Redefining Rental: The Rise of HMOs and Their Influence on UK Housing Dynamics
Over the past few years, the UK rental market has seen a noticeable increase in the conversion of single-family homes into Houses of Multiple Occupation (HMOs). Due to several socioeconomic causes and governmental developments, this trend has considerable effects on both landlords and tenants.
HMOs became popular as student housing, offering shared living areas to students looking for low-cost housing. However, the environment changed in the mid-2000s with the introduction of "professional" HMOs. Investors realised that renting out well-kept, aesthetically pleasing shared residences to working adults—who were prepared to pay premium prices for individual rooms—was a profitable business strategy. This movement was spurred by the difference between housing prices and earnings growth, making renting the sole realistic alternative for many people.
The Private Rental Sector (PRS) saw legislation tightening, with a special focus on HMOs. To guarantee the safety of tenants, requirements for risk assessments, fire safety precautions, and licensing were implemented. Regulations grew over time, including requirements for minimum room sizes and designating a responsible individual for fire safety compliance. Although living standards have increased as a result of these measures, administering HMOs has become more complicated and expensive.
Environmental and Physical Implications
The rise of HMOs has sparked concerns about their environmental impact and physical repercussions for tenants. From an environmental standpoint, converting single-family homes into shared accommodations can result in increased energy usage and carbon emissions per person. Furthermore, the higher tenant density in HMOs may put an additional burden on the utilities and local infrastructure, aggravating environmental challenges.
Physically, renters in HMOs could have cramped living quarters, little privacy, and possible health hazards because of shared amenities. Tenants may have to settle for lower living conditions because they have fewer options, and these issues are frequently more noticeable in places where there is a significant demand for affordable accommodation.
National Differences and Socio-Economic Factors
The presence and impact of HMOs vary by location in the UK, depending on socioeconomic conditions and housing market trends. HMOs may have lower rental yields in high-value locations like London and the South East, but demand keeps them appealing as investments. On the other hand, areas with greater yields, including Wales and the North West, are popular places to invest in HMOs.
Furthermore, the HMO market is significantly shaped by socioeconomic differences. HMOs may be a crucial source of inexpensive housing for low-income individuals and families in more deprived locations. A focused approach is necessary to address housing disparities because tenant rights and the quality of lodgings may vary greatly.
The profitability of HMOs today
HMOs continue to be a profitable investment despite the difficulties brought on by legislative changes. Strong rental yields result from rising rents and a high demand for all-inclusive room rentals; HMOs outperform conventional buy-to-let properties in this regard. According to the PRS research from Paragon Banking Group, HMOs in the UK are yielding the highest returns, with rates ranging from 6% to 9%.
For HMO landlords, however, there is now a new obstacle in the form of the steep increase in mortgage rates and energy costs. Those with high loan-to-value mortgages may incur additional financial burden, emphasising the significance of careful financial planning and regular investment performance monitoring.
HMO Hotspots Right Now
The demand for HMOs varies by region, with some emerging as hotspots for investment. Opportunities have increased in cities including Liverpool, Manchester, Bristol, Durham, and Glasgow, especially in student housing where there has been a shortage recently. Wales offers the highest returns, followed by Yorkshire & Humber and the North West; London and the South East, with their high property values, give lesser yields.
As a result of reasons like investor demand, regulatory changes, and affordability challenges, the number of houses being converted into high-rise apartments and houses (HMOs) is on the rise in the UK rental market. While HMOs have the potential to increase rental yields and housing availability, they also present issues in terms of environmental sustainability, tenant well-being, and socioeconomic inequities. To ensure a fair and equitable housing market for all, addressing these difficulties requires a multifaceted approach that combines regulatory measures, investment in affordable housing, and community engagement.
Get in touch today!
At Studio16a, we understand the complexity of the HMO market and are devoted to assisting you in navigating this constantly evolving environment. With our combined experience in real estate and architecture, we can help you explore the possibilities of HMO homes and realise your financial goals.
Whether you're thinking about property management, remodelling, or HMO conversions, our experts can offer solutions that are specifically designed to match your requirements.
To explore your HMO investing objectives, get in contact with Studio16a today.
