Tough regulations to blame for drop in HMO numbers ‒ Octane Capital

Analysis of the government’s local housing statistics by Octane Capital found that on an annual basis the number of HMOs in England dropped three per cent year-on-year in 2020/21 to 497,884. The situation was more pronounced in the capital, where the number of HMOs declined by 13 per cent, the largest drop in any region.

The report noted that 11 boroughs in London had reported decreases, with the largest falls recorded in Ealing at 59 per cent and Lambeth with a 58 per cent decline.

Octane Capital suggested that this drop in HMOs across the county may be down to HMO rule changes from 2018 taking hold. This was when rules requiring a licence for all HMOs occupied by five or more people were introduced. Additionally, in order to obtain a licence, all rooms within the HMO would have to meet a minimum size criteria, with limits on how many people over the age of 10 who could live there.

Jonathan Samuels (pictured), chief executive of Octane Capital, said that the HMO licensing rules rightly looked to boost the standard of housing, but this had resulted in a decline in the number of operational HMOs across the market, particularly in London.

He continued: “We’ve continued to fund a high number of quality HMO deals throughout the pandemic and this sustained level of interest from professional investors is yet to show any signs of decline. This includes a large number of refurbishment transactions whereby investors are looking to drastically improve the quality of existing HMOs, so while volume has certainly fallen, we don’t believe this will be a long term trend and should benefit the nation’s tenants in the long run.”