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Houses in multiple occupation · Room lets

HMO or single let?

Letting by the room can more than double a property's rent, but you pay the bills, the council tax and a licence. Compare what each keeps you after tax.

The house

Room rents usually include bills.

HMO running costs
Single let instead
Both
HMO, after tax, each year–
HMO: you keep–after tax, 2027/28
Single let: you keep–after tax, 2027/28
Break-even–

Side by side, one year

Gross yield –

HMOSingle let

An HMO is more work: more tenants, more turnover and more inspections.

HMO rules in England

  1. Licence5 or more peopleA licence is required when five or more people from two or more households share facilities. Many councils also license smaller HMOs. Licences last up to five years.
  2. PlanningArticle 4 areasTurning a house into a small HMO normally doesn't need planning permission, unless the council has an Article 4 direction. Seven or more people always need permission.
  3. RoomsMinimum bedroom sizes6.51 m² for one adult and 10.22 m² for two. Smaller rooms can't be used as bedrooms in a licensed HMO.
  4. FireFire safetyExpect interlinked smoke alarms, fire doors and protected escape routes. A fire risk assessment is required for the shared areas.
  5. BillsCouncil tax and utilitiesWhen rooms are let separately, the landlord usually pays the council tax and normally includes bills in the rent.
  6. FinanceHMO mortgage and insuranceMost standard buy-to-let mortgages don't allow HMOs. Use an HMO mortgage and HMO landlord insurance.

Taxed at the 2027/28 property rates, with mortgage interest relieved at 22%. Licensing fees and conditions vary by council. An estimate, not tax or legal advice.

Why HMOs earn more, and cost more

Letting a house room by room usually brings in far more rent than letting it whole. A six-bed house that would let for £1,250 a month can bring in £3,600 at £600 a room. But in an HMO the landlord normally pays the energy, water, broadband and council tax, furnishes the rooms, pays a licence fee and meets stricter fire safety standards. Agents also charge more to manage one.

Worked example

A £280,000 six-bed house with rooms at £600 a month including bills, let 92% of the time, has a gross yield of 15.4% against 5.4% as a single let. After bills, council tax, cleaning, a 15% agent, repairs, licensing and furnishing, it makes about £19,700 a year before mortgage interest, against about £10,300 as a single let.

With a £210,000 mortgage, slightly dearer for an HMO, and the owner earning £60,000, the HMO keeps about £3,200 a year after 2027/28 tax. The single let loses about £1,600. The HMO is about £4,800 a year ahead, and breaks even with the single let at 69% of rooms let, just over four of the six.

Check before you buy

Look up whether the council has an Article 4 direction or an additional licensing scheme, and check room sizes against the licensing minimums. A house that can't legally be an HMO is just an expensive single let.

Questions landlords ask

Do I need a licence for a small HMO?

A mandatory licence applies when five or more people from two or more households share facilities. Many councils also run additional licensing schemes that cover three- and four-person HMOs, so check your council's website.

Do I need planning permission to convert to an HMO?

Changing a house to a small HMO for three to six people is normally permitted development, unless the council has an Article 4 direction that removes it. HMOs for seven or more people always need planning permission.

Who pays council tax in an HMO?

When rooms are let on separate tenancies, the landlord is usually liable for council tax and builds it into the rent.

How does the Renters' Rights Act affect HMOs?

Each room is normally a periodic tenancy, so tenants can leave with two months' notice and rent rises follow the Section 13 process per tenancy. Plan for more frequent turnover.

Sources

Last updated 1 October 2026.

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