The 5 Best UK Cities for HMO Yields in 2026

Why City Selection Is the Biggest Lever in HMO Investing

Pick the wrong city and no amount of good refurbishment, smart room layout, or tenant management will save your yield. I've seen investors spend £40,000 fitting out a six-bed HMO in a city with soft rental demand and end up with gross yields below 7%. That's not an HMO — that's an expensive headache.

City selection is the decision that compounds everything else. Get it right and a modest property can return double digits. Get it wrong and you're fighting the market every single month.

The data I'm working from here comes primarily from The HMO Mortgage Broker Annual Report 2026, published 10 March 2026, which ranked risk-adjusted HMO markets across England and Wales. I've also drawn on FD Commercial's April 2026 yield analysis and regional data from HMO Designers and Promise Money. Where figures differ between sources, I've flagged it.

One important caveat before we get into the rankings: gross yield is not the whole story. Void rates, licensing costs, Article 4 compliance spend, and management fees all eat into your net figure. I'll call out the risk-adjusted picture for each city, not just the headline number.

The 5 Cities Ranked by Risk-Adjusted HMO Yield

**5. Cardiff — ~9% Gross, Lower Entry Costs, Growing Student Base**

Cardiff sits at roughly 9.01% regional gross yield according to HMO Designers' 2025-26 data. That's not the highest number on this list, but Cardiff earns its place because entry prices remain relatively low compared to English university cities, and the student population at Cardiff University and Cardiff Metropolitan keeps demand structurally solid.

The risk to flag: Welsh licensing rules are stricter than England's in some respects, and mandatory HMO licensing thresholds differ from the England framework. Always check with Cardiff Council directly and consider getting qualified legal advice before purchasing — the compliance picture here moves faster than most investors realise.

**4. Bristol & Southampton — 10%+ Gross, Strong Professional Demand**

I'm grouping these two because they share a profile: strong professional tenant demand, proximity to major employers, and consistent occupancy. Promise Money's 2026 research highlights Bristol and Southampton — alongside Portsmouth — as standout markets for professional HMO lets.

Bristol has Article 4 in force across much of the city, which constrains new supply. That's actually a tailwind for existing HMO stock. If you own a licensed HMO in an Article 4 area, you're sitting in a protected market. The flip side: acquisition costs in Bristol are higher than the North, so your yield calculation needs to be tight.

**3. Birmingham — 10-12% Gross, Post-HS2 Demand Shift**

Birmingham is The HMO Mortgage Broker's third-ranked risk-adjusted market for 2026. Gross yields in the 10-12% range are achievable in the right postcodes — think B29, B11, B12 for student and young professional overlap.

Article 4 is active across Birmingham, which again limits new competition. The city's population growth and the continued expansion of its university cluster (five major universities within the city boundary) mean tenant demand isn't going anywhere. The risk: Birmingham's HMO licensing regime is actively enforced, and selective licensing schemes are spreading. Budget for compliance properly or the numbers fall apart fast.

**2. Liverpool — 11-13% Gross, Best Risk-Adjusted Entry in the North West**

Liverpool is my pick for the best risk-adjusted entry point in the North West right now. FD Commercial's April 2026 analysis puts North West university cities in the 10-13% gross yield bracket, and Liverpool consistently sits at the top of that range.

Why Liverpool over Manchester? Entry prices. You can acquire a suitable HMO property in Liverpool for materially less than an equivalent Manchester asset, which means your yield calculation starts from a better base. Manchester's yields have compressed as institutional money moved in. Liverpool hasn't seen the same capital appreciation yet — which is either a risk or an opportunity depending on your investment horizon.

Article 4 is not yet as comprehensively applied in Liverpool as in Manchester, which cuts both ways: more flexibility to convert, but also more new supply entering the market. Net-net, I still think Liverpool edges it on entry yield.

**1. North East England (Sunderland, Middlesbrough, Durham) — 12-15% Gross, Highest Raw Yields in the UK**

This is the number that stops people in their tracks. FD Commercial's April 2026 data puts the North East at 12-15% gross yield for HMOs. That's not a typo. Sunderland and Middlesbrough in particular have entry prices that make the yield maths almost uncomfortable — in a good way.

Sunderland's student population (University of Sunderland) drives consistent room demand, and Durham's collegiate structure creates a perennial HMO market. Middlesbrough has seen increased young professional demand as remote work reshapes where people choose to live.

