Co-living vs HMO: What’s The Big Difference?

Are you torn between the tried-and-tested HMO model and the upscale appeal of Co-living spaces? While both cater to the shared accommodation market, they offer vastly different tenant experiences. HMOs primarily focus on functionality and practicality, typically providing basic amenities and simple communal areas. On the other hand, modern Co-living spaces aim for something more upscale, attracting tenants keen on building a strong sense of community and premium amenities. In essence, Co-living is the evolution of mainstream HMOs. Which one aligns better with your investment strategy? Explore the contrasting features of HMOs and co-living to find out more.

What is an HMO property?

Standing for either “houses of multiple occupancy” or “houses in multiple occupation,” the term HMO began to become more frequent as the population grew in the 20^th century, and the idea of every “household” having a building of its own became old-fashioned.

One of the first recorded citations of the term is in the Housing Act 1985, which defines an HMO as “a house which is occupied by persons who do not form a single household.”

That begs the question – “what’s meant by a household?” Regarding the UK housing terminology, a household can be either a single person or a group. In the case of a group, it will be a family or people living as a family, for example:

• Two people who are married or living together
• A group of relatives or half-relatives
• Step-parents and step-children

In simple terms, a household is a group of people who make a conscious decision to live together, whether or not they are related by blood or wedlock.

HMOs are designed to house more than one household, often meaning tenants who don’t know other residents until they move in together. Although they may share the same building and address for the long term, the occupants will still be classed as individual households.

WHAT MAKES A PROPERTY AN HMO?

An HMO is a property occupied by three or more individuals living as more than one household. Each tenant typically contributes their share of the rent to the landlord. While an HMO doesn’t necessarily have to be a house —as a flat can also operate as an HMO—it must be a single address rather than multiple independent units.

In an HMO, residents usually have private bedrooms but share communal spaces such as living rooms, kitchens and bathrooms. HMOs are a style of housing often taken up by students, young workers, and people taking their first step into a home of their own —or at least away from their parents.

WHY DO HMOS GET A BAD RAP?

Sadly, the term HMO has often been linked with poor-quality housing and landlords cutting corners. Historically, the theme emerged from fire safety legislation and efforts to ensure landlords met their responsibilities in buildings where several households live.

Of course, fire safety and having the right equipment should never be overlooked. They remain critical issues that property builders and owners should never compromise on.

However, the responsible and aspirational landlord is changing this narrative, moving beyond just meeting basic safety requirements. Such landlords strive to attract discerning tenants by providing high-quality living spaces. Rather than conforming, they shift the perception of HMOs from substandard living to an appealing housing solution.

The debate over HMOs often centres on whether they are a necessary response to the growing housing shortage or an exploitation of the wage gap and the cost of living. Critics argue that some landlords take advantage of people’s desperation for accommodation, leading to overcrowded and poorly maintained properties.

While these concerns are valid, it’s essential to recognise the potential of HMOs. I believe we have to move into a setting where multiple occupancy is to provide ethical and attractive housing solutions.

At HMO Architect, we want to tempt a new brand of landlords—one with a passion for design and high-quality living, to consider new ways to allow several households to live under one roof. We can achieve that through Co-living spaces, moving towards a more modern and desirable form of HMO.

Are you a property landlord looking at an HMO Conversion with the highest standards?

CO-LIVING AND HMOS: WHY SHARED LIVING IS HERE TO STAY

With the rising popularity of shared accommodation and its promise of long-term growth, property investors continue to venture into the HMO model —a highly regulated, competitive, yet lucrative market. Now, let’s look at these alternatives from another angle.

Did you know that over 10 million more people live in the UK today than in 2000? This number is projected to increase by at least another 4 million by 2050. Yet, the amount of land available remains the same and could even decrease due to the impacts of climate change over the coming decades. This population growth poses a significant challenge for architects and developers, especially in big cities.

