London's HMO Licensing Patchwork in 2026: A Borough-by-Borough Nightmare for Landlords

Croydon Just Made HMO Life Even More Complicated

If you're a London landlord running HMOs across multiple boroughs, April 2026 has brought yet another headache. Croydon Council has officially approved a new borough-wide additional HMO licensing scheme, set to launch in September 2026. That means every property with three or more tenants forming two or more households in Croydon will need a licence, regardless of the number of storeys.

On its own, that sounds manageable. But when you zoom out and look at how every London borough handles HMO licensing differently, a very frustrating picture emerges. For landlords managing properties in two, three, or five boroughs at once, the compliance burden is becoming genuinely unsustainable.

Let's map out where things stand, what it means for your bottom line, and why a growing number of landlords are rethinking HMOs altogether.

What Is HMO Licensing and Why Does It Keep Changing?

A House in Multiple Occupation (HMO) is any property rented to three or more people from at least two separate households who share facilities like a kitchen or bathroom. Under national law, larger HMOs (five or more tenants, two or more storeys) require a mandatory licence from the local council.

But here's the twist. Individual councils can introduce additional licensing schemes that capture smaller HMOs too. And selective licensing schemes can require landlords to licence even standard single-household rentals in certain areas.

The result? Every London borough gets to set its own rules, its own fee structures, its own timelines, and its own enforcement priorities. There is no central register, no unified application portal, and no consistent standard for what compliance looks like from one side of a borough boundary to the other.

The 2026 Licensing Landscape: Borough by Borough

Let's look at four boroughs that perfectly illustrate the fragmentation.

Croydon

Croydon's new additional licensing scheme (launching September 2026) will cover all HMOs in the borough, not just the larger mandatory ones. Fees are expected to follow the pattern of other boroughs: somewhere between £600 and £1,200 per property for a five-year licence. Landlords who fail to apply face unlimited fines or civil penalties of up to £30,000 per offence.

Newham

Newham has long been one of London's most aggressive boroughs on licensing. It operates both additional and selective licensing schemes, meaning virtually every privately rented property in the borough needs a licence. Fees are among the highest in London, and enforcement is relentless. Newham has issued millions of pounds in civil penalty notices to non-compliant landlords.

Hackney

Hackney runs an additional HMO licensing scheme that covers all HMOs occupied by three or more people. The borough has also been expanding enforcement activity and recently increased its fees. Landlords here face a particularly thorough inspection regime, with strict requirements around fire safety, room sizes, and waste management.

Tower Hamlets

Tower Hamlets introduced its own additional licensing scheme and combines it with selective licensing in targeted wards. The borough's approach to fee structures and renewal timelines differs again from its neighbours, making cross-borough portfolio management a logistical puzzle.

The Real Cost of Compliance Fragmentation

If you own HMOs in all four of these boroughs, here's what you're dealing with in practical terms:

• Four separate applications with different forms, evidence requirements, and portals
• Four different fee schedules, each with early-bird discounts that expire at different times
• Four sets of property standards, because each borough interprets things like minimum room sizes and amenity ratios slightly differently
• Four enforcement regimes, each with its own inspection schedule and penalty culture
• Ongoing renewals that fall at different points across a five-year cycle

For a landlord managing ten or fifteen HMO properties spread across London, the administrative overhead alone can eat thousands of pounds and dozens of hours each year. And that's before you factor in the risk. A single missed renewal or overlooked condition can result in rent repayment orders, civil penalties, or even criminal prosecution.

The teams at Airhosts regularly hear from landlords who started in HMOs expecting strong yields but found their profits steadily eroded by rising compliance costs, void periods between tenants, and the sheer time required to stay on top of borough-specific regulations.

HMO Profitability: Is It Still Worth It?

Let's be honest. HMOs can still work well in the right circumstances. A well-managed, fully compliant HMO in a strong rental area can deliver gross yields of 8% to 12%, which is significantly better than a standard single let.

But the net yield story has changed dramatically over the past few years. Consider the cumulative impact of:

• Licensing fees (often £150 to £250 per room, per cycle)
• Higher maintenance costs due to more intensive wear and tear
• Increased management time or letting agent fees
• Mandatory safety upgrades, from fire doors to emergency lighting
• The risk of civil penalties that can wipe out a full year's profit on a single property
• Section 24 tax changes that already squeezed landlord margins

When you run the numbers honestly, many London HMO operators are netting closer to 4% to 6% after all costs, which starts to look a lot less attractive given the effort involved.

Why Savvy Landlords Are Pivoting to Short-Term Lets

Here's where things get interesting. A growing number of experienced London landlords are stepping back from HMOs and moving their properties into the short-term rental market instead. The reasons are compelling.

Short-term lets in London, when managed professionally, consistently outperform both single lets and HMOs on a net yield basis. A well-positioned one or two-bedroom flat in zones one through four can generate 30% to 60% more income on Airbnb and Booking.com than it would as a long-term rental.

Crucially, short-term lets sidestep the entire HMO licensing framework. You're not running a house in multiple occupation. You're operating a furnished holiday let or serviced accommodation, which falls under a completely different regulatory category. While the 90-night rule applies in most London boroughs (meaning you need planning permission to exceed 90 nights of short lets per year), a professional management company can help you navigate this effectively, including through mid-term lets and hybrid strategies that maximise occupancy year-round.

The Simplicity Factor

Compare the two models side by side. With HMOs, you're managing multiple tenancies, chasing individual room rents, handling disputes between housemates, dealing with higher turnover on individual rooms, and navigating a maze of borough-specific licensing. With a professionally managed short-term let, you hand over the keys and receive income.

That's the model Airhosts has built for London landlords. From professional photography and dynamic pricing to guest communications, cleaning, linen management, and maintenance coordination, every aspect of the short-term rental operation is handled for you. There's no licensing patchwork to navigate, no housemate dramas at 11pm, and no five-year renewal cycles to track across four different council websites.

A Clearer Path Forward for London Landlords

The HMO market isn't disappearing, but it is becoming increasingly difficult to operate profitably, especially for landlords with properties in multiple boroughs. The licensing fragmentation across London shows no signs of getting simpler. If anything, more boroughs are likely to introduce or expand their schemes in the coming years.

For landlords who value their time, want predictable high returns, and prefer a genuinely hands-off experience, professionally managed short-term lets represent the most compelling opportunity in London property right now.

Airhosts works with landlords across London who have made exactly this switch, often seeing their net income increase within the first quarter. Whether you're reconsidering a single HMO or looking to transition an entire portfolio, the conversation starts with understanding what your property could earn.

Ready to see how your property would perform as a short-term let? Get in touch with the Airhosts team today for a free, no-obligation income estimate. Your property could be earning more by next month.