The honest trade-off: capital growth in the North East has historically lagged London and the South. If you're buying for yield and cash flow, this is your market. If you need capital appreciation to fund your next deal within three years, you might be disappointed. I'd rather have 14% gross and reinvest the cash flow than wait for a South East asset to appreciate — but that's a personal investment philosophy, not financial advice. Talk to a qualified IFA before making that call.

Article 4 Directions: The Supply Constraint That Makes Existing HMOs More Valuable

This point doesn't get enough attention. Article 4 Directions remove permitted development rights for converting a standard dwelling (Use Class C3) into an HMO (Use Class C4). Once an Article 4 is in place, anyone wanting to create a new HMO needs full planning permission — and councils routinely refuse.

The HMO Mortgage Broker's 2026 report confirms Article 4 is now active across Manchester, Leeds, Birmingham, Bristol, Nottingham, Southampton, and London. That list covers most of the UK's highest-demand HMO markets.

What does this mean in practice? If you buy an existing, licensed HMO in an Article 4 area, you're buying something that cannot easily be replicated by a competitor. Supply is capped. Demand keeps growing. That's a structural moat.

This is exactly why I think the framing of 'Article 4 is a risk' is backwards. Yes, it adds compliance cost. Yes, you need planning permission to convert from scratch. But if you're buying existing stock — which is what most serious investors do — Article 4 is your friend. It protects your asset's income stream.

ZARSK's database at [zarsk.co.uk](https://zarsk.co.uk) lists HMOs across all of these markets, including properties already operating within Article 4 zones. That's the practical value of having a dedicated HMO database rather than trying to filter general property portals that weren't built for this asset class.

Financing Your HMO Purchase — and Freeing Equity From What You Already Own

Finding the right city and the right property is only half the battle. The financing piece is where deals die.

HMO mortgages are a specialist product. High-street lenders largely don't touch them, and the criteria — room count, licensing status, minimum valuation, maximum LTV — vary significantly between lenders. First-time HMO buyers often spend months trying to arrange finance through the wrong channels before someone points them toward the specialist market.

The equity release problem is even thornier. If you already own a buy-to-let portfolio or existing HMOs, you might have significant equity sitting idle. Freeing that equity to fund your next acquisition should be straightforward — in theory. In practice, lenders applying stress tests to HMO income, portfolio landlord rules introduced post-2017, and the general complexity of multi-property portfolios make this genuinely difficult without experienced specialist support.

ZARSK's regulated mortgage partners work specifically in this space. They've been doing this for over a decade, and the focus is on HMO and portfolio finance — not general residential mortgages with an occasional HMO bolted on. If you're looking at the cities on this list and wondering how to structure the finance, that's where I'd start. You can explore the finance options at [zarsk.co.uk/finance-property](https://www.zarsk.co.uk/finance-property).

One thing I'd say clearly: don't try to navigate HMO mortgage products alone if you're new to this asset class. The cost of getting it wrong — wrong product, wrong LTV, wrong stress test assumption — far exceeds the cost of using a specialist broker.

How to Actually Find Live HMO Stock in These Cities

Here's the practical problem most investors hit: you've done your research, you know which city you want to target, and then you spend three months trawling Rightmove and Zoopla trying to filter for HMOs — only to find that the listings are inconsistent, incomplete, or already under offer.

General property portals weren't built for HMO investors. They don't filter by room count, licensing status, Article 4 compliance, or yield. You end up doing manual work that should be automated.

ZARSK was built specifically for this. The database at [zarsk.co.uk](https://zarsk.co.uk) is — as far as I'm aware — the largest dedicated HMO database in the UK, and it's constantly updated. You can search by city, filter by the metrics that actually matter for HMO investment, and find live stock in the markets covered in this article.

If you're targeting Manchester, Liverpool, Birmingham, the North East, or Cardiff, start your search there rather than trying to retrofit a general portal to an asset class it wasn't designed for. The time saving alone is worth it — and in a competitive market, finding a property before other buyers is often the difference between a deal and a near-miss.

The investors who will look back on 2026 as the year they got it right are the ones who stopped chasing familiar postcodes and followed the yield data into markets that feel slightly uncomfortable. The North East at 12-15% gross is not a secret — FD Commercial published it in April. But most investors still aren't buying there, because unfamiliarity feels like risk. Sometimes it is. But sometimes the real risk is staying in an overpriced market because it feels safe, watching your yield compress year after year while the cash flow that was supposed to fund your next deal never materialises. The cities on this list aren't predictions. They're current data points. What you do with them is up to you.