The importance of HMO properties, and why HMO property investments will remain strong for the long term
September 1, 2026
There is no doubt about it, the disastrous Renters’ Rights Act has scared a lot of landlords away from the sector and has put fear into plenty of people who were considering becoming landlords in the first place. We have always supported stronger regulation where it removes rogue landlords, poor quality accommodation and people who simply should not be responsible for housing tenants. The problem is the way the government has gone about it. Rather than simply removing bad operators and raising standards, the legislation has made the sector harder to operate in across the board, and tenants are now feeling the effect of that through lower supply, fewer rooms and more competition for good accommodation.
A sizeable number of landlords have already left the market, and their reasons vary considerably. Some have sold because of higher borrowing costs, taxation, regulation and the growing amount of administration involved in running rental property properly. Others have left because they knew their properties, management standards and general approach were never going to stand up to closer scrutiny. Either way, every landlord who leaves takes rental supply with them, and in the HMO market that usually means several individual rooms disappearing at once rather than one conventional household tenancy.
This matters because demand for good quality shared accommodation has not suddenly disappeared. Professional tenants still need somewhere sensible to live, particularly people relocating for work, contractors, NHS staff, engineers, logistics workers and younger professionals who do not necessarily want the cost of renting a full house or apartment on their own. When a six-bedroom HMO leaves the market, six people do not simply stop needing somewhere to live. They move into an increasingly competitive pool of tenants trying to find another suitable room.
1st Avenue’s Paul Endacott summed the situation up very well:
“What we’re seeing here isn’t really a story about landlords versus councils, it’s a story about where people are actually going to live when the legal, regulated options start disappearing.
“Every time a licensable HMO gets refused planning permission or a licence application gets turned down, that demand for a cheap room in a shared house doesn’t vanish, it just goes somewhere else.”
That is one of the most important points investors need to understand about the current HMO market. A planning refusal does not remove a tenant from the market. A licensing refusal does not remove a tenant either. It simply limits the amount of legal, properly managed accommodation available to them.
The HMO market currently feels like plaiting fog
There are several things happening at once, which is why so many investors are struggling to work out what is actually going on. Landlords are leaving. New HMO developments are becoming harder to get through in some areas. Councils are becoming stricter on both planning and licensing. At the same time, there is now a strange stereotype being pushed around social media that HMO properties are somehow a new type of accommodation used primarily for asylum seekers or temporary housing.
That could not be further from the market we have operated in for more than 34 years. Professional HMOs have existed for decades and remain an important part of the private rental sector. Our own properties are aimed at professional tenants who want well-maintained rooms, ensuite bathrooms, good communal space, reliable management and sensible access to major employment areas. We have been developing and managing this type of property long before property influencers, Facebook deal groups and HMO training courses became part of the industry.
The reduction in HMO approvals across some councils also needs to be looked at properly rather than treated as proof that HMOs are somehow becoming obsolete. In many cases, what is being refused is simply not good enough. Poor room sizes, weak layouts, unsuitable buildings, bad parking provision, inadequate amenity space or an existing concentration of too many HMOs in one area all create problems at planning and licensing stage.
Manchester, Liverpool and Newcastle are good examples of what happens when too many developers and deal packagers pile into the same market because the purchase prices look attractive on a spreadsheet. Once too many HMOs are concentrated within a small area, councils start applying tighter controls and investors find themselves competing with dozens of similar properties for the same tenant base. The problem in those markets is not the HMO model itself. It is poor location selection, oversupply and people trying to force HMOs into areas that have already absorbed too many of them.
Fewer HMO rooms can increase demand for the good ones
This is where the current market becomes particularly interesting.
If landlords continue leaving, if councils continue refusing weaker developments and if highly concentrated HMO areas become harder to enter, the amount of available accommodation falls. Meanwhile, the number of people who need affordable rooms remains.
That makes professionally developed and properly managed HMOs more important, not less.
The strongest properties are likely to be those in areas where demand is supported by employment, transport, population movement and a genuine shortage of good quality shared accommodation. A tired six-bedroom terrace surrounded by thirty competing HMOs is a completely different investment from a carefully selected property in a market where professional tenants are actively looking for rooms and supply remains controlled.
This is exactly why we have never built our HMO strategy around whatever city happens to be popular with investors that month. We focus on selected parts of the North of England, particularly South Yorkshire, where we understand the housing stock, tenant demand, employment markets and local planning environment. We also avoid Article 4 areas for our HMO development model and stay away from locations where HMO concentration has already reached levels we are uncomfortable with.
Buying the right underlying property matters just as much as the refurbishment itself. We typically source ordinary residential homes that have the correct layout, parking, room sizes and location before developing them into professional HMOs. We are not trying to squeeze six bedrooms into a property that should only ever have been a three-bedroom house.
Regulation is pushing HMO ownership towards professional operators
HMO ownership has become far more demanding than it was years ago. Planning, licensing, fire safety, compliance, tenant management, rent collection, utility bills, property inspections, maintenance and repairs all need to be handled properly, and there is much less tolerance now for landlords who treat these things as an afterthought.
That is part of the reason so many landlords are exhausted.
It is also one of the reasons we believe professionally managed HMO investments remain attractive for investors who want exposure to the sector without running the property themselves.
Our service starts with sourcing the residential property. We then handle the development, planning, licensing and refurbishment before continuing to manage the HMO once it is operational. Our management team deals with tenant enquiries, rent collection, utility bills, inspections, compliance, repairs, maintenance and the general day-to-day running of the property.
The investor owns the asset without having to become the person dealing with every operational issue attached to it.
After more than 34 years in this market, we have built our business around doing exactly that. We know which properties work, which layouts cause problems, where tenant demand is genuinely strong and where investors are likely to struggle because the market has already become overcrowded.
We have helped hundreds of investors over the years and continue to develop and manage HMO properties across the areas we know best.
HMO properties still solve a real housing problem
The long-term case for HMOs comes back to something very simple. Britain needs more affordable rental accommodation, and professional shared housing remains one of the most practical ways of providing it.
People will continue moving for work. Younger professionals will continue looking for alternatives to renting entire apartments. Contractors will continue taking temporary roles in different towns and cities. People going through changes in their personal circumstances will continue needing flexible accommodation.
A well-run HMO gives those tenants a private room, shared facilities or ensuite accommodation, manageable monthly costs and far more flexibility than taking on an entire property alone.
The market will probably become more regulated from here, and we expect weaker landlords to keep disappearing. Councils will continue scrutinising poor applications and high-concentration areas will continue becoming harder to develop in. None of that concerns us.
We would rather operate in a market where the standard is higher.
The opportunity now sits with investors who choose the right locations, develop the right type of properties and place them with experienced operators who understand how to run them properly.
That is exactly what we do.
We source suitable residential properties in selected parts of the North of England, develop them into professional HMOs and manage them on behalf of our investors. Planning, licensing, bills, tenant management, maintenance, repairs and compliance are all handled by our team.
For investors who still want long-term exposure to the HMO sector without becoming a tired, overstretched or non-compliant landlord themselves, a properly structured fully managed HMO remains one of the strongest ways to do it.
You can view our current HMO investment opportunities and more information about our development and management process at: