May

SHOCK drop in number of HMOs blamed on growth of council licensing schemes

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HMO numbers in England have dropped by 3% during the past 12 months many landlords offloaded their buy-to-let stock instead of negotiating more legislative hurdles.

Market analysis by Octane Capital reveals that while there were 511,278 HMOs in 2019/2020, this fell to 497,884 in 2020/21, driven by the London market which saw a 13% reduction in numbers, by far the biggest drop of all the regions.

In the capital, 11 different boroughs have reported a decline, with the biggest in Ealing where the number of HMOs are down by -59%, followed by a -58% drop in Lambeth. Other big losers were Redbridge, Barnet, Greenwich, Enfield, Wandsworth and Croydon.

Licensing

Octane blames the regulations introduced in 2018 that require an HMO licence for all properties occupied by five or more people who are not members of one family, while all rooms must exceed a minimum size and can only sleep a certain number of people over 10 years old.

However, another of the lender’s recent studies found that the average HMO is now worth £364,508, 32% more than the typical house, with professional buy-to-let investors still hungry to expand in the sector, infused by the benefits of greater rental incomes and capital growth.

CEO Jonathan Samuels (pictured) says the changes mean that those reliant on the rental sector now have even less choice when it comes to finding suitable, safe accommodation.

However, he adds: “We’ve continued to fund a high number of quality HMO deals throughout the pandemic and this sustained level of interest from professional investors is yet to show any signs of decline.

Read: The complete guide to renting an HMO property.

“This includes a large number of refurbishment transactions whereby investors are looking to drastically improve the quality of existing HMOs, so while volume has certainly fallen, we don’t believe this will be a long-term trend.”

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