A growing number of traditional family homes across Britain are being converted into Houses in Multiple Occupation (HMOs), often referred to as bedsits or house shares, a trend attributed by critics to recent tax increases and rental reforms enacted by the Labour party.
In affluent areas like Elsenham Street in south-west London, residents are expressing alarm over the proliferation of these conversions. A case in point involves a three-bedroom Victorian terraced house that was purchased by developers for £1.3 million and subsequently divided into six separate bedsits. Neighbors fear this is the beginning of a broader change, potentially transforming family residences into rental accommodations.
Experts suggest that tax changes, including a 5% stamp duty surcharge on additional properties introduced by Rachel Reeves, are making it financially challenging for landlords to maintain traditional rental models. This has incentivized them to "slice and dice" family homes into multiple rental units to offset costs and increase profits.
Furthermore, Labour's Renters' Rights Act, which abolishes fixed-term contracts and allows tenants to leave with two months' notice, is cited as a factor. This legislation can lead to sudden loss of rental income for landlords, who then must cover mortgage and council tax payments until a new tenant is found. The act also empowers tenants to challenge rent increases, further pressuring landlords to maximize revenue from their properties.
In the Elsenham Street example, a property that could previously rent for £3,000 to £5,000 per month to a single family could now generate up to £9,300 monthly by renting out six individual rooms, often to young professionals. In less affluent areas, it is reported that up to 300,000 landlords are considering leasing properties to local authorities, charities, or companies like Serco for housing asylum seekers or vulnerable individuals.
Campaigners argue that the rise in HMOs leads to a loss of much-needed family homes, disrupts local communities, and contributes to issues such as parking shortages, overflowing bins, and a transient population of tenants.
Official figures indicate a significant increase in HMO applications. Freedom of Information requests to over 220 councils revealed 57,725 HMO applications in 2024, a substantial rise from 41,162 in 2018. However, the true number of HMOs may be higher, as many smaller conversions do not require planning permission or a license, leaving councils unaware of their full extent.
Residents in various areas, including Banbury and Guildford, have launched petitions and voiced strong objections to proposed HMO developments, citing concerns about density and neighborhood character. In some Guildford streets, an estimated 70% of homes have reportedly been converted into HMOs, primarily driven by demand from students and NHS workers.
Concerns have also been raised about the government's use of HMOs to house asylum seekers. Reports suggest that incentives from the government make housing asylum seekers through third-party companies more lucrative for landlords than traditional rentals. For instance, a four-bedroom property that might rent for £750 as a family home could command £1,500 when used to house asylum seekers.
A government spokesperson stated that councils already possess powers to limit HMO numbers and that the government is considering stricter rules to enhance local control. However, Conservative shadow housing secretary Sir James Cleverly has argued that Labour's policies are directly contributing to the rise in HMOs by making family home lettings less viable and increasing demand due to soaring rents and a lack of new housing construction.