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HMO stock declines, as Government rule changes take effect

Em Morley - May 13, 2022

The number of HMOs in England has declined in the past year, research from specialist property lending experts Octane Capital shows.

They say this is likely caused by the Government’s regulations for Houses in Multiple Occupation (HMOs) introduced in 2018. A licence is now required for all properties that are occupied by five or more people who are not members of one family.

Octane Capital says the number of HMOs on the market has decreased, with many landlords selling up because of legislative changes. Their market analysis shows that, on an annual basis, the number of HMOs in England fell by -3%, from 511,278 in 2019/2020 to 497,884 in 2020/21.

This overall national decline has been driven by the London market where the level of total HMOs has declined by -13%, the biggest reduction of all regions. In the capital, 11 different boroughs have reported a drop, with the biggest being in Ealing where HMOs have declined by -59%, followed closely by a -58% decline in Lambeth.

Redbridge has seen its numbers halved, and Barnet’s decline sits at -37%. The number of HMOs has also declined considerably in Greenwich (-34%), Enfield (-30%), Wandsworth (-18%), Croydon (-13%), Hillingdon (-10%), Merton (-2%), and Tower Hamlets (-1%).

CEO of Octane Capital, Jonathan Samuels, comments: “It’s only right that all efforts should be made to ensure the safety and wellbeing of the nation’s tenants and that everyone is afforded the right to a basic standard of living. The changes to HMO licensing have certainly looked to ensure this, but as a result, we have seen a decline in the level of operational HMOs across the rental market, particularly within London.

“This essentially means that those reliant on the rental sector now have even less choice when it comes to finding suitable, safe accommodation, but that’s not to say it can’t be found.

“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. 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 and should benefit the nation’s tenants in the long run.”