The UK’s house in multiple occupation (HMO) market has expanded significantly in recent years, with licensing applications rising by 40% since 2018, according to new research from specialist landlord insurance provider Just Landlords.

Analysis of Freedom of Information data from local authorities shows that annual HMO applications have climbed from 41,162 in 2018 to 57,725, highlighting a sustained shift towards shared housing models.

REGIONAL VARIATION IN DEMAND

While growth has been recorded across the UK, activity varies considerably between locations. Edinburgh leads the market, recording an average of 5,158 applications each year, followed by Oxford with 2,458 and Bristol with 1,491.

London boroughs also feature prominently, with Southwark and Tower Hamlets among the areas with the highest levels of activity.

In terms of growth, Sandwell has seen the most dramatic increase, with applications rising by 964% between 2018 and 2024. Other areas experiencing sharp increases include West Lancashire at 886%, Tower Hamlets at 750%, Guildford at 742% and Waltham Forest at 481%.

Clark Ross, managing director of Just Landlords, said: “We’re witnessing a major evolution in the UK rental market. An increasing number of landlords are moving away from traditional lets in favour of HMOs, to help meet the growing demand for flexible, affordable housing solutions.

“We’re also seeing an interesting geographical shift in investment. While London remains a cornerstone of the market, there has been huge growth in the Midlands and the North, with some areas seeing application numbers increase by nearly 1,000% since 2018.”

RISING COMPLIANCE AND ENFORCEMENT

The expansion of the sector has been accompanied by a notable increase in regulatory oversight. Council inspections of HMOs have risen by 83% since 2018, while enforcement actions, including improvement notices and prosecutions, have increased by 180%.

Some areas are also seeing higher refusal rates for licence applications. Blackpool recorded the highest refusal rate at 70%, followed by Fenland at 51% and Sandwell at 48%. Armagh and Norwich also reported elevated refusal levels.

Meanwhile, Lewisham recorded the highest number of enforcement actions at 288 per year, with Wandsworth, Liverpool, Denbighshire and Camden also among the most active authorities.

SECTOR CONTINUES TO PROFESSIONALISE

Despite increased scrutiny in certain locations, the overall trajectory of the HMO market points to continued growth and greater professionalisation.

Ross said: “While our findings reveal an environment of tightened regulation, this should be seen as a positive step for the market. Higher standards protect the reputation of the sector and ensure that dedicated, professional landlords aren’t being undercut by sub-standard operators.

“As the sector continues to grow, the most successful landlords will be those who treat their compliance and insurance as the bedrock of their business strategy.”