HMO Licensing and Selective Licensing: What Private Landlords Actually Have to Do

If you let property in England, there are two separate licensing regimes that can catch you — and confusing them is one of the easiest ways to end up on the wrong side of a council enforcement team. HMO licensing and selective licensing sit under different parts of the same statute, cover different properties, and are triggered in different ways. This guide untangles both for the small landlord, explains what each costs, and sets out why getting it wrong now carries a bigger financial sting than it did a year ago.

TL;DR: HMO licensing and selective licensing for landlords in a nutshell

HMO licensing and selective licensing are two distinct schemes under the Housing Act 2004. A mandatory HMO licence is required nationwide for any house or flat let to five or more people forming two or more households who share a kitchen, bathroom or toilet, according to GOV.UK. Selective licensing is a local, postcode-based scheme where a council requires every private rented home in a designated area — including an ordinary family let — to be licensed. Fees are set by each council and vary widely — often several hundred pounds or more per property. Letting an unlicensed property that should be licensed is a criminal offence carrying an unlimited fine on conviction or a civil penalty of up to £40,000 (£30,000 for offences before 1 May 2026) — and from 1 May 2026 tenants and councils can reclaim up to two years' rent through a rent repayment order.

What is the difference between HMO licensing and selective licensing?

The Housing Act 2004 created three licensing routes, and it helps to see them side by side rather than as one blurry "do I need a licence" question.

The crucial distinction for a landlord like Dave with a handful of terraces: HMO licensing is about how many unrelated people live in the property, while selective licensing is about where the property is. A three-bed terrace let to a single family is never an HMO — but if it sits inside a selective licensing designation, it still needs a licence. That is the point most competitor guides gloss over, and it is exactly the point that generates the surprise fine.

Mandatory HMO licensing has applied without a storey threshold since 1 October 2018, so the old "three storeys or more" rule is dead — a two-storey terrace let to five sharers is a licensable large HMO. GOV.UK confirms the current test: five or more occupiers, two or more households, at least one paying rent, sharing a toilet, bathroom or kitchen.

Is my shared house an HMO if only three or four people live there?

It can be. Being an HMO and needing a mandatory licence are different questions. Under the standard test in section 254 of the Housing Act 2004, a property is an HMO if at least three people live there, they form more than one household, and they share a toilet, bathroom or kitchen (GOV.UK). Section 254 also contains a self-contained flat test and a converted building test, but most small landlords only ever meet the standard one.

So a four-bed semi let to four unrelated graduates sharing a kitchen is an HMO — but it only needs a licence if the council runs an additional or selective licensing scheme covering it. Add a fifth unrelated sharer and it needs a mandatory licence wherever it is.

A household is one person, or members of the same family living together — including partners, parents, children, siblings, grandparents, aunts, uncles and step-relatives. That makes the count less obvious than it looks:

• Three friends sharing a flat are three households — an HMO.
• Two couples sharing a house are two households — an HMO.
• Four cousins sharing a house are one household — not an HMO.
• A family of five in a four-bed house is not an HMO.

Three points regularly catch small landlords out:

• Tenant changes can tip a let into HMO status overnight. Replace one member of a couple or family with an unrelated sharer and the household count changes.
• Children count. The mandatory threshold is five people, not five adults.
• The tenancy paperwork is irrelevant. One joint tenancy signed by five sharers is still an HMO; licensing looks at who lives there, not how the deal was papered.

When does a property need a mandatory HMO licence?

A property in England needs a mandatory HMO licence if all of the following apply: it is occupied by five or more people, they form more than one household, and some or all of them share a toilet, bathroom or kitchen. A "household" means a single person or members of one family living together, so five unrelated working professionals sharing a kitchen is the textbook licensable HMO. According to GOV.UK, the council must also carry out a Housing Health and Safety Rating System risk assessment within five years of your application, and can require works if it finds unacceptable hazards.

Beyond the mandatory threshold, your council may run an additional licensing scheme that pulls in smaller HMOs — typically houses shared by three or four people. These are local and time-limited, so a three-sharer house that needs no licence in one borough may need one across the boundary. There is no national register you can rely on; you have to check with the specific council.

What conditions come with an HMO licence, including room sizes?

