By James Wilmore with quotes from Charles Ferguson-Davie
While US president Donald Trump’s tariffs have shaken the world, some in the property sector are shrugging off the chaos. Among those is asset manager Moorfield Group, which is hoping its investment in one particular subsector – student houses in multiple occupation (HMOs) – will not be hit.
“One of the reasons we’ve been investing in student HMOs – and other living sector assets – is we feel we’re less exposed to some of these geopolitical shocks to the economy,” says Charles Ferguson Davie, the company’s co-chief executive and chief investment officer.
Moorfield Group now has around 300 student HMO properties in its portfolio, including in Derby, Lancaster, Leicester, Lincoln, Liverpool, Manchester and Sheffield. “We’d like to target more cities in due course,” says Ferguson Davie.
Student HMO provision garners far fewer headlines than the purpose-built student accommodation (PBSA) sector, but accounts for a larger share of the student market, although there are no definitive figures on how many students live in the 476,076 registered HMOs in England.
Richard Ward, head of research at property search website StuRents, says demand remains high for HMO accommodation, largely because it is typically cheaper than PBSA.
“Our analysis shows most UK students are searching for accommodation well below £200 per person per week – a price point rarely met by new PBSA,” he explains.
Ward adds that there remains a “pricing disconnect between what students can afford and what’s being built”.
We feel we’re less exposed to some of the geopolitical shocks to the economy
Charles Ferguson Davie, Moorfield
So, could ongoing demand for affordable student accommodation lead to a resurgence in the student HMO market?
Figures from agency CBRE last year estimated there was an unmet demand of around 600,000 bed spaces. According to Knight Frank, 16,382 PBSA beds were delivered across 63 schemes in 2024 – a 3% rise on the previous year. However, this was still well down on the five-year pre-pandemic average of around 25,000 beds.
Home from home: Moorfield has around 300 student HMO properties in various locations including Manchester
Yet student numbers show little sign of abating. The latest data from student admissions service UCAS shows that the number of people accepted on to courses last September was 498,340, a rise of nearly 1%. And UCAS is predicting that the UK could hit one million university applicants in 2030.
But PBSA developers are struggling to deal with demand. The sector has grappled with issues familiar across the property world: rising development costs, planning issues and, of late, the added problem of gaining approval from the Building Safety Regulator for high-rise blocks at planning gateways 2 and 3.
An ‘unconsolidated’ sector
The HMO sector therefore provides an alternative way to fill the gap. But even here, it is not plain sailing for investors. “It’s quite a ‘bitty’ sector where it’s very hard to get to the scale and quantum that a large investor wants,” says Richard Valentine-Selsey, Savills’ head of European living research.
“What holds it back is that it’s very unconsolidated. It’s about trying to find the right opportunities. For some, it’s much easier to write a £50m cheque for PBSA than it is to spend the same amount of money on buying up HMOs.
“With HMOs, it requires more digging around for where the stock is and who owns it.”
Going for growth: Moorfield hopes to boost its student HMO portfolio
Managing the properties also presents a challenge. David Burke, a relationship director at specialist lender Secure Trust Bank, says: “The management of an HMO property is more intensive than [it is with] a PBSA block, so you are likely to see more specialist firms in HMO.
“We have clients who will focus on a particular city and look after 25 to 30 properties. That’s not really a particularly attractive portfolio for a pension or a fund, because it requires more intensive management.”
Last year, the bank provided operator Student Tribe with a £10.5m loan to refinance its student HMO portfolio. Burke says: “We’ve done several transactions over the past 18 months, but we’re a specialist lender so we look for the right customer in the right market.”
The reputation of HMOs has also been a problem historically, with squalid housing seen in TV shows like The Young Ones lingering long in the national memory.
There remains a pricing disconnect between what students can afford and what’s being built
Richard Ward, StuRents
Issues such as noise and overcrowding are among the concerns and have resulted in plenty of councils getting tough on HMOs. Many local authorities use Article 4 directions to restrict the conversion of properties to HMOs. In one crackdown, North Lincolnshire Council adopted tougher rules in March this year, which will mean all HMOs regardless of size will have to go through the full planning permission process.
But those in the HMO space regard this negativity as an opportunity to change the narrative. “We think we can do a better job by professionalising the sector, improving standards and offering our customer – the student – a better experience,” says Ferguson Davie. “We can create a portfolio of scale without having to develop.”
As part of the improvements, Ferguson Davie says Moorfield now has solar panels on nearly all its student HMO portfolio. He adds: “We also felt that PBSA was getting quite expensive and increasingly targeting international students.”
Quicker refurbishment
HMOs do have some advantages over new-build PBSA. The refurbishment of an HMO is generally quicker and less expensive than a ground-up development. “With retrofitting, if you’re not having to completely strip out everything, then you can make it work more easily,” says Valentine-Selsey.
But lurking on the horizon are a number of challenges for student HMO operators, particularly the Renters’ Rights Bill. The proposed legislation includes the abolition of fixed-term tenancies, which means students in HMOs will be able to give just two months’ notice to end their tenancy. On top of this, the abolition of Section 21 will end so-called ‘no-fault’ evictions.
However, a new ground for possession is set to be introduced, which will allow landlords renting to students in HMOs to seek possession ahead of each academic year.
Valentine-Selsey believes these challenges could create opportunities for investors and developers to acquire HMO stock if some operators exit the market because of the additional rules. “You could see in the next year or two more properties coming to the market,” he says.
But it is still unlikely to tempt the major PBSA operators. For example, Property Week understands that Unite Students is not looking at the HMO market and is focusing on developing PBSA assets.
Meanwhile, Kosy Living, another large PBSA operator, is also ruling it out. “Operationally, for us it would just be too expensive to start managing HMOs,” says the firm’s managing director Mark Hughes. “It’s too labour intensive with all the regulations.”
For the time being, it appears that student HMOs will remain a niche pursuit for smaller investors. But for those prepared to take the risks, the rewards are there.
“It’s always created a bit of a barrier for some of the larger investors, because it’s very bitty to get money out of the door,” says Valentine-Selsey. “But if you can make that work, then you can do very well from it.”
Student Homes Management
Student Homes Management, a private equity manager, is among the companies looking to grow in the HMO space. It currently has around 2,000 beds across 13 university cities, but co-founder Nathan Van Paesschen says the firm has big ambitions: “We’re aiming for 10,000 beds in the next four years.”
He believes most students want to live in HMOs rather than PBSA. “The reality is that after a night out, you just want to sit in the kitchen with your five best friends and tell stories so nobody is overhearing you,” he says. “That’s never going to happen in a communal area of a building of 200 people.”
Van Paesschen adds: “Students don’t really care about sitting in a flashy, purpose-built block at £300 a week while they could have the same and probably a better experience at £150 a week in an HMO.”
He is also not overly concerned by the tougher regulations due to come into force. “From our point of view, all the regulatory challenges are an opportunity,” he says. “It clearly restricts the market. But if the supply is limited, it will push up demand and that will push up prices from an investor’s perspective.”
Nevertheless, Van Paesschen argues that when it comes to the Renters’ Rights Bill, there should be a “level playing field between PBSA and HMOs”.
“We don’t think either should be captured in the Renters’ Rights Bill. I think it’s a potentially big mistake,” he says.
But if more landlords sell up because of the bill, he sees this as an opportunity: “Ultimately, what we want to do is consolidate the market. Only a very small percentage of student HMOs are owned by professionally organised landlords. But if everything is much more regulated, that instils confidence for investors.”