In recent years, the dynamics of the rental market have evolved dramatically. Rising demand, constrained supply, and escalating rents have all contributed to a growing shift in tenant preferences — and one standout trend is the surge in co-living.
Once considered a niche or short-term solution, shared living is now a sophisticated and strategic lifestyle choice for a growing segment of renters. For property investors, this evolution has unlocked a highly attractive asset class: Houses in Multiple Occupation (HMOs).
Co-Living Moves Upmarket — And So Do Investor Returns
As rental competition intensifies, particularly in high-demand urban areas, co-living offers tenants a more affordable yet increasingly premium alternative to traditional lets. In tandem, savvy landlords are capitalising on this shift — with BuyAssociation and numerous investment platforms reporting a sharp uptick in HMO-related enquiries.
But this is not just a story of rising demand. Tenant expectations are rising too.
Today’s renters are far more discerning. They seek more than just affordability; they prioritise lifestyle, location, and quality. As a result, the HMO landscape is undergoing a transformation. The modern HMO is no longer a basic shared flat — it is a purpose-designed, professionally managed property that commands strong rents, attracts long-term tenants, and delivers exceptional yields.
Indeed, recent data from the Office for National Statistics (ONS) values the UK HMO market at a remarkable £78 billion, generating over £6.3 billion in annual rental income. For investors, this marks a compelling opportunity to access both yield and growth — provided the right strategy is in place.
What Today’s Tenants Want — And Why It Matters to Investors
A new report from property management platform COHO sheds light on what drives tenant decisions when it comes to shared living — and it holds key insights for those looking to build or expand their HMO portfolios.
Affordability remains the number one motivator, with 58% of tenants citing cost as their main reason for choosing shared housing. HMOs, by design, offer significant savings over renting solo, especially in desirable areas where rental premiums are high.
Yet affordability is only part of the equation. The report found that tenants are increasingly willing to pay higher rents for properties that meet specific criteria — including high-speed internet, well-maintained communal areas, and professional property management.
Location came in as the second most important factor. Proximity to workplaces, transport links, and social hubs is paramount. As the report notes:
“Tenants want to live near work, friends, and everything else that makes life easier or more enjoyable.”
Well-located HMOs enable this, often without the rental premium that comes with solo lets.
All-inclusive bills are another critical feature. Simplifying household finances creates predictability and removes friction among housemates. In an age of rising utility costs, this level of transparency and convenience is increasingly non-negotiable.
Tenant compatibility also emerged as a major driver of satisfaction — and retention. Shared living is inherently social, and poor household dynamics can quickly lead to voids. Robust tenant vetting and a thoughtful approach to occupancy are no longer optional; they are essential.
The Investor Advantage
For landlords, the HMO model offers a distinct advantage: multiple revenue streams from a single asset. Even if one room becomes vacant, the rest of the property continues to generate income — significantly reducing exposure to full-property voids.
Moreover, because each room is let on an individual tenancy, the total rental income typically outperforms that of a traditional buy-to-let. Combined with growing tenant demand, this makes for a resilient, high-yielding investment.
And the demand is only set to rise. According to COHO, 77% of tenants not currently in shared accommodation would consider it in the future, while 39% of current HMO residents intend to stay — a strong indicator of shifting long-term rental preferences.
The New Normal in Residential Lettings
The modern tenant doesn’t just want a place to live — they want a place that enhances their lifestyle. HMOs, when executed well, meet this need. As co-living becomes an intentional, long-term choice rather than a stopgap, investor opportunities are only expanding.
As COHO puts it:
“We’re entering a new phase of the rental market where shared housing is a long-term choice. As expectations rise, those who stay ahead of the curve will have the edge — not just in demand, but in loyalty, retention, and reputation.”
For investors looking to future-proof their portfolio and tap into a fast-growing market, high-spec HMOs represent a compelling route to strong returns, reduced risk, and long-term tenant value.