An HMO licence is a set of ongoing legal duties, not a certificate you collect and forget. Since 2018, the Licensing of Houses in Multiple Occupation (Mandatory Conditions of Licences) (England) Regulations 2018 have written minimum bedroom sizes into every HMO licence:

Floor area under a ceiling lower than 1.5 metres does not count, so attic rooms with sloping ceilings can be smaller than they look on paper (SI 2018/616). A room below the minimum cannot be let as a bedroom for that number of people, which can cut the rent a house can earn.

Beyond room sizes, a typical licence also sets conditions on:

• Gas safety — an annual gas safety certificate, supplied to the council on request
• Electrical safety — a current EICR
• Fire safety — working smoke alarms, fire doors where required and clear escape routes (see our guide to fire safety regulations for rental property)
• Refuse and waste storage — meeting the council's arrangements
• Maximum occupancy — for each room and for the property as a whole

Breaching a licence condition — for example letting to more people than the licence allows — is itself an offence under section 72 of the Housing Act 2004, separate from letting without a licence, and a breach of several conditions can attract several penalties.

What is selective licensing, and why does it feel like a cash grab?

Selective licensing lets a council designate an area — a few streets, a ward, or in principle the whole district — where every privately rented home must be licensed, regardless of how many people live there. The power sits in Part 3 of the Housing Act 2004, section 80, and a council can only designate an area if it can evidence problems such as low housing demand, significant anti-social behaviour, poor property conditions, high migration, high deprivation or high crime, as set out in MHCLG's selective licensing guidance.

The resentment among decent landlords is understandable: you pay a per-property fee for a scheme aimed at problems you did not cause, and the fee can feel like it buys you nothing but a certificate. It is worth knowing where the money legally has to go. The funds raised are ring-fenced to running the scheme — a council cannot use selective licensing income to plug unrelated budget gaps — and licence conditions cannot be used to control your rent.

Selective licensing is about the postcode, not the property. A perfectly ordinary family let can need a licence purely because of the street it's on.

Why selective licensing is spreading faster now

Here is the development that has genuinely changed the landscape, and that most older guidance misses. With effect from 23 December 2024, a new General Approval came into force, and MHCLG's guidance confirms that local housing authorities in England no longer need the Secretary of State's confirmation before introducing a selective licensing scheme of any size. Previously, a scheme covering more than 20% of a council's area or private rented stock needed central sign-off. That brake is gone.

In practice, this means larger, borough-wide schemes are now easier and quicker for councils to roll out. Councils must still consult for at least 10 weeks and satisfy the statutory conditions, but the political friction of getting Whitehall approval has been removed. If you let in an area with older housing stock or a history of anti-social behaviour complaints, the odds of a scheme landing on you have gone up — so watching your council's consultations is no longer optional.

How much do HMO and selective licences cost?

Licence fees are set by each council, not nationally, so there is no single number — which is precisely why landlords struggle to budget for them. Mandatory HMO licences are often higher than selective ones because many councils scale them with the number of bedrooms.

To ground that: the London Borough of Hammersmith & Fulham, as of 2026, publishes a mandatory HMO fee of £1,387 for a five-bedroom HMO plus £170 per additional bedroom, and £597.50 for an additional HMO or selective licence, with discounts for accredited landlords. Those are illustrative of one council only — your own council's fee could be materially higher or lower.

What happens if you let an unlicensed HMO or unlicensed property?

Letting a property that should be licensed — whether under HMO or selective rules — is a criminal offence. On conviction the fine is unlimited; as an alternative to prosecution, a council can impose a civil penalty of up to £40,000 (raised from £30,000 for offences committed on or after 1 May 2026, per GOV.UK's civil penalty guidance), and a conviction or penalty can also cost you your "fit and proper person" status, jeopardising your other licences. But the change that should focus every landlord's mind is what happens to your rent.

Under section 40 of the Housing and Planning Act 2016, a rent repayment order (RRO) can be made against a landlord who controls or manages an unlicensed HMO (section 72(1)) or an unlicensed house in a selective area (section 95(1)). The Renters' Rights Act 2025 amended these provisions with effect from 1 May 2026. According to Shelter, for offences committed on or after that date an RRO can now require repayment of up to two years' rent — double the previous 12-month cap. A tenant does not need the council to prosecute first; they can apply to the First-tier Tribunal directly, which need only be satisfied beyond reasonable doubt that the offence was committed.

