HMO landlords keep investing despite £10,000 improvement costs

More than a quarter of house in multiple occupation (HMO) landlords - 28% - now expect to spend over £10,000 on property improvements in the next 12 months. That's according to research from Paragon Bank via Mortgage Solutions (26 August 2026), and it's the single most common answer landlords gave. Despite the bill, landlords aren't retreating: 80% plan to grow or hold their portfolios over the same period.

Where the £10,000 is going

The work isn't just cosmetic. According to Paragon Bank (26 August 2026), landlords are funding a mix of presentation updates, regulatory or compliance upgrades, safety improvements such as alarms and fire doors, and energy-efficiency works.

A further 15% of landlords expect to spend between £5,001 and £10,000 over the next year, according to the same research. Add that to the 28% already planning to spend more than £10,000, and 43% of HMO landlords are budgeting over £5,000 on improvements alone.

In practice this means safety and compliance items - not paint and carpets - are taking the largest share of many landlords' improvement budgets. Alarms and fire doors are the kind of items councils commonly attach as conditions to HMO licences, so this spend tends to recur rather than tail off. If you hold a licensable HMO, you may wish to check your current licence conditions against your planned works before you commit the budget, using the HMO valuation calculator to see how the works stack up against value.

Portfolios keep growing despite the cost

Landlords aren't scaling back to dodge the bill. 80% of HMO landlords told Paragon Bank they intend to either increase or maintain their portfolio size over the next 12 months, according to the same research (26 August 2026).

Investment activity backs this up. 62% of HMO landlords improved a property within the last six months, and a further 24% did so within the past year, according to Paragon Bank (26 August 2026) - between the two figures, the clear majority of HMO landlords have carried out improvement work recently.

Looking ahead, 54% said they were extremely likely to carry out further improvements in the next 12 months, while 18% are already in the process of upgrading properties. Between recent activity and what's planned, spending on HMO stock shows little sign of slowing. If you're weighing whether to expand, the property investment strategies hub breaks down how to balance growth against ongoing improvement costs.

Why the numbers still add up

Landlords keep spending because HMOs are still outperforming other lettings. 82% of HMO landlords said the properties provide better rental yields than other residential lettings, and 79% reported stronger returns overall, according to Paragon Bank (26 August 2026).

Paragon Bank's own lending data backs the sentiment: HMOs generated an average yield of 8.9% in the second quarter of 2026, outperforming every other property type it tracks.

"What stands out is that landlords are continuing to invest as standards, costs and regulation evolve," said Louisa Sedgwick, managing director of mortgages at Paragon Bank (26 August 2026). "The level of planned expenditure suggests that many are focused on maintaining quality, supporting compliance and ensuring their properties remain well-positioned over the long term."

In practice this means the spend isn't wasted money. It's what's underpinning the yield gap. If you're planning improvement works alongside refinancing, you may wish to run the numbers through the stress test calculator first, then check how the works affect the property's value using the HMO valuation calculator before you commit. For a wider look at funding options, the free resources hub has further tools and guides.

Key takeaways

- 28% of HMO landlords expect to spend over £10,000 on improvements in the next year, the most common response in Paragon Bank's research (26 August 2026) - 62% of HMO landlords improved a property in the last six months, and a further 24% did so within the past year (Paragon Bank) - HMOs delivered an average yield of 8.9% in Q2 2026, ahead of every other property type Paragon Bank tracks - 80% of HMO landlords plan to grow or hold their portfolio size over the next 12 months - 54% say they're extremely likely to carry out further improvements in the next year, and 18% are already mid-upgrade