Paragon Bank says 28 percent of HMO landlords expect to spend more than £10,000 on property improvements over the next 12 months, with another 15 percent budgeting between £5,001 and £10,000.
The new figures add fresh detail to where HMO operators are putting money as compliance costs, tax pressure and tighter standards keep building. Paragon said 62 percent had already carried out improvements in the previous six months, while 18 percent were already in the middle of further upgrade work when the research was compiled.
That leaves landlords with a clear short-term choice. The strongest HMO investors still appear willing to keep spending, but the figures also show how far the sector has moved away from passive ownership. Higher-yielding shared housing can still pay, yet it now demands more capital, more oversight and faster responses on standards.
Compliance and energy work are driving spend
Paragon said the planned outlay ranges from decoration and kitchen or bathroom work through to compliance upgrades such as fire doors and alarms, alongside energy-efficiency measures. More than half of respondents – 54 percent – said they were extremely likely to undertake further improvements over the coming year.
That emphasis on compliance matters because HMO landlords are being pushed from several directions at once: licensing conditions, safety standards, future energy rules and the need to keep shared homes lettable in a more competitive market. Landlord Knowledge recently reported that Paragon’s HMO research found many operators already ahead on EPC upgrades, suggesting this latest spending wave is not only cosmetic but tied to keeping stock usable and compliant.
There is also a practical warning in the numbers. A landlord planning major HMO works may be able to protect rents and occupancy, but the upfront cash requirement is becoming much harder to ignore – especially for smaller operators dealing with tax drag and higher borrowing costs than they faced a few years ago.
Long-term HMO operators still back the sector
Three-quarters of the landlords in Paragon’s study had let their HMO for at least 10 years, and around 80 percent said they planned either to maintain or expand their wider portfolios in the next year. Paragon also said HMOs generate an average yield of 8.90 percent across its data, the highest of any property type it tracks.
This follows Landlord Knowledge’s July report on Paragon’s HMO yield figures, which found shared housing was still producing the strongest average returns in the lender’s book. The latest spending data suggests those higher yields are being defended by ongoing reinvestment rather than enjoyed as easy margin.
Louisa Sedgwick, managing director of mortgages at Paragon Bank, said many HMO providers remained experienced operators taking a long-term view of the sector. She said the level of planned expenditure showed landlords were focused on maintaining quality, supporting compliance and keeping properties well positioned over time.
What this means for landlords
- If you’re running HMOs: budget for recurring upgrade costs, not just one-off refurbishments, especially where fire safety and energy work are stacking up together.
- Watch for: any gap between headline HMO yields and the capital spending needed to keep rooms compliant, competitive and financeable.
- Bottom line: HMOs are still delivering strong returns for experienced operators, but those returns are increasingly tied to regular reinvestment.
Editor’s view
There is still money in HMOs, but this is no longer the corner of the market for landlords who want to coast. The Paragon figures point to a more demanding reality: better returns are still available, but they increasingly belong to operators willing to keep spending to protect them.
Author: Editorial Team – UK landlord & buy-to-let news, policy, and finance
Published: 01 September 2026
Sources: Paragon Bank research
Related reading: Paragon: HMO yields push landlord returns above 7%
