When HMOs come up in conversation, most people still picture the same things. Large cities, big student populations, young professionals, high rents and limited space. That’s been the conventional view for a long time, and for obvious reasons.
These areas tended to offer greater reliability for landlords, particularly when it came to vacancy rates, while the high demand from prospective tenants allowed for higher prices and, therefore, positive yields.
But the market’s changing, and one of the more interesting shifts in buy-to-let right now is that HMO demand is no longer confined to those traditional urban centres.
A recent article in Property Reporter, which featured analysis of local council data by Just Landlords, highlighted that HMO licence applications rose by 40% between 2018 and 2024, from 41,162 to 57,725. There was notable growth in areas outside the usual city hotspots, with Sandwell, West Lancashire and Guildford all reported as experiencing particularly sharp increases.
It shows that something is changing in the shape of rental demand, and landlords are responding to it.
Renters are looking further afield
A large part of this trend is a much-discussed issue: affordability.
SpareRoom data, based on more than 241 million area search terms entered in 2025, shows flat share demand rising strongly in coastal towns, market towns and smaller locations. This suggests that renters are moving away from 'expensive' cities in search of lower costs and, in many cases, a different lifestyle.
For instance, five seaside towns were among the 28 locations where searches rose by more than 50%, while Helston and Bideford both recorded 70% increases. The same analysis found the average UK room rent had reached £747 a month, up 30% from £574 in Q1 2020.
This suggests that shared living is no longer just a city-centre solution for younger renters. Prices are comparatively lower in these areas, but the same SpareRoom data shows that renters are also looking for more space, a stronger sense of community, or a location better suited to hybrid and remote working.
Affordability aside, this shows that the actual nature – both in terms of location and size – of what property sharers are looking for is changing. Investors are noticing the same trend
This shift goes some way in explaining why HMO license applications are up in some more of the less conventionally HMO-prominent areas of the country. That said, the continued rise in renters looking to make a move to smaller towns or coastal areas means that there is still a market for new or diversifying HMO landlords to cater for.
In some of these areas, property values may still be lower than in larger urban hubs, while demand for affordable shared accommodation is growing. That can create a more attractive balance between purchase price and income potential.
What’s more, in a market where increased borrowing costs, taxation and regulation have all put pressure on traditional buy-to-let returns, HMOs can offer a way to generate stronger yields and a more resilient income stream. HMOs are less reliant on one household alone, which can help reduce the impact of voids and improve overall cashflow.
Opportunity does not mean simplicity
Of course, that doesn’t mean every emerging location will be right, or that landlords should chase the trend without proper due diligence. An area can show rising search activity, but that does not automatically make every property suitable for HMO use.
Property investors still need to ask the same basic questions they would anywhere else: who is the target tenant, what standard of accommodation is expected locally, and does the likely income justify the extra complexity?
That complexity is an important part of the story. HMOs are not simply standard buy-to-let properties with extra doors on the bedrooms. They come with greater management intensity, more regulatory oversight and, in many cases, more operational risk.
For example, the aforementioned local council data showed that council inspections are up by 83% since 2018 and enforcement actions are up 180%, which is a useful reminder that growth in the sector is being matched by scrutiny.
For brokers and lenders, this shift is worth watching closely. A rise in HMO interest reinforces the need for specialist advice, careful structuring and a clear understanding of what the borrower is trying to achieve.
Those who provide the most value will be those who can help clients understand the demand behind it, choose their locations carefully and approach the asset class with a clear view of both the opportunity and the responsibilities that come with it.
The market may be widening geographically, but it’s not becoming any simpler.
