HMO lending requirements are becoming increasingly varied, as landlords tailor houses in multiple occupation (HMO) to appeal to clearly defined tenant groups, according to new research from Paragon Bank.
For brokers, this shift is translating into more nuanced borrowing needs, shaped as much by tenant positioning as by property fundamentals.
The findings show that 92% of landlords actively prepare or present their HMOs to attract a particular tenant type, with students the most commonly targeted group at 36%, followed by white collar or professional workers at 25% and young single tenants at 19%. This targeted approach is influencing the types of HMO lending propositions brokers are being asked to place, both at acquisition and refinancing stages.
A quarter of landlords now prioritise ensuite bedrooms when identifying HMO investment opportunities, while 19% favour locations close to work hubs or transport links. Larger bedroom sizes, cited by 19%, and improved energy efficiency, cited by 23%, also feature prominently in acquisition decisions, with implications for how brokers assess refurbishment finance and exit strategies.
Investment activity reflects this positioning:
- 62% of landlords have improved an HMO within the last six months
- A further 24% have done so within the past year
- 58% are undertaking upgrades beyond minimum legal requirements
- Half are carrying out regulatory or compliance-focused improvements
Tenant expectations are also shaping the specifications brokers need to account for when placing HMO lending cases, with demand rising for faster broadband, cited by 40% of landlords, ensuite facilities at 39% and inclusive bills at 33%.
Louisa Sedgwick, managing director of mortgages at Paragon Bank (pictured), said: "These findings show how the HMO market is continuing to evolve, with landlords taking a more targeted and strategic approach to their investments.
"Many are now clearly identifying the tenant groups they want to attract and shaping their properties accordingly, which is influencing decisions around layout, location and the amenities being offered.
She added, "For brokers, this highlights how varied HMO propositions can be, with borrowing requirements increasingly shaped by property specification, refurbishment plans and the rental positioning landlords are aiming to achieve.
"This creates opportunities to engage with clients at both the acquisition and refinancing stages, particularly where landlords are repositioning properties or building portfolios focused on defined tenant segments. Lenders with experience in more complex propositions, including HMOs, are well placed to support these requirements."
