According to a report from Paragon, which surveyed 138 HMO landlords, this trend was more pronounced amongst young professionals, with 45 per cent of owners citing strong demand from young professionals for high-end properties.
An HMO is a property with at least three people not from one household using shared facilities like a living room or kitchen.
The landlords said that tenants were expecting more in terms of property value, such as en-suite bathroom, larger rooms, high speed broadband and quality furnishings.
Around 56 per cent of landlords surveyed said demand for high-speed broadband had grown, and 39 per cent said tenants were seeking larger rooms.
Over half, 53 per cent, said tenants were looking for properties with en-suite bathrooms and 39 per cent reported tenants demanding higher quality furnishings.
More than a third of landlords, 35 per cent, said that tenants were asking for office facilities for home working.
Paragon Bank’s managing director of mortgages Richard Rowntree (pictured) said: “HMOs used to be dogged by a reputation for poor-quality housing, but that perception is shifting as landlords upgrade stock and meet the changing demand from tenants. Tenants will no longer accept poor quality; they want broadband, bathrooms and better-quality furnishings.
“We saw strong growth in demand from landlords to acquire HMOs during the pandemic. This may reflect the wider shortage in rental property with tenants opting for a room in a shared home because one or two-bedroom properties are in short supply. Tenants also like the flexibility and social nature of HMOs, particularly if they are renting with friends.”
HMO landlords likely to buy more property
The report found that 47 per cent of landlords with HMOs said the housing offered better rental yields, and 40 per cent said it offered more protection against rental voids.
Around 42 per cent of HMO landlords reported net yields of 10 per cent or more, whilst 64 per cent had yields of eight per cent or more.
However, two thirds of landlords spent more than 10 per cent of rental income on annual property maintenance.
Landlords with HMOs were also more likely to buy more than one property, with 43 per cent saying they planned to buy another HMO property in the next six months.
Only four per cent said they would sell their HMOs and leave the sector and eight per cent had plans to reduce their HMO holdings in the next 12 months.
The majority, 64 per cent, said higher energy bills were a concern. This is possibly because utility bills are typically included in the rent for HMO properties.
One in five landlords said they did not plan to pass on the cost of higher energy bills to tenants, but more than half did plan to increase rents to cover the increased cost of living. Around 19 per cent said they had already increased rents.