Challenges to the student HMO market
Houses of Multiple Occupancy (HMOs) serve as a vital housing option for students who can’t secure rooms in Purpose-Built Student Accommodation (PBSA). Research suggests that over the past decade, the number of students living in HMOs has increased by 18%, reaching an all-time high. However, the number of HMOs in England is decreasing, creating pressure on all tenants, especially students, due to a lag in PBSA supply.
The Department for Levelling Up, Housing, and Communities reports a 4% decline (equivalent to 21,000 licenses or 60,000 to 80,000 beds) in HMO licenses across England between 2019/20 and 2021/22. Several regulatory changes are discouraging HMO landlords and contributing to this decline include the following factors:
- Increasing mortgage costs and taxes reduce the attractiveness of operating a HMO which are therefore leading landlords to sell their HMOs. Whilst this increases the housing stock in local communities, it negatively affects students and others who are seeking residential accommodation
- Regulatory requirements for HMO operation have grown, including additional licencing in certain locations, stricter building and fire regulations, with non-compliance resulting in fines.
- Changing restrictions for minimum energy performance certificates (EPCs) standards will no doubt cause further significant costs and may lead to landlords deciding to sell.
- The proposed Rental Reform Bill includes the appeal of Section 21 and the replacement of fixed-term tenancies with a system of periodic tenancies.
The current fixed term tenancies commonly seen with HMOs align with the academic cycle which is essential for students. If this were to be removed, landlords cannot guarantee vacant possession at a given point in time. This will in turn make the operations of a HMO challenging for landlords as it will restrict the period in which they can market their properties and also result in available stock being marketed not in line with the academic cycle, with longer void periods occurring.
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