Understanding Utility Bills in HMOs: Part 1 - The Challenges of Energy Costs

In our educational blog series about factors that affect HMO (House in Multiple Occupation) profits, it’s important to discuss utility bills. These costs are unavoidable and can be a heavy drain on your earnings, especially since, as an HMO landlord, you’re responsible for covering them. Let’s explore why utility bills are so challenging and what factors make managing these costs difficult.

Why Utility Bills Are So Challenging for HMO Profits

1. Lack of Control Over Energy Prices

Energy prices are on a near-constant upward trend, with no sign of slowing. Unfortunately, landlords have little to no control over these price hikes, which makes it difficult to budget accurately from year to year. Although you can lock in fixed-rate energy contracts to avoid some price increases, these savings are generally minor. Fixed rates are often temporary solutions, and when contracts end, you could find yourself paying much higher rates.

2. The Tedious Process of Switching Providers

Switching providers can be a strategy to save on energy bills, but the savings might not justify the time and hassle involved. Comparison shopping and negotiating rates can take hours, and the switch itself may disrupt your service temporarily. Since the savings are often minimal, switching may not be worth the hassle, especially in an HMO where any interruption can quickly impact tenants and potentially harm tenant satisfaction.

3. Seasonal Variability in Utility Costs

Utility costs are also unpredictable due to seasonal shifts, with winter being especially burdensome. During colder months, your tenants will naturally turn the heat up, and since heating systems in HMOs tend to work overtime, you may see skyrocketing bills. When temperatures drop, you’re effectively watching your profits burn away as heating costs climb. It’s a tough reality, but one that can be managed with the right approach, as we’ll discuss in Part 2.

4. The Impact of Tenant Habits on Energy Use

Tenants can unknowingly drive up your utility bills, and this is especially common in HMOs. When tenants control their own thermostats, many tend to turn them up high and forget to adjust them before leaving. For example, some tenants may leave the thermostat on high and then open windows to cool down, or simply leave the heating on when they’re out. This kind of wasteful energy usage can quickly inflate bills, adding to the already high cost of utilities in shared properties.

Conclusion

Utility bills are a significant and often unpredictable cost for HMO landlords. From rising energy prices to seasonal fluctuations and tenant habits, there are numerous factors that can inflate your monthly expenses. While it’s frustrating to lack control over many of these costs, recognizing where the biggest challenges lie is the first step toward effectively managing them. In Part 2, we’ll explore practical strategies and tools to help you curb these expenses and improve the profitability of your HMO.