5 Cities Where HMO Yields Still Hit Double Digits in 2026

Why London HMO Yields No Longer Make the Maths Work

Let me be direct about this: London isn't a yield play anymore. Per The HMO Mortgage Broker's 2026 Market Report, yields in the capital have softened to the point where purchase prices are simply too high relative to achievable room rents. You're buying at £600k-£900k for a property that might generate £3,500-£4,000 per month in HMO income. That's a gross yield of under 6% before you factor in management fees, licensing costs, and the inevitable voids.

Compare that to what a well-run HMO produces in the North or Midlands. Quartico's 2026 investor guide puts it plainly: a well-managed HMO routinely delivers 8-12% gross yield against a standard buy-to-let's 5-6%. That gap is not closing. If anything, it's widening as London purchase prices stay stubbornly elevated while Northern rents continue rising on the back of student and young professional demand.

I'm not saying London is a bad city. It's a great city. It's just a bad yield trade in 2026.

The 5 Cities Delivering Double-Digit HMO Yields Right Now

These aren't obscure towns. They're established cities with real tenant demand, functioning licensing frameworks, and enough transaction history to give you confidence the numbers aren't flukes.

**1. Liverpool** Liverpool leads nationally on gross HMO yields according to The HMO Mortgage Broker's 2026 Market Report. The driver is structural: a large student population across the University of Liverpool and Liverpool John Moores, plus a growing young professional base drawn to the city's regenerating Baltic Triangle and Knowledge Quarter. Entry prices are still accessible — you can acquire a licensable HMO in L6 or L7 for £130k-£180k — and room rents have held firm. The maths works. Gross yields above 10% are achievable with a sensible purchase price and full occupancy.

**2. Manchester** Manchester sits alongside Liverpool at the top of the national yield table, per the same 2026 report. Limited new HMO stock entering the market is the key factor here — Article 4 Directions across most of the city mean you can't just convert any terraced house anymore. That supply constraint is doing the work for existing HMO landlords. Demand from the city's two universities and its expanding financial and tech sectors keeps void periods short. Gross yields in areas like Salford, Stretford, and parts of M14 regularly hit double digits.

**3. Sheffield / South Yorkshire** This is the one I'd highlight most strongly for 2026. Foot Forward Properties named South Yorkshire as the front-runner for this year, citing approximately 7% annual capital appreciation alongside strong rental income. That combination — income yield plus capital growth — is rare. Sheffield has a chronic undersupply of quality HMO accommodation relative to its student population (two major universities, over 60,000 students). Gross yields in S1-S3 and S10 postcodes are consistently reported in the 9-12% range. And unlike some Northern cities, Sheffield's property market hasn't yet been fully repriced by investor attention.

**4. Nottingham** Nottingham is a city I'd argue is underrated in most yield comparisons. Two universities, a young demographic skew, and a city council that — despite its well-publicised selective licensing scheme — has actually created a more professional HMO market by pushing out the worst operators. That's good for compliant landlords. Yields in NG7 (Lenton, Forest Fields) and NG1 remain strong, and the licensing framework, while demanding, is navigable with the right managing agent.

**5. Leeds** Leeds rounds out the list. A growing financial services sector, three universities within commuting distance, and a housing stock that lends itself to HMO conversion. Gross yields in LS6 (Headingley) and LS4 have remained resilient even as purchase prices have ticked up. The city's Article 4 Direction — which covers much of the inner city — means supply is constrained, and that's a tailwind for anyone already holding stock.

The Yield Compression Warning You Shouldn't Ignore

HMO Checker's Q1 2026 data shows average HMO yields have compressed from 10.4% to 9.6-10% nationally, driven by higher operational costs — mainly energy bills, licensing fees, and compliance spend. That compression is real and it matters.

But here's what that data doesn't tell you: compression from 10.4% to 9.6% is still more than double a standard London BTL yield. The direction of travel is worth watching, but the absolute numbers still make a compelling case for the North and Midlands over the South East.

What you do need to account for: HMO management costs are genuinely higher than standard BTL. Expect 12-15% management fees rather than 8-10%. Licensing costs vary — Nottingham's selective licensing runs to several hundred pounds per property per cycle, and Article 4 compliance in Manchester means conversion costs are a real consideration. None of this kills the yield case. It just means you need to model it properly rather than relying on headline gross figures.

How to Actually Find These Properties — and Finance Them

This is where most investors get stuck. Not at the analysis stage — at the sourcing stage.

Finding a genuine HMO in Liverpool or Sheffield isn't as simple as running a Rightmove search. Most listed properties aren't marketed as HMOs. Many are already tenanted. Some need licensing you won't spot without knowing the local authority's Article 4 boundaries. The database problem is real: there's no comprehensive, regularly updated source of HMO stock that most investors can actually access.

That's the gap [ZARSK](https://zarsk.co.uk) is built to fill. It's the UK's largest HMO database — constantly updated — and it's specifically designed for investors who want to search by city, postcode, yield potential, and licensing status rather than wading through generic property portals that weren't built for this asset class.

Financing is the other wall. HMO mortgages are a specialist product. Standard buy-to-let lenders often won't touch them, and even experienced investors with existing portfolios find it genuinely difficult to free up equity for the next acquisition. ZARSK's regulated finance partners have spent over a decade placing HMO mortgages and portfolio remortgages — they know which lenders will move on a 6-bed Article 4 property in Sheffield and which won't. If you're trying to refinance an existing portfolio to fund a Northern acquisition, that expertise matters more than you'd think. You can find out more at [zarsk.co.uk/finance-property](https://www.zarsk.co.uk/finance-property).

The investors who'll look back at 2026 as a turning point are the ones who stopped anchoring to London and started running the numbers on cities where the fundamentals actually support double-digit yields. Liverpool, Manchester, Sheffield, Nottingham, Leeds — these aren't backup options. For HMO yield, they're the primary market. London is the backup.