A significant increase in Houses in Multiple Occupation (HMOs) across Britain is prompting concerns among residents about the loss of family homes and the impact on communities. Property experts suggest that tax changes and rental legislation introduced by the Labour party are compelling private landlords to convert traditional family houses into smaller rental units, often referred to as bedsits or house shares, to maintain profitability.
In affluent areas like Southfields, London, near the All England Club, residents are contesting developments where family homes are being divided into multiple bedsits. One three-bedroom property, purchased for £1.3 million, was reportedly converted into six separate rooms, a move neighbours fear could lead to further similar conversions. Residents' associations have raised concerns about the strain on local services, increased traffic, and the transient nature of tenants in HMOs, which can disrupt community cohesion.
This trend is partly attributed to changes in stamp duty and rental laws. Last year, the stamp duty surcharge on additional homes was increased to 5%, adding thousands of pounds to property purchases for landlords. Furthermore, the Renters' Rights Act has altered tenancy agreements, abolishing fixed-term contracts. This change allows tenants to leave with two months' notice, potentially leaving landlords with unexpected vacancies and the responsibility of mortgage and council tax payments until new tenants are found. The act also empowers tenants to challenge rent increases, incentivizing landlords to seek alternative revenue streams.
Experts indicate that converting a family home into an HMO can yield up to four times more rental income compared to a traditional family let. While large HMOs, defined as properties rented to at least three unrelated people, require a license, many smaller conversions may not necessitate planning permission or a license, making it difficult for local authorities to track their exact number. Data from over 220 councils shows a rise in HMO applications, with 57,725 lodged in 2024, up from 41,162 in 2018.
Concerns have also been raised about the role of HMOs in housing asylum seekers. Some estimates suggest that up to 10% of UK landlords are exploring deals to lease properties to councils, charities, or private firms like Serco, which house asylum seekers on behalf of the Home Office. Reports suggest that landlords are receiving substantial payments for these arrangements. For instance, a four-bedroom property that might rent for £750 a month could yield £1,500 when rented through Serco to house asylum seekers.
Local authorities and politicians are responding to these developments. In Banbury, Oxfordshire, residents have petitioned for protection against the conversion of family homes into high-density HMOs. In Guildford, Surrey, some neighborhoods reportedly have as many as 70% of homes converted into HMOs, driven by demand from students and NHS workers. Labour councillor Howard Smith noted that landlords can outbid families for properties, converting them into HMOs, a practice that has become a significant issue in some areas.
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. Conservative shadow housing secretary Sir James Cleverly argued that Labour's tax policies and regulations have made traditional lettings less viable, pushing landlords towards the HMO market. He also pointed to rising rents and a shortage of new homes, along with Labour's policy of housing asylum seekers in HMOs, as contributing factors to the increasing pressure.
Jim Halibuton, a landlord managing a large portfolio of HMOs, acknowledged that while profitable, he would be hesitant to live next door to such a property due to past negative experiences. The situation highlights a complex interplay of economic incentives for landlords, legislative changes, and community impact, with ongoing debate about the appropriate balance between rental market dynamics and the preservation of traditional housing stock and neighborhood character.