Houses in Multiple Occupation appear to be performing better on energy efficiency than much of the wider private rented sector, challenging the assumption that larger and more intensively occupied rental properties are necessarily the least prepared for future regulation.

New Paragon Bank research found that 66% of HMOs already hold an Energy Performance Certificate rating between A and C. The finding suggests that a substantial proportion of professional HMO landlords have already invested in improving heating, insulation and the general standard of their properties.

That places the sector in a comparatively strong position ahead of the Government’s planned increase in minimum energy-efficiency standards. Under the confirmed policy framework for England, privately rented homes will generally need to satisfy the new EPC C-equivalent standard by 1 October 2030, unless a valid exemption applies. Landlords will be required to invest up to £10,000 per property, with Government modelling estimating an average cost of approximately £5,400 for homes requiring work.

The Paragon figures are encouraging, but they do not remove the need for planning. Approximately one-third of HMOs remain rated below C, and improving those properties may be more complicated than upgrading a conventional single-let house.

HMO landlords must consider energy performance alongside fire safety, licensing, room standards, ventilation, tenant disruption and the property’s existing mortgage. The works may need to be funded while rental income is temporarily reduced, and lenders may interpret the resulting value and income differently.

The practical question is therefore no longer simply whether an HMO needs improvement. It is how the landlord can complete the right works without weakening compliance, cash flow or future refinancing capacity.

Professional HMO Landlords May Already Be Ahead of the Market

The finding that 66% of HMOs are rated A to C is notable because HMOs are often older, larger properties with more complex layouts than standard buy-to-let homes. Many were originally constructed as single-family houses and subsequently adapted to provide several individually rented bedrooms, shared kitchens and communal living areas.

These characteristics can create energy-efficiency challenges. Larger floor areas require more heating, repeated internal alterations can complicate insulation, and older Victorian or Edwardian properties may have solid walls, suspended timber floors and limited opportunities for straightforward fabric improvements.

At the same time, professional HMO landlords have strong commercial reasons to maintain higher standards. Energy consumption can be substantial, particularly where utilities are included within the rent. Poor insulation or inefficient heating therefore affects the landlord directly rather than only increasing the tenant’s bills.

Higher-quality HMOs also compete on more than price. Tenants increasingly expect warm rooms, effective heating, modern bathrooms, reliable broadband and well-maintained communal spaces. Previous Paragon research has identified growing demand for higher-specification HMOs, including en-suite accommodation and better-quality facilities.

The higher proportion of A-to-C-rated properties may consequently reflect the professionalisation of the HMO market. Landlords operating at scale are often more accustomed to licensing inspections, scheduled refurbishment and specialist mortgage underwriting than owners of occasional single-let properties.

The Remaining Third May Present the Harder Retrofit Cases

The 34% of HMOs below EPC C should not necessarily be viewed as landlords who have failed to make straightforward improvements. Many of the easiest and most economical properties may already have been upgraded, leaving a more challenging group of older or unusually configured buildings.

A property sitting just below C may require relatively modest work, such as additional loft insulation, heating controls, low-energy lighting or improvements to hot-water systems. Another HMO may require replacement glazing, wall insulation, a new heating system or substantial changes to ventilation.

The cost of moving from D to C also depends on how close the existing score is to the threshold. Two properties carrying the same letter rating may require very different levels of expenditure.

This is why landlords should not budget for retrofit purely by multiplying the number of below-C properties by a national average. The Government’s estimated average cost of £5,400 is useful at sector level, but an individual HMO can cost materially more where the building is large, listed, poorly insulated or occupied throughout the works.

The correct starting point is an asset-level assessment identifying the existing score, certificate expiry date, recommended measures and likely cost of achieving the future standard.

The 2030 Standard Is More Complex Than a Single Letter Grade

Landlords should also be cautious about assuming that the future requirement will operate exactly like the present EPC system.

The Government intends to introduce reformed EPCs using several headline measures rather than relying solely on the current energy-efficiency rating. Private rented homes will be expected to satisfy a primary fabric standard and a second measure based on either heating performance or smart readiness.

The policy is intended to prioritise improvements to the building fabric before landlords rely on heating technology or controls. All qualifying private tenancies are expected to comply by 1 October 2030 unless the property benefits from transitional treatment or a registered exemption.

There is, however, an important transitional opportunity. A privately rented property achieving an Energy Efficiency Rating of C or better on a qualifying EPC before 1 October 2029 can be treated as compliant until that certificate expires or is replaced.

For HMO landlords, this creates a reason to review existing certificates well before the final deadline. A property close to C might benefit from completing appropriate works and obtaining a new certificate under the current methodology, provided the measures are properly assessed and the timing is suitable.

