The acronym “HMO” is mentioned a lot in property circles, but what does HMO stand for and what is it?
HMO stands for House in Multiple Occupation and is a property where three or more tenants from two or more households share common facilities such as bathrooms, kitchens, or living rooms. A household is determined as individuals who are related by birth, marriage, or relationship (a couple), it is a shared living space occupied by individuals who are not part of the same family or household.
Who Lives in HMOs?
HMOs cater to a diverse range of tenants, including students, young professionals, and individuals who require more affordable accommodation or who are new to an area or city and choose not to live on their own. Students are a significant demographic in HMOs, particularly in university towns and cities, as they often seek cost-effective housing solutions during their studies. Young professionals, especially those just starting their careers, opt for HMOs to manage living expenses while enjoying proximity to amenities and workplaces. The HMO landscape has changed considerably over the years, with many boutique HMOs popping up. Some of these high end HMOs can be more expensive than a studio or one bedroom flat and attract tenants who are looking for co-living environments, refurbished to a high standard, close to amenities, employers and good transport links.
Where Might You Find HMOs?
HMOs are commonly found in towns and cities, especially in cities with large student populations, significant numbers of young professionals, or high housing demands. Cities like London, Bristol, Manchester, Birmingham, and other major metropolitan areas have substantial HMO markets and the need for more HMOs and the areas in which you will find them, is growing constantly. HMOs can be found near universities, colleges, and business districts where the demand for affordable, shared housing is high. Additionally, some smaller towns with strong educational institutions or specific industries may also have a notable presence of HMOs.
Why Are HMOs More Time Consuming to Manage?
Managing HMOs is more demanding compared to single-family rentals for several reasons:
- Higher Tenant Turnover: With multiple occupants, there is a higher likelihood of frequent tenant turnover, requiring constant advertising, vetting, and administrative work.
- Increased Wear and Tear: Shared living spaces tend to experience more wear and tear due to higher usage of facilities. This necessitates more regular maintenance and repairs.
- Complex Interpersonal Dynamics: Managing the relationships and dynamics between multiple tenants can be challenging. Disputes or issues between tenants can arise, requiring the landlord or property manager to mediate and resolve conflicts.
- Stringent Tenant Selection: Due to the points above, Tenant Selection needs to be even more stringent in HMOs, to avoid issues later. When selecting tenants for an HMO, you are not only profiling the potential incoming tenant, but also profiling them in terms of the mix of the tenants already in the house. Tenant harmony, in HMOs, is vital.
- Inspections: These need to be thorough – more people; more compliance; more wear and tear – this all equals thorough inspections and very hands on management, so that everyone is happy, the property is well looked after and the landlord is kept safe with regard to regulation, compliance and adherence to the terms of his/her HMO licence.
Compliance and Legislation
HMOs are subject to stringent compliance and legislative requirements:
Licensing: If your HMO houses 5 or more people or it is in an area of Additional Licensing (all HMOs need licenses in these areas) or an area where Selective Licensing applies (all rented properties need a license, even non HMOs, in these areas) then landlords must apply for an HMO licence, which involves meeting specific standards and paying associated fees.
Please also note that if your HMO houses more than 6 people, then it will also require planning and this is a very separate issue to licensing – DO NOT make the mistake of thinking that because you have a licence, you do not need planning – this is NOT the case!
Safety Regulations: HMOs must comply with rigorous safety standards, including fire safety measures, gas and electrical safety checks, and adequate provision of facilities, amenities and room sizes. Fire alarms (different properties and layouts will require different specifications), and safe and clear exit routes (including thumb turns on doors in most instances) and fire doors are mandatory in HMOs. Boarding under stairs may also be required. Fire Risk Assessments and HHSRS Assessments are also required.
Health and Safety Standards: Individual Local councils may impose additional health and safety standards, so it is always good to double check with your local council.
Higher Risk Model:
HMOs are considered a higher risk model for several reasons:
Regulatory Scrutiny: The extensive regulatory framework and compliance requirements mean landlords are under constant scrutiny. Failure to comply can result in hefty fines or legal action and in some cases, even custodial sentences.
Financial Risk: Higher tenant turnover can lead to voids, impacting rental income. Additionally, increased maintenance and repair costs can strain financial resources.
Management Complexity: The day-to-day management of an HMO is more complex and time-consuming, requiring a more hands-on approach and often the services of specialised property managers.
As Landlords and Investors ourselves, we can help and advise on all aspects of your portfolio. If we can help you then give us a call on 0117 440 6789 or email us here together we can make being a landlord simple, passive and stress free!
