The UK, particularly its popular cities like London, attracts local and international students who wish to take advantage of its world-class education system.
Before the pandemic, nearly 500,000 students from around the globe enrolled in its universities and colleges. Meanwhile, over 340,000 outside of the European Union packed their bags to study here.
This number provides an attractive income opportunity for properties located near schools and urban areas. They can actually convert them into a house in multiple occupation (HMO).
What Is HMO?
Broadly speaking, HMO refers to properties with at least three tenants who don’t belong to the same household. In some areas of the country, however, the definition may be more specific.
For example, it may imply a house that shelters three people who belong to at least two different households. Let’s say a single person occupies one room while two people, such as a couple, stay in another.
Also known as a house-share arrangement, the residents, now tenants, share communal spaces. These can include bathrooms, lounges or living areas, hallways, dining, kitchen, and yard.
HMO, for many landlords, can be a lucrative business, particularly if they are planning to market to students:
- They can expect a stable rental income for many years. Students are likely to live in the area for at least two or more years, depending on their program.
- Landlords cannot charge high rent to students. In 2020, the average amount students spend on accommodation is around £550 a month. In cities like London, it can be a bit more at over £630. On the other hand, letting the house to a single household or person may be worth more than £750 monthly. However, landlords may still end up earning more because of the volume of tenants.
- The cost of marketing is low because of high demand and long-term stay. They can also approach estate agents specializing in HMOs if they need more support in promoting their property.
How to Convert a House into an HMO
To enjoy the benefits, though, a potential landlord needs to know what it takes to convert their space into an HMO:
1. HMO Licence
The rules for licensing can vary among cities or towns. The best way to know the qualifications and the requirements is to talk to the local council.
However, as a general rule, one may have to obtain a license if it is a large HMO. This means that the house has a minimum of five tenants accounting for two or more households, sharing many communal spaces. Further, at least one of these residents pays their rent out of pocket or via sponsorships (such as their school).
Landlords need to note that the licenses may identify the maximum number of people to live in the space. If they want to accommodate more, they may need to apply for another one and even argue their position to the council. Often, councils refer to certain guidelines, one of which is the minimum room sizes.
2. Minimum Room Sizes
Before 2018, following the minimum room sizes for HMOs was optional. The suggested sizes of the spaces also varied depending on the council. That is until three years before.
In 2015, the Clark vs. Manchester City case helped change the rules on minimum room sizes after one of the HMO landlords disputed the decision of the council to reject his license application that would have allowed him to accommodate six instead of only five people.
Under the new guidelines, an HMO needs to meet the minimum standard room sizes to get approved for a license. In general, the minimum area for a room that can sleep someone over 10 years old is at least 4.64 square meters.
If any of the rooms is less than 4.64 square meters, the HMO landlord needs to notify the local housing authority immediately. However, it cannot be used or converted into a sleeping accommodation unless the property owner can expand the size. The biggest room measures at least 10.22 square meters, but this one can sleep only two people.
3. Suitable for Human Habitation
The basic guideline in converting a house into an HMO is simple: make sure that it’s habitable. There’s enough space for everyone to move around, sleep well, and enjoy their privacy. To ensure this, HMO landlords need to follow the provisions of the Homes (Fitness for Human Habitation) Act 2018.
Based on the amendments, landlords should guarantee habitable conditions from the beginning to the end of the tenancy agreement. Tenants, meanwhile, will have greater power when it comes to making these property owners accountable for this. This includes having the ability to sue on the grounds of poor maintenance.
Before a property owner can enjoy the rewards of the conversion, they need to be aware of the laws and guidelines in HMO.