Landlords Drive HMO Growth in Search of Stronger Returns

April 10, 2026

The UK HMO market is clearly booming. More landlords are moving away from traditional single lets and into shared housing, driven by growing tenant demand for affordable, flexible and better managed homes. For investors, that opens up a major opportunity. It also creates a bigger need for caution, because a growing market rewards experienced operators and exposes weak ones very quickly.

New research from specialist landlord insurance provider Just Landlords, based on Freedom of Information requests sent to councils across the UK, shows how strong this shift has become. Since 2018, annual HMO licence applications have climbed from 41,162 to a record 57,725. That is a rise of 40%, which underlines just how much momentum the sector now has.

This is not just a passing trend. It reflects a deeper change in the UK rental market. More tenants are looking for good quality shared housing, and more landlords are recognising that HMOs can meet that demand. At the same time, councils are paying closer attention to standards, compliance and enforcement, which means investors must now think far more carefully about where they invest and who they work with.

The Numbers Show Just How Fast the HMO Sector Is Growing

Some parts of the UK are seeing especially high levels of HMO activity. The areas with the highest annual application rates are:

  • Edinburgh , 5,158
  • Oxford , 2,458
  • Bristol , 1,491
  • Southwark , 1,412
  • Tower Hamlets , 1,394

These figures show where HMO activity is already concentrated. However, headline application numbers do not automatically make those locations the best place to invest. In many cases, they highlight just how crowded and competitive those markets have become.

The areas with the highest application growth tell an equally important story:

  • Sandwell , 964%
  • West Lancashire , 886%
  • Tower Hamlets , 750%
  • Guildford , 742%
  • Waltham Forest , 481%

This rapid growth shows that the HMO market is expanding well beyond the usual high profile cities. It also confirms that investor appetite is spreading into other regions where affordability and tenant demand create strong conditions for shared housing.

Why Chasing Trophy Cities Can Hurt Returns

Many investors still chase the same fashionable locations because they believe a bigger city name automatically means a better investment. In practice, that often means they walk straight into lower yields, heavier competition and saturated tenant markets.

Cities like Edinburgh, Oxford, Bristol and parts of London attract huge investor attention. That sounds positive at first. Yet intense demand from landlords usually drives up buying costs, compresses yields and creates more competition for the same tenant pool. The result is often an investment that looks impressive on paper but produces weaker returns than expected once the real costs are accounted for.

That is one of the biggest mistakes in the HMO sector today. Too many investors prioritise city status over investment performance. A trophy city may sound good in conversation, but if saturation limits rent growth and competition eats into margins, the postcode alone will not protect returns.

Growth Does Not Remove Risk, It Increases the Need for Experience

The same data also shows that as the HMO market grows, scrutiny is rising with it. Across the UK, council inspections of HMOs have risen by 83% since 2018, while enforcement actions such as improvement notices and prosecutions have jumped by 180%.

That matters because it proves the sector is becoming more professional, more regulated and far less forgiving for landlords who cut corners.

Some areas already show clear signs of that pressure. The areas with the highest application refusal rates are:

  • Blackpool , 70%
  • Fenland , 51%
  • Sandwell , 48%
  • Armagh , 26%
  • Norwich , 24%

These figures highlight an important truth. HMO demand alone is not enough. Investors must understand the local authority environment, planning stance, licensing standards and what is actually required to run a compliant property.

The areas with the highest number of annual enforcement actions are also worth noting:

  • Lewisham , 288
  • Wandsworth , 146
  • Liverpool , 141
  • Denbighshire , 141
  • Camden , 117

Again, the lesson is clear. The HMO sector may be growing strongly, but it is not a simple shortcut to easy returns. Investors who enter the market without the right structure, the right knowledge and the right operator behind them can run into costly problems very quickly.

This Is Why Professional Operators Matter More Than Ever

As the market grows, the gap between professional operators and poor quality landlords gets wider. That is a positive thing for the sector overall, because better regulation and better enforcement help protect standards and improve the reputation of shared housing. However, it also means investors need to be much more selective.

Working with an experienced, well established developer and operator is no longer optional for serious investors. It is essential.

With over 34 years of experience, we understand what makes an HMO investment sustainable. Strong performance does not come from squeezing extra rooms into a building or following whatever city is currently popular online. It comes from choosing the right locations, developing high quality stock, understanding tenant demand properly and operating the property to a professional standard over the long term.

That is exactly where many newer entrants fall short. They may market attractive sounding yields, but investors need far more than a headline figure. They need proper development standards, ongoing management, compliance oversight and a team that understands the sector in detail.

Why South Yorkshire Is Attracting More HMO Investors

While many investors continue to crowd into saturated city markets, we are seeing a major increase in HMO investors coming to us in South Yorkshire. That is happening for good reason.

South Yorkshire offers a far better balance between affordability, tenant demand and achievable returns. Instead of chasing overinflated city centre markets, investors are increasingly looking at areas where strong employment, excellent transport links and realistic entry prices create better long term investment conditions.

This is especially important in the current market. Investors want high quality, fully managed HMO property investments that are built around real tenant demand rather than hype. They also want stronger yields and better value, rather than watching returns get squeezed in cities where too many landlords are all chasing the same thing.

That is where South Yorkshire stands out. It is not relying on image alone. It offers real fundamentals, which is exactly why more investors are turning towards the region and towards experienced operators like us to source, develop and manage quality HMO investments.

The HMO Opportunity Is Real, But Investors Must Choose Carefully

The latest HMO data paints a very clear picture. The market is booming. Licence applications are rising. Demand is strong. Professionalisation is increasing. Standards are moving upward.

Still, not all growth is equal. Some locations are becoming overcrowded. Some councils are taking a much harder line on standards and refusals. Some landlords are still entering the market without the systems or experience needed to succeed.

For serious investors, the answer is not to blindly follow the most talked about city. It is to work with a professional, experienced operator and focus on regions where the numbers still make sense.

That is why we believe more investors should stop chasing trophy cities and start focusing on where genuine HMO performance still exists. South Yorkshire is proving to be one of those areas, and the growing number of investors coming to us for high quality, fully managed HMO property investments reflects exactly that.