Demand for high-end HMOs growing

Tenants also expect better amenities, a survey of HMO landlords finds

Demand for high-end HMOs growing

Around one in every two landlords said there is growing demand for high-end houses with multiple occupation (HMOs), with more tenants demanding better amenities.

A survey of HMO landlords by Paragon Bank revealed that 48% had seen demand for high-end HMOs rising, while 45% said demand from young professionals had gone up over the past year.

The landlords also told Paragon that more tenants today expect ensuite bathrooms, larger rooms, high speed broadband, and quality furnishings.

The majority of landlords said demand for higher speed broadband had increased over the past year (56%), while a significant proportion of tenants were seeking larger rooms (39%), ensuite bathrooms (53%) and better-quality furnishings (39%). Some 35% of landlords said tenants were also asking for office facilities to enable working from home.

“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,” Richard Rowntree (pictured), managing director of mortgages at Paragon Bank, said. “Tenants will no longer accept poor quality; they want broadband, bathrooms, and better-quality furnishings.”

Read more: HMOs and the challenges landlords can face in getting them.

Paragon said the investment case for HMOs was compelling, with 47% of landlords with an HMO agreeing that they offered better rental yields than other residential rental property. Some 40% said HMOs offered better financial protection from voids.

The Paragon research also found that given the shifts in tenant demand and the higher yields on offer, HMO landlords were more likely to purchase additional stock than sell. Over four in 10 HMO landlords (43%) said they planned to buy an additional HMO property in the next six months. Just 4% said they planned to sell all of their HMOs and exit the sector, with 8% intending to reduce their HMO holdings in the next 12 months.

“We saw strong growth in demand from landlords to acquire HMOs during the pandemic,” Rowntree said. “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.”