The HMO market has been valued at £78million and generates annual rental income of £6.3million.

New analysis from HMO management platform COHO highlights that there are an estimated 182,554 HMO properties in England and Wales.

The average value of an HMO property in these nations is £293,197 and it has a typical annual rental income of £29,715.

The calculations were based on figures from the Office for National Statistics (ONS) and Landlord.io.

A total of 74% of the 182,554 HMO properties in England and Wales are shared by three or four tenants, while 26% have five or more tenants.

Regional differences

In London, HMOs generate an average annual rental income of £40,169, meaning that the capital’s entire stock creates an annual rental income of £2.5billion.

While London has the largest combined HMO rental income, individual properties generate the most rental income in the South East, where each HMO averages £46,042. It gives the region a combined rental income of more than £1.1billion.

In the South West, the HMO market generates rental income of £747.3million, and £419.2million in the North West.

Yorkshire & Humber is home to the lowest average HMO value at £196,014  and second-lowest average rental income at £21,208. However, its large market means that it outperforms Wales and the North East for both combined stock value and combined rental income due to the latter two regions having HMO markets less than half the size of Yorkshire's.

Meanwhile, the East Midlands commands the lowest average annual rental income per property at £20,223, but due to a healthy average HMO value of £236,779, its total stock value of £2.9billion is higher than Yorkshire & Humber, Wales, and the North East.

Significant force

Vann Vogstad, of COHO, said: “HMOs are a significant force on the national rental market, generating a combined rental total of well over £6billion every year.  

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

He claimed tenants are willing to pay as much as 10% more in rent in exchange for a heightened HMO experience, including the opportunity to live with housemates whose personalities and lifestyles are a good match for their own.

He suggested further premiums might be available for HMO properties, including if they have high quality finishes, strong landlord communication, efficient financial processes, and speedy maintenance management.

He concluded: “The HMO market’s value is going to keep increasing, not only due to 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.”

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