As our population grows, inventive housing solutions are essential to ensure everyone has a roof over their head and maintain Britain’s high standards of housing and living. One outcome has been the development of HMOs —which can be highly functional and practical for creating affordable housing.

THE REALITY OF HMOS

Unfortunately, it isn’t rare to hear of HMOs barely meeting the basic requirements of acceptable housing, with some featuring crowded kitchens, cramped bedrooms, outdated facilities, poor energy efficiency and disregard for safety standards. And that’s before we even come to their aesthetics. Often, it’s common design mistakes that undermine the HMO living experience and a landlord’s investment.

IS CO-LIVING A BETTER WAY FORWARD?

But does it have to be that way? Can architecture be inventive and design-led while meeting the practical needs of housing large numbers of people, particularly in the UK’s most significant urban areas? We believe it can. We’ve already demonstrated that it’s possible, and as such, we are strong advocates for co-living spaces versus traditional HMOs.

Co-living represents a modern approach to addressing Britain’s housing needs. It makes the most of limited space while catering to the requirements of working professionals and high-end tenants, offering shared living spaces that – quite literally – don’t cramp their style.

WHAT IS A CO-LIVING SPACE?

A co-living space, often referred to as “coliving,” can best be portrayed as a high-end counterpart to traditional HMO properties. While both involve several households sharing the same address and amenities, modern co-living properties are designed to offer a more desirable and upscale living space rather than merely providing affordable housing born out of necessity.

Co-living is particularly attractive to working professionals in urban areas. These properties starkly contrast the typically sterile and dated HMO buildings with their dank and dated kitchens and bathrooms. Instead, coliving properties focus on modern design, sustainability and community.

Modern design for Co-living spaces focusing on sustainability and community building

The risks and downsides of shared living schemes can be mitigated when you work with someone experienced in HMO conversions and clearly understand the differences between co-living and HMOs and the potential for your investment.

WHAT ARE THE BENEFITS OF CO-LIVING SPACE?

Co-living spaces offer numerous benefits, making them attractive for sharp-eyed individuals, especially those in hybrid working models. Here’s a closer look at what makes co-living spaces so appealing.

Innovative Design: Rooms in co-living are often spacious and creatively designed, incorporating elements like signage, vibrant colours and rustic materials. This high-end approach can offer residents a stimulating and enjoyable atmosphere, creating an environment not unlike trendy bars or art studios.

Beyond Practicality: Obviously, the co-living design is an attractive proposition for those who are part of the post-Covid surge of hybrid working. Innovative and creative, these are spaces designed for co-living and increasingly accommodated for co-working.

Efficiency Focus: Another frequent aspect of co-living spaces is the trend to maximise the use of natural light. With energy prices and climate change warnings becoming decisive factors, modern homes must be more effective at using the resources we won’t run out of any time soon. The emphasis on natural light and energy-efficient systems can lead to lower utility costs, reducing operational costs and returning higher net rental income.

WHY SHOULD LANDLORDS BE INTERESTED IN CO-LIVING SPACES?

Co-living spaces are ideal for landlords and property owners who want to engage with ethical, design-led concepts while attracting high-end tenants. While all our HMOs offer excellent quality, co-living spaces go the extra mile to provide a particular type of accommodation and attract a specific niche of tenants.

Attracting High-Quality Tenants: For landlords, the upscale amenities and style mean they can attract aspiring individuals, like young professionals, who are keen on the added benefits and lifestyle improvements. We’re talking about tenants who take pride in where they live and will look after their homes, pay their bills and stay on top of their rent payments.

Commanding Higher Rents: The premium features in the co-living design allow landlords to charge higher rents than mainstream HMOs. This can significantly boost lease income and overall return on investment.

Enhancing Portfolio Value: For portfolio landlords, co-living spaces present an excellent opportunity to create a cohesive and recognisable brand. By working closely with an architect, those with several co-living spaces can implement their preferred designs, materials, and concepts across multiple properties. This consistent aesthetic can differentiate your portfolio in the market and be the backbone for a recognisable brand of co-living spaces.

