and rising operating costs is rarely straightforward, but landlords who have weathered past regulatory and fiscal changes benefit from scale and access to capital are generally better placed to absorb further evolution of the market and make considered decisions about where to deploy investment. 

Our data also shows that HMOs are often not a starting point, but a deliberate step taken later in a landlord’s investing journey. More than half of respondents told us they began with other property types before moving into HMOs, while fewer than four in ten started out directly with shared accommodation.  

That reflects the reality that this is rarely an entry‑level strategy.  

HMOs typically require higher upfront investment, whether through the purchase of larger properties or the cost of converting and configuring homes to meet planning and licensing requirements, making access to capital an important consideration. 

Management considerations are another important factor. Our research reinforces that HMOs bring additional layers of responsibility, from local authority engagement and fire safety through to energy standards and compliance with licensing conditions.  

Even so, landlords continue to commit time and resources to this part of the market, suggesting that the balance between effort and return remains attractive for those with the right experience and infrastructure in place. 

More than 80% of respondents agree that HMOs deliver better rental yields than other residential letting properties, and a similar proportion believe they generate stronger overall returns.  

There is also broad agreement that multiple income streams within a single property can soften the financial impact of voids, with over 60% saying HMOs reduce the financial impact when rooms are empty.  

This is reflected in tenancy patterns, with most landlords reporting typical stays of at least six months and many extending well beyond a year. While tenant turnover is an inherent feature of shared accommodation, it is not necessarily seen as a structural weakness by those operating at scale. 

Demand dynamics underpin this confidence. Our landlords tell us that their HMOs serve a broad mix of tenants, led by young single renters and students, each cited by around four in ten landlords, alongside a similar proportion letting to professional tenants.  

In London and other urban centres, where affordability pressures remain acute and access to home ownership continues to be constrained, shared accommodation remains a practical and often necessary option. Against the backdrop of an ongoing cost‑of‑living challenge, HMOs are frequently among the most accessible forms of well‑located rental housing. 

For mortgage brokers, these trends point to sustained opportunity rather than retrenchment. Our data indicates that nearly two‑thirds of HMO landlords have made improvements to their properties in the last six months alone, and more than half say they are extremely likely to invest further over the next year. Around three in ten expect to spend more than £10,000 on improvements, underlining the relevance of further advances and structured funding solutions rather than acquisition finance alone. 

Brokers are well placed to add value by helping landlord clients understand both the opportunities and the trade‑offs associated with HMOs. That means informed conversations around capital requirements, cashflow resilience, compliance risk and long‑term portfolio planning, rather than focusing solely on headline returns.  

It also highlights the importance of working with lenders that combine specialist underwriting expertise with technology designed to support detailed assessment, enabling experienced teams to make balanced decisions on a case‑by‑case basis. 

HMOs are not a shortcut and they are not suitable for every investor. What our research does show is a segment of the buy‑to‑let market that remains active, professional and forward‑looking.  

For experienced landlords with sufficient capital and a long‑term perspective, HMOs continue to offer a resilient response to a challenging operating environment, and one that brokers can support effectively with the right advice and funding structures in place. 

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