Today, houses in multiple occupations are becoming increasingly popular among young professionals and students. Larger homes can be divided into several rooms or even individual apartments to be let out to different tenants. An HMO can often be a more profitable choice for a landlord with each tenant paying rent for their own share of the home rather than a combined rental fee. If you’re considering purchasing a large property to rent out as an HMO, here are some of the main things to consider.
What is a House of Multiple Occupancy?
An HMO is a building or a part of a building that is occupied by more than two persons who are living as more than one household. The most common type of HMO is where two or more unrelated persons live in a home, paying rent for their own room, and sharing a kitchen and/or bathroom. However, there are various ways in which a building can be considered as an HMO, including buildings that comprise self-contained flats.
What is Classed as a House of Multiple Occupancy?
A house of multiple occupancy is any property that is shared by two or more tenants who are not a couple of members of the same family. The following types of accommodation are likely to be classed as an HMO:
- Shared flats or houses
- Hotels or B&Bs with permanent residents
- Halls of residence for students or workers
- Boarding houses
- Some supported accommodation such as ‘move on’ housing for homeless people
What Must Landlords Do to Start a House of Multiple Occupation in London?
If you are currently operating an HMO or intend to begin operating an HMO, it’s important to consult with your local authority in London, where you can get advice on the specific requirement from local Fire and Environmental Health Officers. If you’re contemplating converting a property in order to turn it into an HMO, local planning approval will be needed, and you will be provided with specific requirements and standards by building inspectors.
Any landlord operating an HMO will be required to fulfil all the usual landlord obligations when it comes to maintaining the property, its structure, and its internal services to ensure that it is consistently in a condition that is fit and safe for tenants.
What Regulations are in Place for a House of Multiple Occupancy?
The government regulates the quality of HMO accommodation to protect tenants in these properties from living in poor conditions. Landlords must comply with regulations to ensure that the conditions within the property are monitored and that there are not too many people living within the property. Some of the main legal responsibilities involved in letting an HMO include:
- Ensuring that electrics are checked every five years
- Installing smoke and carbon monoxide detectors
- That there is a separate private room for each couple, every single person over the age of 21, and for every two young people aged over ten
- Ensuring that the shared facilities and communal areas are cleaned and in good repair
- Ensuring that adequate cooking and washing facilities are available
There’s also a national minimum private room size that must be adhered to when renting out an HMO. These are:
- One occupant under ten years old: 4.64 square metres or larger
- One occupant over ten years old: 51 square metres or larger
- Two occupants over ten years old: 10.22 square metres or larger
Rooms must have a ceiling height of at least 1.5 metres.
Landlords must also contact their local council to determine whether an HMO licence is required before letting to tenants. If you rent an HMO without a licence when one is required, you could risk a fine of up to £20,000.
What Additional Requirements are in Places for Multiple Occupancy Landlords?
In addition to the normal obligations of a landlord to maintain the property and ensure that it is in good repair, landlords must arrange HMO management of common areas in particular to ensure that:
- The property’s occupancy is maintained at an acceptable level
- You are registered with your local authority and any changes in occupancy are reported
- The layouts and facilities meet the minimum standards for an HMO set out by your local authority
- The property is maintained in a safe, habitable condition
- There is a responsible person identified to manage the property and that their contact details are displayed on the premises for tenants
- Any fire alarms and fire extinguishers are tested and maintained on a regular basis
- Any passageways, stairways, and fire escapes are clean, in good repair, and free from obstructions
Other key points to consider before starting an HMO include:
- A special landlord’s insurance policy will be required to cover an HMO
- The landlord is liable to pay Council Tax on behalf of the occupiers, and an amount to cover this cost should be included in the rent charged
- Increases in noise and rubbish should be managed correctly by the landlord in order to prevent nuisance claims brought by neighbours
HMO tenants should also be held responsible for cooperating with their landlord to ensure that all regulations are met. This may mean:
- Allowing access to the property at reasonable times
- Paying rent on time
- Reporting any damage to the property
- Keeping to noise level restrictions after certain times
What Does Multiple Occupancy Mean for Landlords Financially?
An HMO can be a more profitable venture for landlords since rent is collected from each tenant for their respective rooms. This means that even if not all of the rooms in the property are filled, the landlord can continue to collect rent payments from the tenants currently residing in the property. Rental rates are often lower per tenant compared to renting an entire home, however, depending on the number of rooms in the home, landlords can often earn more with an HMO compared to letting the property to a single tenant or household.
However, despite the potential to earn more, landlords need to be aware of the additional costs that are involved with letting an HMO. These include:
- Liability for tenant council tax payments – this is typically included in the rent agreed to be paid by each tenant
- The cost of running the home; many HMO landlords remain responsible for making utility payments and include this in the cost of the rent, particularly in larger properties with several occupants.
- Additional insurance costs for a policy designed to cover an HMO
- Cost of property management services
- The cost of running the property when not all of the rooms are currently full
- Additional costs for advertising each room for rent compared to advertising the property for rent as a whole
- The additional cost of background and credit checking each tenant
What Does Multiple Occupancy Mean for London Landlords?
As the busiest and often the most expensive city in the UK, landlords in London have a lot of opportunities with an HMO. London is home to many young professionals who are looking for a shared home rather than to rent an entire property, which makes it an ideal choice for landlords who want to reach the biggest market. Districts like The City, Angel, Camden Town, Brixton, Shoreditch, and Clapham are popular with young professionals and have a lot of large properties that make ideal HMO locations whether you want to offer shared accommodation or self-contained flats.
What is Multiple Occupancy in Terms of Benefits for Tenants?
Deciding to let an HMO is a big decision, and you will need to consider how you are going to advertise your rooms to your potential tenants. There are several benefits of living in an HMO for tenants compared to renting an individual property for oneself. Some of the main benefits of living in an HMO that make them a popular choice for tenants and increasingly popular with landlords include:
- Cheaper rent compared to renting an individual property
- If you choose to cover utilities in the rent, this can be more convenient for tenants
- Option to socialise with other tenants compared to living alone
- HMO landlords must provide more facilities to tenants compared to letting an entire property including cooking and washing facilities and white goods
- HMO property opportunities are available in prime locations allowing tenants to live closer to work without the high price tag
Whether you are already a landlord in London or are considering purchasing a property to let, there are various reasons to consider an HMO. Not only are houses of multiple occupancies becoming increasingly popular with tenants, particularly in cities like London that are filled with young professionals, but they also offer landlords the opportunity to earn more money and continue taking rent payments even when the entire house is not filled.
Before purchasing a house to rent as an HMO, it’s important that you are aware of the responsibilities that you will face as a landlord. These include applying for an HMO licence from your local council where applicable, getting planning permission for converting the property if needed, and ensuring that the property meets all HMO regulations.