Feel free to reach out by phone, or call into our studios for a complimentary consultation with our team.
a look back to 2024 and our goals for 2025
a look back at 2024:
china town:
the team at 16a has been working on an exciting commercial project located in liverpool’s chinatown which is home to the oldest chinese community in europe.
currently, in the planning stage, we are looking forward to working on the development of a boutique hotel and restaurant space for our client, global school alliance.
home 96b:
2024 saw the launch of “home,” taking inspiration from john lennon's legendary "home restaurant" in new york. the once-neglected art deco bank on liverpool road in maghull has been transformed into a thriving restaurant and bar, right in the heart of maghull.
the team at 16a oversaw all architectural aspects from demolition to the finishing touches and interior design. their dedication promises a unique and inviting space that locals and visitors alike will enjoy.
heinz:
in partnership with usp, 16a created design proposals for reimagining numerous key aspects of the heinz factory at kitt green.
our goal was to promote an inclusive and innovative work environment that would not only improve functionality but also extend from the factory entrance to occupational health, research, and development, plus a canteen.
the initial design philosophy of this project is based on the idea of a dynamic, inclusive workspace. our idea is to build a strong foundation at the factory entrance, which would stand for unity and connectivity. this foundation represents kraft heinz's culture of cooperation and unity in addition to acting as a structural support.
egerton house:
egerton house was a former banana warehouse originally completed in 1874.
16a were commissioned for the refurbishment of the west wing of the building which we completed earlier this year. the refurbishment saw the number of offices grow from 25 to 50 and is part of a series of exciting projects in birkenhead after wirral council secured £25 million in funding from the government, to allow more businesses to thrive in such a prime location on the periphery of the wirral waters scheme.
roderick kearns:
in 2024 we launched roderick kearns, a collection of meticulously curated luxury designer homeware pieces bespoke to our clients and their homes. working with brands such as roche bobois, visual comfort and porta romana means we can deliver a range of high end products ranging from furniture, lighting and decorative accessories.
trend blogs:
this autumn, we launched trend reports focusing on some of the world’s largest design fairs, such as paris design week, pad london, and dutch design week. as a studio, it is crucial for us to stay up to date with trends, ensuring that we make informed choices that align with our clients' needs.
home building and renovation show harrogate:
in november the team took a trip to harrogate where we exhibited at the home building and renovation show. the show has been running for over 30 years now and was an excellent opportunity to gain inspiration and meet new clients.
looking forward to 2025:
the 16a Interiors team is looking forward to starting new residential and commercial projects in 2025 and visiting numerous trade shows, starting with the surface design show in february.
8 Ways to Get Planning Permission on the Green Belt
8 Ways to Get Planning Permission on the Green Belt
The Green Belt is a planning designation which aims to strictly control inappropriate development to protect the countryside from encroachment, prevent urban sprawl and stop neighbouring towns from merging into one another. What is defined as appropriate development in the Green Belt has a very narrow definition and as such most types of development including residential are deemed inappropriate in this context.
Green Belt designation is one of the highest levels of protection that the planning system can afford an area of land from development. As a result, securing planning permission to develop in the Green Belt can be a challenge. That being said, it doesn’t mean that securing planning permission for new homes in the Green Belt is impossible, but you will need a strong justification for it. There are however several approaches to securing planning permission in the Green Belt and we explore these below.
1. Removing land from the Green Belt through the Local Plan process
National planning policy (NPPF) allows Local Planning Authority’s to remove land from the Green Belt when they are preparing their Local Plans – however they need to demonstrate in their evidence that there are “exceptional circumstances” for doing so.
While a shortage of land for new homes can be considered exceptional circumstances, councils must first demonstrate that:
- they’ve used as much brownfield land as possible;
- have optimised the density of development; and,
- have considered whether neighbouring councils can help meet their housing need.
Although this is the route that is most likely to prove successful, it is dependent on the timing of the Local Plan process and this will require investing time and effort in promoting your site above those of others as being a more sustainable site for future development. There is also likely to be stiff competition from other land owners attempting to get their sites allocated for residential development and the Local Planning Authority will only release as much land as necessary from the Green Belt to meet its development needs for the plan period.
The Local Plan process can be a highly politicised process as has been seen in the recent rewriting of the Greater Manchester Spatial Strategy and the Wirral Local Plan where significant opposition to Green Belt development caused a rethink by local politicians. There is therefore a clear tension between the Government promoting increased housebuilding and local politicians representing the wishes of their local electorate and it is a difficult tightrope to walk.