Adapting to Market Trends: The growing popularity of co-living aligns with broader societal trends towards urbanisation, remote working, and sustainable living. Investing in co-living properties positions landlords and investors at the forefront of these trends, ensuring their assets remain relevant and in demand.

In summary, if your investment goals include increasing demand, boosting lease income, attracting high-quality tenants, and operating in the high-end market, the co-living scheme might be the perfect fit for your investment strategy. This model goes beyond providing affordable shared housing—it’s about creating an environment where tenants feel at home and connected.

COMPARING HMOs AND CO-LIVING

So, what’s the difference between co-living and HMOs? Is it just a snappy alternative phrase, or are there fundamental differences in design between the two concepts?

We see Co-living as an evolution of the HMO term. After a period of low-quality accommodation for people sharing spaces, we are moving forward to a high-end type of HMO designed to secure tenants with professional jobs and appreciation for interior design, community, and enhanced services.

SIMILARITIES BETWEEN HMO AND CO-LIVING

1. Shared Living: Both co-living and HMOs are designed for shared living, where residents have private bedrooms but share common areas such as kitchens, living rooms, and sometimes bathrooms.
2. Multiple Households: Both housing types are typically occupied by individuals from different households. They are a compelling choice for unrelated individuals looking to share space and costs.
3. Management: Co-living spaces and HMOs often require enhanced management to take responsibility for maintenance, tenant relations, and ensuring compliance with local housing standards and regulations. These models often rely on companies or professional landlords with the experience and resources to carry out the day-to-day administration.

DIFFERENCES BETWEEN HMO AND CO-LIVING

1. Target Audience and Pricing:

• Co-living: Target residents include professionals and digital nomads who seek a community-oriented lifestyle. Co-living spaces are often marketed as premium accommodations, featuring high-end amenities such as gyms, coworking spaces, and sometimes even concierge services. The lease income tends to be higher, reflecting the quality of the facilities and services provided. Noticeably, such a premium property also requires a higher investment.
• HMOs: These are typically aimed at students, young professionals, or individuals seeking affordable accommodation options. While some HMOs offer modern amenities, they are generally more functional and less luxurious than co-living spaces. The focus is more on providing basic, cost-effective housing.

2. Design and Amenities:

• Co-living: This type of housing is designed to foster a sense of community. The layout and amenities typically encourage residents’ interaction through spacious communal areas, event spaces, and shared kitchens that serve as social hubs.
• HMOs: While offering communal areas, the HMO design may not necessarily focus on community building to the extent seen in co-living spaces. The amenities might be more basic, primarily focusing on the necessities rather than creating a high-end experience.

3. Lease Flexibility:

• Co-living: Often offers more flexible lease terms, catering even to temporary residents seeking short-term or flexible accommodations due to their work or lifestyle.
• HMOs: Typically, HMOs have fixed lease terms, similar to traditional rental agreements, which require tenants to commit to a longer duration.

If you’re wondering how you can set your property apart from the competition and thrive rather than just survive, we’ve covered the HMO model extensively, sharing insights to boost your investment. From design and the ensuite trend to budgeting and best practices for managing your property.

CONCLUSION

We’ve discussed the difference between co-living and HMO spaces. The reality is that there isn’t a straight answer to which one is “better,” as that will depend entirely on the landlord and the specific investment strategy.

As we face the challenge of housing an ever-growing population, the key is to blend innovation with sustainability. The market needs both traditional HMOs and high-end co-living spaces. Some landlords will look for purpose-driven accommodation, while others will prefer enhanced style and individuality.

But for the latter group, one thing is certain: as we continue to adopt new and recent trends, like hybrid working, it’s time to usher in a new era of co-living and HMOs—one led by design rather than functionality.

Have a project in mind? Let’s chat about how we can bring your vision to life while addressing the pressing demands of modern urban development. Reach out today and talk to an architect; we’ve helped convert 100s of HMOs in various councils across the country,

We’d love to help you.