A worked example of the numbers

Say a landlord lets a five-bedroom house share in a Manchester suburb, unaware the storey rule was scrapped, and runs it for 14 months without the mandatory HMO licence. The five rooms bring in £2,400 a month combined. Because the offence period is 14 months, a rent repayment order could in principle reach up to that 14 months of rent the tenants paid themselves — roughly £33,600 — with utility elements stripped out. Layer on a civil penalty of up to £40,000 and the council's own costs, and a single missed licence can wipe out several years of net profit on the property. That is the mechanism behind the headline: the penalty is designed to be larger than the rent you earned by cutting the corner.

One older rule no longer applies. Before 1 May 2026, a landlord could not serve a Section 21 notice on an unlicensed HMO or selective-licence property. That rule went when Section 21 was abolished (sections 75 and 98 of the Housing Act 2004 were repealed), and possession now runs through the Section 8 grounds. Being unlicensed still leaves you open to the penalties and rent repayment orders above. For how possession now works, see how to end a tenancy after Section 21 abolished, and for the wider enforcement picture, the penalties landlords face for non-compliance in 2026.

What should a landlord actually do?

1. Check the property against the HMO test. If five or more people in two or more households share facilities, it is a mandatory HMO — everywhere, no exceptions for low storeys.
2. Check the postcode with your council. Ask the private-sector housing team whether the address falls in an additional HMO or selective licensing designation. Do not assume a family let is safe.
3. Measure every room and gather the paperwork. Record each bedroom's floor area, leaving out space under a 1.5m ceiling, against the room-size minimums above. Councils typically ask for a current gas safety certificate, EICR, EPC, fire risk assessment, floor plans and evidence that you are a fit and proper person.
4. Apply before you let, or immediately if a new scheme lands. An outstanding application is a defence — for HMOs under section 72(4) of the Housing Act 2004 — but simply being unlicensed is not. Keep proof of when you applied, such as the council's acknowledgement.
5. Diarise the expiry. Licences typically run five years and are not transferable. Renew before expiry and re-check on any sale or change of manager.
6. Keep the compliance file current. Gas, electrical and alarm certificates are usually licence conditions — a lapsed CP12 can breach your licence as well as safety law.

Frequently Asked Questions

Do I need a licence for a single-family house?

Only if the property sits inside a selective licensing area designated by your council. A single-family let is not an HMO and needs no HMO licence, but selective licensing under Part 3 of the Housing Act 2004 can require a licence for ordinary family lets in a designated postcode. Check the specific address with your council.

How much is a rent repayment order for an unlicensed property?

For offences committed on or after 1 May 2026, a rent repayment order can require repayment of up to two years' rent, according to Shelter's summary of the Renters' Rights Act 2025 changes. The exact amount is set by the First-tier Tribunal based on the length of the offence and the landlord's conduct, and rent paid by universal credit or housing benefit is claimed by the council rather than the tenant.

Is an HMO licence the same as a selective licence?

No. An HMO licence (mandatory or additional) is triggered by the number and make-up of the occupiers under Part 2 of the Housing Act 2004. A selective licence is triggered by the property's location in a designated area under Part 3. A property is only ever caught by one regime at a time — an HMO in a selective area needs the HMO licence, not the selective one.

How long does an HMO or selective licence last?

Both types of licence usually last up to five years, though a council can grant one for a shorter period. Selective licensing designations themselves run for up to five years before the council must review or renew the scheme. Licences are not transferable, so a new owner or manager must apply afresh.

Can a council fine me and make me repay rent for the same offence?

Yes. A civil penalty of up to £40,000 (or an unlimited fine on conviction) and a rent repayment order are separate mechanisms and can both follow from the same unlicensed letting, alongside recovery of the council's costs. This is why the total exposure from a single missed licence can far exceed the licence fee you avoided.

Do I need planning permission to run an HMO?

It depends on the council. Some councils have Article 4 directions that remove the permitted development right to change a family home (use class C3) into a small HMO (use class C4), so planning consent is needed. Planning and licensing are separate: you can need one without the other. Check your council's planning pages before marketing a property as a shared house.

The bottom line

HMO licensing and selective licensing are not interchangeable, and the safe assumption for any small landlord is to check both the occupancy and the postcode before letting. The regime is not softening — the removal of central sign-off for large selective schemes and the doubling of the rent repayment order cap both point the other way. None of this is a substitute for advice on your specific property; where the facts are borderline, or a council has served a notice, speak to a solicitor or your accredited landlord body. To keep the rest of your obligations in one place, our Renters' Rights Act compliance checklist sets out the deadlines that sit alongside licensing.