That should not be interpreted as a reason to commission unnecessary EPCs without advice. Reassessment can produce an unexpected result where the methodology, assumptions or property information changes. The decision should be based on the likely works, certificate expiry and future refinancing plans.

HMOs Are Being Brought More Clearly Within the EPC Framework

The future treatment of HMOs is particularly important because the existing EPC framework has not always applied consistently to properties let by the room.

Historically, an EPC has generally been required where an entire property or a self-contained unit is sold or let. Individual rooms sharing facilities have not always triggered the same certification requirement, creating gaps in coverage across parts of the HMO sector.

The Government has stated that it intends to require a valid EPC for an entire HMO when a single room is marketed for rent. This would bring more shared properties explicitly within the certification regime and make energy information available when rooms are advertised.

That development could be significant for landlords whose properties do not currently have a recent whole-building certificate. The absence of an EPC should not be interpreted as evidence that the property will avoid future standards.

As the regime is expanded, lenders, valuers, local authorities and tenants are likely to have greater visibility over the energy performance of individual HMO assets.

Energy Improvements Cannot Be Planned Separately From HMO Licensing

Refurbishment within an HMO must be coordinated with licensing and management obligations.

Many HMOs require mandatory or additional local-authority licensing, depending on the number of occupiers and the area in which the property is situated. Licence applications can require floor plans, room dimensions, fire-risk assessments, alarm records, gas and electrical certificates, an EPC and evidence that the property is properly managed.

An energy-efficiency measure that appears straightforward in a single-let home may interact with these requirements. Internal insulation can reduce room dimensions. Replacement doors or changes to compartmentation may affect the fire strategy. New heating or hot-water systems must be capable of serving a larger number of occupants.

Ventilation is another critical consideration. Improving airtightness without providing suitable ventilation can increase condensation, mould and indoor-air-quality problems. Kitchens, bathrooms and communal areas may require particular attention because of the high levels of moisture generated by several unrelated occupants.

Landlords should therefore avoid commissioning isolated work solely because it appears on an EPC recommendation list. The retrofit plan should be reviewed against the licence, fire-risk assessment, building regulations and the practical use of each room.

Room Sizes Can Limit the Available Improvements

Minimum room-size rules create an additional constraint for HMO landlords.

Certain licensed HMOs must meet national minimum sleeping-room sizes, while local authorities may impose higher standards through their own licensing policies. A room that only narrowly meets the required size could become non-compliant if internal insulation substantially reduces its usable floor area.

The landlord may then face a trade-off between improving the thermal performance of the wall and preserving the property’s licensed occupancy.

External wall insulation might avoid reducing room sizes, but it can be more expensive and may require planning permission or agreement from other owners. It can also be unsuitable for particular building types or conservation areas.

The most appropriate measure cannot therefore be decided from the EPC score alone. Surveyors and retrofit professionals need accurate floor plans and a clear understanding of the existing licence conditions before specifying work.

Fire Safety Must Remain the Priority

HMOs carry more extensive fire-safety obligations than ordinary single-household homes because several unrelated occupiers may be living behind individual bedroom doors.

Properties may require interconnected alarm systems, fire-resistant doors, emergency lighting, protected escape routes and suitable separation between bedrooms and communal areas. Alterations to ceilings, walls, doors or service routes can affect these protections.

Energy works must therefore be integrated with the fire strategy. Insulation products need to be appropriate for the building and installed correctly. Contractors must avoid compromising fire stopping when routing cables, pipes or ventilation ducts through walls and floors.

The landlord should also consider whether improving insulation changes the heating load or ventilation requirements of the building. A lower-energy property remains unsafe if alterations undermine its fire protection or create moisture problems.

Compliance with a future EPC standard will not excuse failure to meet HMO management, licensing or fire-safety requirements.

Tenant Disruption Can Become a Significant Project Cost

Many energy improvements are easier to complete while a property is vacant. HMO landlords, however, may have several occupiers with separate tenancy agreements ending at different times.

Coordinating a complete vacant period can therefore be difficult. Waiting for every room to become empty may delay the project, while carrying out major works around tenants can extend the timetable and create management problems.

The direct cost of insulation, heating or glazing may consequently represent only one part of the budget. The landlord may also face lost rent, temporary accommodation obligations, additional management time and repeated contractor visits.

For larger projects, it may be more efficient to complete the works during a planned refurbishment between academic years or when several tenancies expire together. Student HMOs often offer a more predictable window, although contractors and materials must be booked well in advance.

A realistic finance plan should include both the construction cost and the income lost while the building or individual rooms cannot be occupied.

Retained Profits May Be the Simplest Funding Route

Landlords with sufficient cash reserves may choose to fund energy improvements from retained rental profits.

