What’s causing the drop in the number of HMOs in England?

London market drives overall national decline

What’s causing the drop in the number of HMOs in England?

The number of houses in multiple occupation (HMOs) in England has declined in the past year, market analysis from specialist property lending expert Octane Capital has revealed.

The latest data shows that, on an annual basis, the number of HMOs in England fell by 3%, from 511,278 in 2019 and 2020 to 497,884 in 2020 and 2021.

This overall national decline has been driven by the London market where the number of total HMOs has decreased by 13%, which was the biggest reduction of all regions.

In the capital, 11 different boroughs have reported a drop, with the biggest coming in Ealing, where HMOs have declined by 59%, followed closely by a 58% decline in Lambeth.

In 2018, the UK government introduced new regulations which insist that a licence for HMO is required for all properties that are occupied by five or more people who are not members of one family. Previously, a licence was only required for properties of three storeys or more in which five or more people live and are not members of one family.

Furthermore, in order to obtain a licence, all rooms in an HMO must exceed a minimum size and can only sleep a certain number of people over 10 years old.

Jonathan Samuels, chief executive at Octane Capital, said that while the rule changes since 2018 have ensured a better and safer standard of living for tenants, they have also likely caused the decrease in the number of HMOs on the market, particularly in London.

“This essentially means that those reliant on the rental sector now have even less choice when it comes to finding suitable, safe accommodation, but that’s not to say it can’t be found,” Samuels stressed.

“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,” he added.