Councils across England are cracking down on HMOs to combat the over-concentration of shared housing, curb anti-social behaviour and raise minimum property safety standards.
Property experts at Property Buyers Today have identified the UK's biggest HMO investment hotspots outside London and commented on how the proposed legislation could affect the sector.
The UK regions with the largest share of HMOs outside London are:
- Oxford, 2,664 HMOs, 4.52% of all houses
- Cambridge, 2,243 HMOs, 3.98% of all houses
- Exeter, 2,000 HMOs, 3.60% of all houses
- Bristol, 6,904 HMOs, 3.40% of all houses
- Nottingham, 4,151 HMOs, 3.09% of all houses
- Norwich, 2,026 HMOs, 3.00% of all houses
- Brighton and Hove, 3,843 HMOs, 2.94% of all houses
- Newcastle upon Tyne, 3,677 HMOs, 2.84% of all houses
- Lincoln, 1,197 HMOs, 2.65% of all houses
- Bath and North East Somerset, 2,075 HMOs, 2.47% of all houses
The highest concentrations of HMOs are largely found in some of England's least affordable housing markets. Oxford, which tops the ranking with 4.52% of homes classified as HMOs, had an average house price of around £475,000, one of the most expensive outside London, and a monthly rent of up to £1,958.
While high purchase prices can make shared accommodation one of the few affordable options for students and young professionals, Oxford City Council has warned that the city's high concentration of HMOs has raised concerns over housing quality and the growing dominance of shared accommodation in some neighbourhoods. Cambridge, ranked second, also remains one of the UK's most expensive cities outside London.
"There's been a noticeable shift in landlord sentiment over the last 12 months, with landlords selling off at least 2,000 student accommodation beds across the UK in that time, ahead of the introduction of the Renters' Rights Act," said Saif Derzi, founder of Property Buyers Today.
"Whilst some have opted to sell, the new licensing rules could in part benefit non-casual landlords by eliminating sub-standard competitors, stabilising tenant demand for high-quality properties, and driving up rental yields for professional operators, due to the overall supply of compliant rooms shrinking due to the new regulation.
"For professional HMO operators, who already consider licensing, fire safety, room size, tenant suitability, rent collection, maintenance, complaints handling, deposit protection, tenancy documentation, rent review evidence, and the overall condition of the property, the new Renters' Rights Act is arguably the direction the market should be moving in.
"In short, the Renters' Rights Act has signalled a shift towards higher industry standards rather than the end of HMO investment. It has changed the rules of participation and standards. HMOs will continue to serve a clear need in the rental market.
"The new shift is arguably a positive that protects both tenants and landlords by weeding out those particular individuals just there for investment purposes, rather than a service that provides fair, flexible housing."
