Last updated: 8 October 2026 · Next review: April 2027
Houses in multiple occupation (HMOs) can produce higher rental income than single lets, but they come with more regulation and noticeably higher running costs. The most visible cost is the council licence — and because every council sets its own fees, the price for the same house can vary widely depending on where it is.
This guide explains when you need a licence, what it typically costs (with a real council’s fee schedule as a worked example), how long it lasts, what happens if you don’t have one, and the other costs that come with running an HMO.
What counts as an HMO?
According to GOV.UK, a property is an HMO if it’s rented to at least 3 people who aren’t from one household (for example, not one family) but share facilities such as the bathroom or kitchen.
When is an HMO licence mandatory?
GOV.UK says you must have a licence if all of these apply:
- the property is rented to 5 or more people who form more than 1 household;
- some or all tenants share toilet, bathroom or kitchen facilities;
- at least one tenant pays rent.
Smaller HMOs may need a licence too
GOV.UK notes that smaller properties may still need a licence depending on the council area. Many councils run additional licensing schemes covering smaller HMOs (for example, 3–4 tenants), and some run selective licensing covering all private rented homes in certain areas. Always check your own council’s website before letting.
How long does a licence last?
A licence can last up to 5 years, and you must renew it before it runs out. Some councils issue shorter licences — for example if they have concerns about the property or its management.
How much does an HMO licence cost?
There’s no national fee. Each council sets its own charges, usually intended to cover the cost of running the scheme. Fees often depend on the number of bedrooms or occupants, whether it’s a new application or a renewal, and whether you apply on time.
Worked example: South Cambridgeshire District Council
| Fee | Amount |
|---|---|
| Licence length | 5 years |
| New application (up to 5 bedrooms) | £895 |
| Each additional bedroom (new application) | + £36 |
| Renewal (up to 5 bedrooms) | £544 |
| Each additional bedroom (renewal) | + £24 |
For a 7-bedroom HMO, that means:
- new licence: £895 + (2 × £36) = £967;
- renewal after 5 years: £544 + (2 × £24) = £592.
Spread over the 5-year licence, the initial licence works out at about £193 a year, and a renewal at about £118 a year.
This is one council’s schedule, used to show how fees are structured. Other councils charge more or less — search “[your council] HMO licence fee” and use the official council page.
What happens if you don’t have a licence?
- GOV.UK warns you could face an unlimited fine for renting out an unlicensed HMO.
- Councils can also use civil penalties and other enforcement powers, which the Renters’ Rights Act has strengthened.
- Tenants and councils can seek a Rent Repayment Order for certain offences, including letting an unlicensed HMO. Under the Renters’ Rights Act, the maximum order has risen from one to two years’ rent.
On a 5-bed HMO with rooms let at, say, £600 a month each, two years’ rent is £72,000 — dwarfing the cost of a licence.
The other costs of running an HMO
The licence fee is usually the smallest part of the extra cost.
Running costs are much higher overall
Pegasus Insight’s Landlord Trends research (Q3 2025, reported in January 2026) found:
| Non-HMO landlords | HMO landlords | |
|---|---|---|
| Running costs as a share of gross rental income | 25% | 45% |
| Average annual portfolio expenditure | £19,604 | £35,720 |
| Utilities as a share of total spending | 4% | 16% |
The utilities figure reflects a common HMO model where the landlord pays the bills and includes them in the rent.
Safety certificates cost more
More appliances and circuits mean higher certificate prices. Property Tax Partners gives typical 2026 ranges of £100–£200 for a gas safety check on a multi-appliance or HMO property and £250–£450+ for an EICR on an HMO or large multi-circuit property. See landlord certificate costs.
Fire safety
HMOs usually need more extensive fire safety measures than single lets, and licence conditions often specify them. The requirements depend on the property’s size and layout, and your council’s standards, so budget for an assessment before you buy or convert.
Insurance
HMOs need specialist landlord insurance, which is normally more expensive than a standard single-let policy. See landlord insurance costs for the factors that drive premiums.
Maintenance and management
More occupants mean more wear, more frequent redecoration and more management time. Plan a higher maintenance budget than the 1% rule — see landlord maintenance costs.
PRS database
From 15 December 2026, landlords must register let properties on the new PRS database (£65 per property per year, according to Osborne Clarke) and upload safety documents.
