Professional tenants are able to save £134 more a month by sharing in a House in Multiple Occupation (HMO) rather than renting a one bedroom flat alone, according to new research from Platinum Property Partners (PPP).
A survey of HMO tenants by SpareRoom.co.uk and PPP shows that professional sharers can afford to put away an average of £308 per month by living in a flat or house share. In contrast, the average renter saves just £174 per month, £1,608 less over the course of a year.
89% of HMO tenants surveyed said they would like to own their own home in the future and 7% believe they could afford to buy now. A further 29% could afford the mortgage payments but not the deposit or stamp duty.
If HMO tenants were to put these monthly savings towards buying a property, it would take them 5.6 years to save for the average first-time buyer deposit of £20,600. For private renters not living in an HMO, this would take 9.9 years – almost double the time.
Tenants who live in shared housing are able to save more partly because they pay much lower rental costs. According to the survey, the average monthly cost of a room in an HMO (including bills) is £556. In comparison, the average monthly rent for a one bedroom flat is £7304: 31% higher and £2,088 more expensive on an annual basis, even before the cost of bills is considered.
Average monthly household bills for a one bedroom flat (including council tax, gas, electricity, water, broadband and TV) are £245, bringing the total costs for average renters up to £975 per month: £5,028 more than renting in an HMO.
When asked why they share as opposed to renting alone, 53% of respondents cited affordability and 18% said it was the ability to save.
The average monthly pay of a professional renting in an HMO is £24,460: this amounts to £1,643 in monthly take-home pay. Professional sharers therefore spend 34% of their take-home pay on rental costs (also including bills).
Assuming a similar average salary, tenants in a one bedroom flat spend 44% of their take-home pay on renting alone, and this rises to 59% when bills are taken into account.
42% of HMO tenants say they would save less if they were renting on their own and 21% wouldn’t be able to save anything at all.
Having all bills included means that HMO tenants feel they are better able to manage their budgets – a third of tenants surveyed agreed with this (33%).
However, financial benefits aren’t the only advantage of living in an HMO. 17% of professional HMO tenants agree that they share as opposed to renting alone because it’s more social and gives them the opportunity to meet new people.
In addition, separate PPP research revealed that living in an HMO is also a more flexible option for the UK’s increasingly mobile workforce. 14% of PPP tenants say that they share rather than rent alone because they haven’t decided where they want to settle yet, while 8% need to be able to move around for work.
Steve Bolton, PPP chairman, said: The cost of renting has been rising steadily in the past few years as consumer demand for rental property grows. Social trends are partly behind this – people are choosing to settle later in life, and the UK’s workforce is increasingly mobile. Rising house prices have also resulted in some choosing to stay in the private rental sector longer.
“At some stage, renting is a fact of life for most people. However, excessive rental costs can prevent tenants from realising their long-term goals, leaving them trapped in a vicious spiral of sky high rents and not being able to save for the future. Our research shows that living in an HMO is far more affordable than renting alone – and means HMO tenants have a realistic timeframe for saving up for future goals like a house deposit.
“HMOs aren’t just more affordable – they also offer high quality, flexible living. Living alone isn’t for everybody, and many HMO tenants enjoy the social aspect of living with a group of new people. For those who don’t want to commit to one location just yet, HMOs are also an enjoyable and affordable way of testing the waters in a new area. They also remove the cost and hassle of moving from one unfurnished property to another – which can prove invaluable when moving frequently for work.”