What Are Student HMOs? and Are They Worth It For Landlords & Investors?
Student HMOs continue to be an attractive property investment opportunity for landlords, providing strong rental yields, impressive tenant demand and long-term tenancies.
Here’s our guide on what student HMOs are, including the pros and cons, trends in the student market and what areas landlords should consider when starting a property business and building a property portfolio.
Article updated: September 2025
Contents
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by Robert Jones, Founder of Property Investments UK
With two decades in UK property, Rob has been investing in buy-to-let since 2005, and uses property data to develop tools for property market analysis.
What Exactly is a Student HMO?
A traditional HMO is a house in multiple occupation. In simple terms, it is a shared house. In law, an HMO is a property rented out to three or more people who are not from the same household and share some amenities.
A student HMO is simply an HMO that students wholly occupy. It is distinct from other types of HMOs, such as HMOs aimed at professional workers or those on benefits.
It may have specific planning and licensing if it is an article 4 area, and its tenants may benefit from exemptions to council tax.
The Advantages of Student HMOs for Landlords
Student HMOs can offer landlords a number of advantages:
- HMOs can offer very high yields. And student HMOs can offer some of the highest yields of all HMOs. A traditional buy-to-let property investment may yield 8% gross rental income, whereas a student let in the same location may yield 15% gross and 10% net returns.
- There is exceptionally high demand for student HMOs in some student towns and cities with populations growing rapidly and housing supply growing slowly.
- Tenant turnover is lower than other HMOs. Students will normally stay for the whole academic year and pay for rent for the whole year, rather than a 6-month AST.
- Students can be exempt from council tax, which in a professional HMO, may be a cost the landlord pays out of pocket, so there are sometimes savings when renting to students instead of other types of tenants.
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The Disadvantages of Student HMOs for Landlords
Alongside the benefits, there are also some possible disadvantages of student HMOs:
- As with HMOs generally, the set-up costs for a student HMO are higher than for a simple buy-to-let. Our HMO costs calculator can help you assess the true return on investment and net yields.
- Student HMOs have a reputation for being harder to run and manage than other HMOs. There can be problems with parties, noise and rubbish etc. and complaints from neighbours.
- Wear and tear on a property can be higher with student HMOs than might otherwise be the case.
- Bills are usually included with the rent, as with other types of HMOs, although this can be problematic in times of high utility costs, if tenants spend alot of time in the property and use more utilities like electricity and heating than the average tenant.
- There is competition from university halls and privately run student accommodation blocks in some student towns and cities. This has reduced the demand for student HMOs in some places.
- Student HMOs can have unavoidable void periods in the summer when students often go back home. Depending on local competition and how tenancies are run, there may be no rental income during this period.
- The rules and regulations covering student HMOs can be complex.
- The standard of accommodation needed in a student HMO is higher than in the past. This is both to meet student (and parent) expectations and to stay competitive with other types of student accommodation. For example, students often expect contemporary decor, large bedrooms, the latest in entertainment systems and superfast broadband.
The Size of the Student Accommodation Market
Student numbers have grown considerably in the last few decades and students now represent a massive market for accommodation.
According to HESA figures in 2000-2001, there were around 1.99 million HE students in the UK. By 2020-2021, this had grown to approximately 2.75 million, a significant 38% increase.
In major university cities, between the 2011 census and the 2021 census, the total population of Manchester saw a 9.70% growth, the total population of Birmingham saw a 6.7% growth, and London's population saw a 7.11% growth rate.
Student numbers have been increasing at a significantly higher rate than the general population, and the vast majority of these students are in the market for local accommodation, including both university housing and properties provided by private landlords like HMOs.
Trends in the Student HMO Market
The student accommodation market has also changed considerably in the last few decades, and trends from the Education Policy Institute show an increase in students living in their own home or at home with parents due to major pressure on affordability.
To help provide affordable accommodation, significant investment is being made in to PBSA, like this £440 million pound investment in the student investment market in Manchester, growing accommodation from 770 beds to 2,300 new student beds across its All Saints Campus.
The emergence of purpose-built student accommodation is growing as it's the only way to add significant housing for students in a condensed area and in one development.
For many local councils, this is seen as preferable rather than taking many traditional Victorian or Edwardian family homes and converting them to houses of multiple occupation for 5,6 or 7 students at a time.
Student HMOs continue to be very popular with students however as they enjoy the feeling of home, their own space and smaller groups living together with communal spaces more suited for a group of friends rather than 100's of people they don't really know.
As PBSA accommodation is often newly built it can also be expensive and is accessible mainly to well-off students and particularly students from abroad. University halls usually have many rules and regulations and do not always offer young people the student experience they are looking for compared to living in a smaller house of multiple occupation with a handful of other students.
Many students, especially after their first year, prefer to live in a house share with their friends. Student HMOs generally also offer good value for this reason compared to the other accommodation options.
How to Find the Best Locations for a Student HMO
It goes without saying that student HMOs will only work in towns and cities with one or more universities. However, there is a little more to it than that: In most student towns and cities certain areas tend to be most popular amongst students as places to live. These are areas which already have lots of student accommodation and the shops, bars and eateries that are popular with students.
It is usually the case that the nearer a student HMO is to the university campus the better. The most popular student HMOs tend to be within a 25 minute walk/1 mile distance or a short bus ride from campus.
The Best Towns and Cities for Student HMO Yields
This report from Paragon Bank suggests that the top 20 best yielding student property locations currently are (highest first):