England and Wales HMO market generates £6.3 billion in rent

The house in multiple occupation (HMO) sector across England and Wales is worth £78 billion and yields an impressive £6.3 billion in rent annually.

That’s according to HMO management platform, COHO, which has analysed Office for National Statistics data.

It estimates there are 182,554 HMO properties and 74% of these are classified as ‘small’ HMOs, housing three or four tenants.

The other 26% of HMOs are ‘large’, accommodating five or more occupants.

HMOs are a PRS force

The firm’s founder and chief executive, Vann Vogstad, said: “HMOs are a significant force on the national rental market, generating a combined rental total of well over £6 billion every year.

“But while this sounds like a strong number, HMO landlords are actually leaving a huge amount of money on the table.

“We have previously found that tenants are willing to pay as much as 10% more in rent in exchange for a heightened HMO experience, not least the opportunity to live with housemates whose personalities and lifestyles are a good match for their own.”

He added: “Further premiums can likely be commanded for HMO properties that are altogether more considered and thought-through than your average, such as high-quality finishes, strong landlord communication, efficient financial processes, and speedy maintenance management.

“As such, the HMO market’s value is going to keep increasing not only because of the constant and growing demand from a variety of tenant demographics, but also because rising tenant expectations means landlords are going to improve the standard of living and thus benefit from stronger rental income.”

London has most HMOs

London dominates the HMO landscape, hosting 33.9% of the nation’s HMOs, followed by the South East (13.6%), South West (10.7%), North West (8.4%) and Yorkshire and Humber (7.4%).

The typical HMO in England and Wales is valued at £293,197, contributing to the sector’s £78 billion market worth.

In London, where the average HMO is worth £660,227, the capital’s stock alone is worth nearly £40.9 billion.

The South East follows with an average HMO value of £436,146 for a regional total of £10.8 billion.

The South West’s HMO portfolio is valued at £7.9 billion, while the North West’s stands at £4 billion.

HMO annual income

Rental income is equally significant, with the average HMO generating £29,715 annually, culminating in a national total of £6.3 billion.

London’s HMOs yield £40,169 per property worth £2.5 billion in total.

Surprisingly, the South East leads in individual property rental income, with each HMO averaging £46,042, totalling £1.1 billion for the region.

The South West and North West generate £747.3 million and £419.2 million, respectively.

Yorkshire and Humber has the lowest average HMO value at £196,014 and a modest rental income of £21,208 per property.

However, because of its size, the region surpasses Wales and the North East in total stock value and rental income.

The East Midlands, with the lowest average rental income per HMO at £20,223, still achieves a total stock value of £2.9 billion.

It outpaces Yorkshire and Humber, Wales and the North East, thanks to an average HMO value of £236,779.

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