The HMO market remains a “profitable and appealing” investment opportunity, yet landlords must navigate an increasing array of challenges as regulations evolve, according to a leading industry expert.

Mish Liyanage, a seasoned professional with over 20 years of experience in the field, underscores the growing risks and regulatory demands involved in managing Houses in Multiple Occupation (HMOs).

Mr Liyanage, the founder of Mistoria Estate Agents, commented: “While HMOs continue to be a highly rewarding investment option, they come with escalating regulatory obligations and risks. With increased fines, stricter enforcement, rental reform proposals, and diverse licensing schemes across cities such as Manchester, Salford, Bolton, and Liverpool—where I operate—landlords must remain well-informed to mitigate risks and capitalise on opportunities.”

Key Opportunities in the HMO Market

According to Mr Liyanage, landlords can still find significant advantages in the HMO sector, including:

Attractive Rental Yields and Strong Demand

HMOs generally provide higher rental returns than standard buy-to-let properties, as rooms can be rented out individually. This is particularly beneficial in cities like Salford and Manchester, where student demand remains high.

Increasing Demand for Shared Accommodation

With the ongoing shortage of affordable housing and rising rental prices, an increasing number of tenants—including students and young professionals—are opting for shared accommodation. This helps landlords maintain high occupancy levels.

Government Support for Energy-Efficient Properties

With a growing emphasis on sustainability, landlords who invest in energy efficiency improvements to meet EPC (Energy Performance Certificate) standards can benefit from reduced operational costs and potentially command higher rents.

Expansion into Developing Markets

Cities like Bolton are experiencing a surge in HMO demand, particularly with selective licensing schemes aimed at raising housing standards. Investing in these emerging areas ahead of further regulatory tightening could offer long-term rewards.

Major Challenges for HMO Landlords

Despite the potential benefits, landlords must contend with several challenges, including:

Tougher Licensing and Compliance Requirements

New licensing regulations add layers of complexity for HMO landlords. For example:

  • Salford has extended its additional HMO licensing to cover properties with 3-4 bedrooms, whereas previously, only HMOs with five or more tenants required a license.
  • Liverpool enforces Article 4 planning permissions for new HMOs in most areas.
  • Bolton has stringent space and room size requirements. Failing to comply with these regulations can result in fines of up to £30,000 per offence, with councils like Salford taking a strict stance on enforcement.

Increased Penalties and Compliance Crackdowns

Local councils are ramping up enforcement efforts, penalising landlords for common violations such as:

  • Insufficient fire safety measures (e.g., missing fire doors, smoke alarms, self-closing mechanisms).
  • Operating an unlicensed HMO.
  • Neglecting essential maintenance, such as fixing damp issues and blocked drains.

The Renters Reform Bill and Its Consequences

The proposed Renters Reform Bill, which aims to eliminate Section 21 ‘no-fault’ evictions, could make it more difficult for landlords to remove problematic tenants. This poses a significant challenge for HMO landlords, who frequently deal with high tenant turnover and potential disputes. To mitigate risks, landlords must establish well-drafted tenancy agreements and ensure effective property management.

Stricter Fire Safety Regulations

 Local authorities are enforcing rigorous fire safety standards, requiring:

  • Properly installed fire doors with self-closers.
  • Smoke alarms in all communal spaces.
  • Monthly inspections to maintain compliance. Failure to meet these requirements can lead to hefty fines and even legal action.

Regulatory Variations Between Cities

HMO landlords managing properties across different cities face the added challenge of navigating varying local regulations. For instance:

  • Salford: Enforces additional licensing for 3-4 bed HMOs, coupled with stringent inspections.
  • Liverpool: Applies selective licensing in high-risk areas, requiring extensive planning permissions for new HMOs.
  • Bolton: Imposes detailed room size and amenity requirements, making compliance more complex.

Mr Liyanage concluded: “The HMO market continues to be a viable investment avenue, but with growing regulatory scrutiny, licensing obligations, and enforcement actions, landlords must be more vigilant than ever. Staying up to date with legislation, ensuring full compliance, and taking a proactive approach to property management will be essential for landlords looking to safeguard and maximise their investments.”

Notes for editorsOver the last 15 years, The Mistoria Group’s strategic approach has resulted in a varied portfolio encompassing more than 2,000 tenancies, including residential, student, professional HMOs, and commercial properties across eight branches in the North East and West. For more information on property sales, purchases, or joint venture opportunities, contact t: 0800 5003015 or https://mistoriaestateagents.co.uk/team-members/mish-liyanage/