This avoids a new valuation, mortgage application and interest cost. It may also allow smaller measures to be completed gradually as rooms become vacant.

The drawback is the reduction in liquidity. HMO portfolios can require substantial reserves for repairs, voids, licensing, furniture and utility costs. Using most available cash for retrofit can leave the business vulnerable to an unexpected boiler failure, roof repair or period of reduced occupancy.

Landlords operating through limited companies must also consider where the funds are held. Cash retained within the property company may be readily available for business expenditure, whereas money held personally may need to be introduced through a director’s loan or another appropriately documented route.

The decision should be based on the portfolio’s total cash requirement rather than whether enough money exists to pay the immediate invoice.

A Further Advance Can Release Equity Without Replacing the Mortgage

Where an HMO already has a competitive mortgage, a further advance may allow the landlord to raise money without refinancing the entire debt.

The existing lender advances an additional sum secured against the property, subject to valuation, loan-to-value, rental coverage and credit assessment. The new borrowing may carry a separate interest rate and repayment period from the original mortgage.

This can be attractive where the existing loan has a favourable fixed rate or a substantial early repayment charge.

Paragon has recently reduced the minimum loan on its buy-to-let further-advance proposition to £2,000 and stated that a substantial proportion of its further-advance lending supports landlords improving their properties. The lender specifically identified compliance with future minimum energy-efficiency standards as a potential use.

A further advance is not automatically the cheapest solution. Product fees, valuation assumptions and the combined loan-to-value must be assessed, while the rent must continue to support the total borrowing.

Refinancing Can Fund Work but May Require the Property to Be Mortgageable First

A full remortgage can release a larger amount by replacing the existing mortgage with a new facility.

This may work where the property has appreciated, the current loan is modest or the landlord intends to restructure other borrowing at the same time. It can also provide an opportunity to move to a lender with stronger HMO criteria or higher aggregate portfolio limits.

The challenge is that the lender will assess the property in its current condition. A landlord cannot necessarily rely on the value the HMO may achieve after improvement.

If the building has serious disrepair, licensing problems or inadequate facilities, some term lenders may decline it until the work is complete. The proposed rent after refurbishment may also carry limited weight where it has not yet been demonstrated.

Timing matters as well. Refinancing during an existing fixed period could trigger early repayment charges, reducing the net funds available for the project.

The landlord should compare the current mortgage, proposed borrowing, work cost and post-improvement valuation before deciding whether a full remortgage is justified.

Bridging Finance May Be Appropriate for Major Refurbishment

Short-term bridging finance can be used where an HMO requires substantial work before it is suitable for long-term mortgage lending.

The facility may fund the acquisition and refurbishment of an older property, or release capital against an existing asset while major improvements are completed. Interest can sometimes be retained or rolled up, reducing the immediate monthly cash requirement.

This flexibility comes at a higher cost than a conventional buy-to-let mortgage. Arrangement fees, legal costs, valuation fees and monthly interest all need to be included within the project budget.

The exit strategy is critical. The landlord must establish that the improved property is likely to qualify for an HMO mortgage at a value and rent sufficient to repay the bridge.

Energy improvements should therefore be part of a complete refurbishment appraisal. The lender and valuer will also consider planning, HMO licensing, room sizes, fire compliance and the local rental market.

Bridging should not be used merely to postpone a financing problem. It is most effective where there is a clearly defined programme of works and a credible term-mortgage exit.

Green Mortgage Pricing May Reward Stronger Properties

Energy efficiency is already influencing buy-to-let mortgage pricing.

Paragon and several other lenders offer products with preferential rates for single self-contained properties rated EPC A to C. Paragon’s recent product ranges have priced qualifying energy-efficient properties slightly below equivalent D- or E-rated homes.

HMO pricing does not always carry the same explicit green discount, because the lender must also account for the specialist property type, management intensity and licensing requirements. Nevertheless, the direction of travel is clear.

Lenders are increasingly collecting EPC data and considering energy performance as part of their mortgage books. Paragon reported that 52.5% of its new mortgage lending with available data during 2025 related to properties rated A to C.

A better EPC may therefore support access to a wider range of products over time, particularly as lenders seek to improve the energy profile of their secured portfolios.

The benefit should not be overstated. A C-rated HMO will not compensate for weak rental coverage, defective licensing or an unsuitable layout. Energy performance will sit alongside the wider quality of the asset.

Valuers May Place Greater Weight on Future Compliance

Commercial and specialist residential valuers already consider whether an HMO is legally lettable, properly licensed and capable of sustaining the reported rent.

As the EPC C deadline approaches, energy efficiency may become a more explicit part of that assessment. An HMO requiring substantial expenditure could attract a deduction for outstanding works or be viewed as having greater letting and refinancing risk.