2. Redevelopment of Previously Developed Land
It is worth noting that not all Green Belt was created equal or has the same value for that matter. Rather than the public perception of rolling green fields, much of the Green Belt is far less attractive in reality. Often the Green Belt will include sites that already have development on them.
Where land is classed as Previously Developed Land, sites can often be redeveloped to provide new homes. There are some restrictions on the amount of development that is allowed, to ensure that the openness of the Green Belt is maintained and the new buildings should have no more of an impact on the Green Belt than that of the existing development footprint on site.
3. Conversion of Agricultural Buildings
Agricultural buildings don’t normally constitute ‘Previously Developed Land’ which prevents their demolition and replacement with homes. However, they can often be converted into residential use utilising permitted developed rights under Class Q of the General Permitted Development Order. There are, though, some constraints on the use of these rights – no more than five homes can be created, for example, and there are some size restrictions, although these are fairly generous following further relaxation of the permitted development rules in 2018.
4. “Infill” DevelopmentBuilding a new property on a gap site in an existing built frontage is another possibility
The logic being that a new building in an existing frontage would not cause additional harm to the openness of the Green Belt through the extension of the built form. Whether or not this applies can be very subjective and is usually quite strictly interpreted by Local Planning Authorities. Clearly, building a six-bed detached property set back from the road behind the existing building line is unlikely to cut the mustard, however a sensitively designed property which respects the existing pattern of development may well be deemed appropriate ‘infill’ development.
5. Affordable housing on Green Belt land
Demand for affordable housing is a concern right across the country and this can be particularly acute in rural locations.
The NPPF makes provision for exception sites for new affordable homes to be allowed in the Green Belt to meet this need. However, this exception only applies where there is a demonstrable need and evidence to support this.
6. “Very special circumstances” for developing Green Belt Land
This requires the identification of some benefit of the proposed development that could be delivered on this specific site, but nowhere else.
A shortage of housing land does not represent very special circumstances, but there are other factors which could do.Enabling development may be justified to generate funding to repair and bring back into economic use a listed building that has fallen into disrepair and is on the ‘At Risk’ register. New homes could also be required in order to the expansion of an adjacent school. The delivery of a “Paragraph 79” house or a home for an agricultural or forestry work are also considered to be types of very special circumstances and these are explained in further detail below.
7. A so-called “Paragraph 79” house
To satisfy the requirements of Paragraph 79 of the NPPF, the design of a house must be of exceptional quality – that it is so “outstanding and innovative” that it would “significantly enhance its immediate setting.” That quality must be so high that it will off-set the harm to the Green Belt. This usually only applies to single dwellings on large sites remote from existing settlements.
Convincing a Local Planning Authority to relax its Green Belt policies to accommodate such a dwelling is likely to prove challenging as it is likely they will adopt a safety-first approach rather than risk setting a precedent and opening the floodgates to similar proposals across the district. Many such proposals invariably end up the subject of a planning appeal with varying degrees of success, although the Planning Inspectorate seem to be more open minded on the matter, it is still a challenge to convince an inspector with more failing than succeeding.
8. Building Homes for Agricultural or Forestry Workers
The NPPF acknowledges the need for an agricultural or forestry worker to live in a specific location in specific circumstances. There are various reasons why it might be necessary for such a worker to live on site, such as animal welfare which can constitute the very special circumstances required to allow a new home in the Green Belt.
However, using this exemption requires the production of credible evidence of the need for the worker to live on site as well as evidence that there is no other suitable accommodation nearby. Where a site is in close proximity to properties in other settlements, it can often be difficult to prove that no alternative exists.
Securing planning permission for your development in the Green Belt is certainly not a cakewalk, but equally if you approach it with eyes wide open and understand the risks and how to mitigate these then there is reason for optimism that you might be able to develop. Having an experienced Planning Consultant by your side who understands the nuances of Green Belt planning policies as well as the idiosyncrasies of the local political landscape is vital and this should be your first port of call before engaging an Architect or other professionals on your project.
We also have experience designing new build developments that range from one-off new builds to large scale urban developments. We have expertise in conjunction with Paragraph 80 of the National Planning Policy Framework (NPPF). In addition to architectural design services outlined in the 16 A Client Journey, we offer site finding and site evaluation services drawing upon our detailed knowledge of planning policy.
- Joel Anthony Roderick, Founder 16a
