Total HMOs falls by over 12,000 in a year

According to figures from Sirius Property Finance, which uses UK government local authority housing statistics, the number of HMOs has decreased by over 12,000 year on year, which it partially attributes to changes in regulation.

Regional differences

The East Midlands HMO stock went down by over a quarter to 21,752 properties, followed by the North East at 15.8 per cent decreasing to 17,378 and the South East at 6.7 per cent, falling to 69,102.

West Midlands HMOs increased by 16.9 per cent to 44,366 properties, the largest growth of any region. Yorkshire and the Humber HMOs grew by 11.2 per cent to 5,511 properties.

South West and East of England both increased by just under one per cent, and all other regions reported a decline.

London had the highest concentration of HMOs as a proportion of housing stock at four per cent, followed by Yorkshire and the Humber at 2.2 per cent and the South West at 1.9 per cent.

HMOs account for two per cent of UK housing stock.

In 2018, the government extended mandatory licensing to HMOs in order to cover the majority of properties with five or more people from two or separate households.

Prior to that, change-only properties with three or more storeys with five or more people from two or more households needed a HMO licence.

There was also further tightening by local bodies like county and city councils. Brighton, Sefton and Brent are some of the councils who have recently implemented it.

Sirius Property Finance said that regulations mean that HMO landlords occupy a “more expensive and more complicated corner” of the rental market, which could lead some to exit the market rather than deal with extra cost.

Heavy-handed approach by government

Sirius Property Finance’s head of corporate partnerships Kimberley Gates said: “Any legislative change designed to improve tenant welfare is a positive one on the face of it, but much like the regular buy-to-let sector, a perhaps overly heavy-handed approach by the government has led to a decline in the number of HMOs available across the nation.

“The implications of this decline to tenants are inevitably a higher cost when renting, due to the growing imbalance between HMO supply and demand.”

She added: “However, as the HMO sector continues to find its feet in the wake of these legislative changes, it presents a great opportunity for investors entering the space who can hit the ground running and capitalise on high tenant demand levels. Providing they have their house in order in terms of licensing and living standards, of course.”