The stock of houses in multiple occupation (HMOs) across England has fallen by 2.4% in the last year, new market analysis by Sirius Property Finance has shown.

Figures showed that England has an estimated 489,701 HMO properties, which accounts for 2% of the country’s entire dwelling stock.

London is home to the largest number of HMOs with 145,615 properties, accounting for 4% of the capital’s homes, while the South East has 69,102 HMOs to make up 1.7% of the regional total.

The region with the fewest HMOs is the North East, where 17,378 properties account for 1.4% of the region’s dwellings, but the region where HMOs account for the smallest percentage of local homes is the East Midlands, where 21,752 properties account for just 1% of the whole housing market.

Sirius’ analysis revealed the East Midlands has recorded an annual HMO stock decline of -26.1%, the North East has seen HMO stock levels drop by a -15.8% drop, while in the South East numbers are down -6.7%. These declines, however, are not universal across all regions. The West Midlands (16.9%) as well as Yorkshire and Humber (11.2%) have recorded annual stock growth over the past year.

These current stock levels have been recorded after the government’s recently implemented changes to HMO regulation. In an attempt to improve the safety and living standards for tenants in October 2018, the government extended the mandatory licensing of HMOs to cover the vast majority of properties containing five or more people from two or more separate households. Previously, only properties with three or more storeys containing five or more people from two or more households required an HMO licence.

The new regulations mean that HMO landlords now occupy a more expensive and more complicated corner of the rental sector. As a result, Sirius believes that many have chosen to cut their losses by offloading properties rather than dealing with the added cost.

“Any legislative change designed to improve tenant welfare is a positive one on the face of it, but much like the regular buy-to-let sector, a perhaps overly heavy handed approach by the government has led to a decline in the number of HMOs available across the nation,” said head of corporate partnerships at Sirius Property Finance, Kimberley Gates.

“The implications of this decline to tenants are inevitably a higher cost when renting, due to the growing imbalance between HMO supply and demand. 

“However, as the HMO sector continues to find its feet in the wake of these legislative changes, it presents a great opportunity for investors entering the space who can hit the ground running and capitalise on high tenant demand levels. Providing they have their house in order in terms of licensing and living standards, of course.”

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