Conversely, a compliant property with modern heating, good insulation and controlled energy costs may prove more attractive to tenants and investors.

The valuation effect will depend on the local market. Not every £10,000 spent on retrofit will add £10,000 to the property’s value. Some work may be necessary simply to preserve the existing rental use.

For portfolio planning, avoiding a future reduction in financeability can be as important as generating an immediate capital gain.

EPC Performance Can Strengthen Tenant Demand

Energy efficiency has particular relevance where HMO rents include gas, electricity or heating.

A landlord operating an all-inclusive model bears the risk of volatile energy consumption. Improving insulation, controls and heating efficiency can reduce that exposure, although higher occupancy and tenant behaviour will continue to influence actual bills.

Where tenants pay their own energy costs, a more efficient property can still improve marketability. Renters comparing similar rooms may favour a home that is warmer and less expensive to run.

This can support occupancy, reduce complaints and improve tenant retention. Those benefits are difficult to capture within a simple EPC payback calculation but can materially affect the property’s operating performance.

The strongest HMO landlords may therefore treat EPC C as a minimum rather than the sole objective. The wider commercial case can include reduced utility costs, a better tenant proposition and stronger long-term asset quality.

Portfolio Landlords Need an Asset-by-Asset Schedule

A landlord with several HMOs should not approach the deadline as one portfolio-wide project.

Each property may have a different EPC rating, certificate expiry, mortgage maturity, licence renewal and refurbishment requirement. Some may already comply, while others may be poor candidates for further investment.

A useful review should record the current EPC, likely future status, estimated work cost, licence position, existing loan, early repayment charge, available equity and preferred completion date for each asset.

The landlord can then group properties into several categories: those requiring no immediate action, those suitable for minor works from cash flow, those needing refinancing and those where sale may be more commercial than major retrofit.

This prevents the weakest property from consuming capital that could produce a stronger return elsewhere in the portfolio.

It also allows works to be aligned with mortgage maturities and tenancy cycles rather than being forced into the final months before October 2030.

Acquiring an Older HMO Requires a Retrofit Appraisal

Investors purchasing existing HMOs should assess future energy costs before exchange.

The current rent and gross yield can make an older property appear attractive, but the buyer may inherit a material compliance programme. A low EPC can also indicate wider issues with heating, damp, ventilation or the underlying fabric.

Due diligence should include a current EPC, the recommendations report, HMO licence, planning status, fire-risk information, room schedule and details of previous works.

The buyer should then establish whether the proposed mortgage lender will accept the property in its existing condition and whether additional funds can be raised for improvement.

Where significant work is required, the acquisition price should reflect both the construction cost and the period of reduced income.

A high headline yield is less compelling where several years of profit will be needed to fund essential compliance work.

Acting Early Preserves More Finance Options

The Government has selected a single 1 October 2030 deadline rather than requiring new tenancies to comply at an earlier date. This provides landlords with a defined planning period, but it may also encourage some owners to delay action.

Waiting until 2029 or 2030 could create practical difficulties. Demand for energy assessors, surveyors and suitable contractors may increase as the deadline approaches. Landlords could also find themselves refinancing at the same time as they need to fund substantial work.

Early planning does not mean every improvement should be completed immediately. EPC methodology, lender products and available technology will continue to develop.

It does mean identifying the scale of the problem now, reserving capital and aligning the work with sensible tenancy and mortgage dates.

Landlords whose properties are already close to C may be able to act relatively quickly. Those with older, lower-rated buildings need sufficient time to assess whether improvement, restructuring or disposal represents the strongest outcome.

Being Ahead of EPC C Could Become a Competitive Advantage

Paragon’s finding that 66% of HMOs are already rated A to C is positive for a sector frequently portrayed as being associated with older and lower-quality housing.

It suggests that many professional landlords have already recognised the connection between property condition, tenant demand and long-term investment performance.

For these owners, future energy standards may present less of a compliance shock. Better-performing assets could benefit from lower operating costs, stronger tenant appeal and access to lenders increasingly interested in energy-efficient security.

The remaining third faces a more demanding challenge. HMO improvements must work around licensing, fire safety, room dimensions, tenant occupation and specialist lender requirements. The method used to fund the works can also affect portfolio liquidity and future borrowing capacity.

The objective should not be to reach EPC C at any cost. It should be to establish which improvements are technically appropriate, how they will affect the property’s operation and whether the finance remains sustainable.



For HMO landlords, energy efficiency is becoming part of the asset-management and borrowing strategy. Those who review their properties early will have more freedom to choose when to complete the work, how to fund it and whether every asset still deserves a place in the portfolio.