HMO licence application checklist
- Check whether the property needs a mandatory, additional or selective licence
- Get your council’s current fee schedule and application form
- Current gas safety record and EICR
- Valid EPC (Band E or above)
- Fire safety measures in place and documented
- Floor plans showing room sizes and facilities
- Tenancy agreements and management arrangements
- Diary reminder to renew well before expiry
Is an HMO worth the extra cost?
HMOs can generate more rent per property, but with running costs averaging 45% of gross rental income in the Pegasus Insight research — compared with 25% for other landlords — the extra rent has to be substantial to come out ahead. Use the landlord cost calculator with higher insurance, utilities and maintenance figures to test an HMO against a single let, and read our true cost of being a landlord.
Planning permission: a separate question from licensing
A licence and planning permission are two different things, and an HMO can need both. South Cambridgeshire District Council’s guidance summarises the national position:
- Small HMOs fall within planning use class C4; larger HMOs are classed as sui generis.
- Changing a house (use class C3) to an HMO for 7 or more people requires planning permission.
- Smaller conversions may be possible without a planning application, but many councils use Article 4 directions to remove that right in certain areas — so always check before converting.
- Without the right permissions, the council’s planning enforcement team can require the property to go back to single occupancy.
Building control approval may also be needed for conversions and for work such as plumbing, electrics, insulation or structural changes.
Management standards and fire safety
Once an HMO is let, the HMO Management Regulations apply, whether or not it’s licensed. They cover duties such as keeping common parts, fire escapes, water supply, drainage, gas and electricity in good order, and providing the manager’s contact details to occupiers. South Cambridgeshire notes that failing to meet the management regulations can lead to a fine of up to £5,000.
For fire safety, the council expects a fire risk assessment and compliance with national housing fire safety guidance, with different standards for HMOs of up to two storeys and those of three or four storeys. Budget for an assessment and any work it identifies, such as fire doors, alarm systems or escape route improvements.
Budgeting for an HMO: a checklist of extra costs
| Cost | When | Where to find a figure |
|---|---|---|
| Licence fee | Every 5 years (or less) | Your council’s fee schedule |
| Planning application | On conversion, if needed | Your council’s planning fees |
| Fire risk assessment and fire safety works | On conversion and when layouts change | Quotes from assessors and contractors |
| Gas safety check | Every year | £100–£200 for multi-appliance/HMO properties |
| EICR | At least every 5 years | £250–£450+ for HMOs |
| Specialist HMO insurance | Every year | Insurer quotes |
| Utilities and broadband (if included in rent) | Monthly | Your suppliers — 16% of HMO landlords’ spending in the Pegasus Insight research |
| Council tax (often payable by the landlord in HMOs) | Monthly | Your council |
| Cleaning of common areas | Ongoing | Local quotes |
| PRS database registration | Every year from its launch | £65 per property (reported) |
The council tax point is worth checking early: in many HMOs let by the room, the landlord rather than the tenants is liable for council tax. Your council will confirm how it treats your property.
Frequently asked questions
How much is an HMO licence? It depends on the council. As a worked example, South Cambridgeshire charges £895 for a new 5-year licence for up to five bedrooms, plus £36 per extra bedroom.
Do I need an HMO licence for 3 or 4 tenants? Not under mandatory licensing, which starts at 5 people from more than 1 household. But your council may run an additional licensing scheme that covers smaller HMOs.
How long does an HMO licence last? Up to 5 years.
What’s the fine for an unlicensed HMO? GOV.UK says it can be an unlimited fine, and you could face a Rent Repayment Order of up to two years’ rent.
Is the HMO licence fee tax-deductible? Licence fees are generally treated as a cost of running the letting business; check with an accountant for your situation.
Sources
- GOV.UK — House in multiple occupation licence
- South Cambridgeshire District Council — HMO licence fees
- GOV.UK — Renters’ Rights Act: an overview for landlords
- Mortgage Soup — Rising maintenance bills push landlord running costs to nearly half of rental income (Pegasus Insight data)
- Property Tax Partners — Gas safety certificate cost · EICR cost
- Osborne Clarke — PRS database
Council fees change; always check your own council’s current schedule. Not legal advice. Last checked: 8 October 2026.
Related guides
- Landlord Costs FAQ: 31 Questions Answered
- Landlord Safety Certificate Costs in 2026: Gas Safety, EICR and EPC
- Landlord Maintenance Costs in the UK: How Much Should You Budget?
- The True Cost of Being a Landlord in the UK (2026)
- Making Tax Digital for Landlords: Does It Apply to You, and When?
Figures are published examples, estimates and averages, not quotes. Rules change: check the linked official source before you act.