Is Birmingham Good for HMO Investment?

January 14, 2026

Birmingham has long been viewed as a natural choice for HMO investment. As the UK’s second largest city, it historically benefited from strong tenant demand, regeneration projects, and a broad employment base. However, the reality facing investors today looks very different from the reputation many still rely on.

With over 33 years of experience developing and managing HMO properties, we speak to investors day in, day out. Increasingly, those conversations reveal a clear shift away from Birmingham as a preferred HMO market.

Why investors are reconsidering Birmingham HMOs

For many years, Birmingham delivered reliable capital growth alongside steady rental demand. That balance has changed. A growing number of investors now tell us that capital appreciation is no longer as strong as it once was, with values in many areas flattening rather than accelerating.

Alongside this, the Midlands has experienced a sharp rise in HMO supply. Large numbers of landlords entered the market based on Birmingham’s size and historic performance, rather than current supply and demand fundamentals. This has led to oversaturation in several locations.

One investor recently shared with us that his HMO in Solihull has remained at just two tenants out of six for over four months. This was not due to poor management or pricing, but simply a surplus of similar HMO properties competing for the same tenant base. Stories like this are becoming increasingly common.

Council clampdowns and Article 4 restrictions

In 2025, many Midlands councils began to take decisive action to curb HMO oversaturation. This came through the expansion and enforcement of Article 4 Directions across large parts of Birmingham and surrounding areas.

For investors, this has materially changed the landscape. Article 4 removes permitted development rights, meaning planning permission is now required to convert a property into an HMO. This process is lengthy, costly, and crucially, not guaranteed.

Planning refusals have become more frequent as councils prioritise controlling density and managing pressure on local services. Even well thought through schemes can face delays, professional fees, and uncertainty, which significantly increases risk for investors relying on future HMO conversions.

Oversupply, regulation, and stagnation risk

When oversupply combines with tighter regulation, investors face a difficult environment. Longer void periods, increased competition, and limited growth prospects all place pressure on returns. Even high quality properties can struggle when supply outweighs demand and councils actively restrict further development.

This is why many investors are now recognising that Birmingham’s reputation reflects what it once was, not how the market operates today.

Why investors are turning to Doncaster and surrounding areas

In contrast, we are seeing strong and sustained demand for HMO investment in Doncaster and the wider South Yorkshire region. Oversaturation remains low, tenant demand remains high, and councils are generally supportive of well planned, high quality HMO development.

Capital appreciation in these areas is currently averaging around 7 percent per annum. Combined with affordability and strong rental demand, this creates a far more balanced investment environment.

Through fully managed HMO properties that we develop, we regularly achieve net yields of around 9 percent for our investors. This performance is supported by a 33 year track record built on consistent delivery rather than short term market trends.

For investors who are considering venturing into Doncaster for a stronger, more resilient HMO investment, our current opportunities can be viewed at
https://www.footforwardproperties.co.uk/hmo-for-sale/

Experience over reputation

A key takeaway for many investors is that size alone does not make a market attractive. Birmingham remains a major city, but that does not automatically translate into strong HMO returns under current market conditions.

Markets evolve. Regulation tightens, supply changes, and tenant behaviour shifts. Investors who rely on outdated assumptions often find themselves exposed to unnecessary risk.

By focusing on areas with genuine demand, sensible supply levels, and supportive planning environments, investors place themselves in a far stronger position for long term performance. This shift in thinking is exactly why many experienced landlords are now reallocating capital away from Birmingham and into regions that are delivering results today.