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Not all HMOs are the same. The planning use class, property configuration, and occupancy level all determine which regulations apply, what licence you need, and which lenders will offer you a mortgage. Understanding the different HMO types — and which category your property falls into — is fundamental to making informed investment decisions.
What does HMO mean in real estate? HMO stands for House in Multiple Occupation — the meaning of HMO in real estate refers to any property rented by three or more tenants from two or more separate households who share facilities such as a kitchen or bathroom. A licenced HMO is one that holds a valid HMO licence from the local council — the term "licenced HMO" simply means the property has been inspected, meets minimum standards, and is legally permitted to operate as a shared house.
Use Class C4: Small HMOs
What it means
Use Class C4 covers HMOs occupied by three to six unrelated people who share basic amenities. This is the most common HMO type and includes the typical shared house where individual tenants each rent a room and share a kitchen and bathroom.
Planning
In areas without an Article 4 Direction, converting a family home (C3) to a C4 HMO is permitted development — no planning application required.
In areas with an Article 4 Direction, full planning permission is needed for C3 to C4 conversions.
Licensing
C4 HMOs with five or six occupants from two or more households require a mandatory HMO licence.
C4 HMOs with three or four occupants may require an additional HMO licence if the council has adopted an additional licensing scheme.
Mortgage implications
C4 HMOs are the most straightforward to finance. The widest range of HMO mortgage lenders operate in this space, and rates are generally the most competitive. Properties with three to five bedrooms attract the broadest lender appetite.
Sui Generis: Large HMOs
What it means
Sui Generis (Latin for "of its own kind") applies to HMOs occupied by seven or more people. These properties fall outside the standard use classes and are treated as a distinct planning category.
Planning
Full planning permission is always required for a property to operate as a Sui Generis HMO, regardless of whether an Article 4 Direction is in place. This applies to:
- New conversions from C3 or C4 to Sui Generis
- Properties that have always been large HMOs but lack formal planning permission
Licensing
Sui Generis HMOs with five or more occupants require a mandatory HMO licence (which in practice means all Sui Generis properties, since they house seven or more people by definition).
Licensing conditions for large HMOs tend to be more demanding — stricter fire safety requirements, more detailed management conditions, and closer scrutiny of room sizes and amenity provision.
Mortgage implications
Sui Generis HMOs narrow the lender pool. Not all HMO mortgage lenders will finance properties with seven or more bedrooms. Those that do may apply higher rates or lower LTV limits. Specialist broker advice is particularly valuable for large HMO finance.
Learn more about large HMO mortgages and how to access specialist lenders.
Section 257 HMOs
What it means
A Section 257 HMO is a building that has been converted into self-contained flats where:
- The conversion did not comply with the Building Regulations 1991 (or later equivalent), AND
- At least one-third of the flats are let on short-term tenancies
The key distinction is that Section 257 HMOs are made up of self-contained units (each flat has its own kitchen and bathroom), unlike traditional HMOs where occupants share facilities. However, because the building conversion predates modern building standards, the fire safety and structural standards may be inadequate.
Planning
Section 257 HMOs do not typically trigger use class issues in the same way as traditional HMOs, because each flat is self-contained. However, the building as a whole may be subject to HMO management regulations and potentially licensing.
Licensing
Section 257 HMOs can fall within the scope of additional licensing schemes (if the council has adopted one that covers Section 257 properties) or selective licensing (if the property is in a designated area). They are generally exempt from mandatory licensing because the individual flats are self-contained.
For more on this topic, see our guide to The UK Landlord’s Guide to HMO Property Licensing.
For more on this topic, see our guide to HMO Property: Ultimate Guide (2025) | What is HMO Property?.
For more on this topic, see our guide to HMO Property Insurance; Ultimate Guide.
For more on this topic, see our guide to The UK Landlord’s Guide to HMO Property Licensing.
Council approaches to Section 257 licensing vary significantly. Some councils actively license these properties; others do not.
Mortgage implications
Section 257 properties are among the most difficult HMOs to finance. Many HMO lenders exclude properties that do not meet modern building regulations standards. Commercial mortgage or specialist lender routes may be required. Valuation can also be complex because the non-compliant conversion status affects the property's investment value.
Purpose-Built HMOs
What it means
A purpose-built HMO is a property that was designed and constructed specifically for multi-occupancy use, rather than converted from a family home. Examples include:
- New-build HMO developments with individual studio rooms and shared facilities
- Purpose-built student accommodation blocks
- Modern co-living developments with communal kitchens and living spaces
Planning
Purpose-built HMOs require full planning permission as they are typically designed for Sui Generis use from the outset. Planning applications for purpose-built HMOs are assessed on the same criteria as conversions — concentration, parking, amenity, and local impact — but may benefit from being designed to modern standards from day one.
Licensing
Purpose-built HMOs are subject to the same licensing rules as converted properties — mandatory licensing for five or more occupants from two or more households, plus any applicable additional or selective licensing.
Mortgage implications
Purpose-built HMOs can be easier to finance than converted properties because they are designed to meet current fire safety, building regulations, and learn more. However, they are typically more expensive per unit and the development finance required to build them is more complex than a simple conversion.
Bedsits
What it means
A bedsit (bed-sitting room) is a single room used for both living and sleeping, typically with shared kitchen and bathroom facilities. Traditional bedsit properties are large Victorian or Edwardian houses divided into individual rooms, each let to a separate tenant.
How bedsits differ from standard HMOs
The key difference is that bedsit rooms tend to be more self-contained in use — the occupant lives primarily in their room rather than using shared communal living spaces. However, for planning, licensing, and mortgage purposes, bedsit properties are generally treated as HMOs and subject to the same rules.
Licensing
Bedsit HMOs with five or more occupants require mandatory licensing. The room size minimums apply to each bedsit room based on its intended occupancy.
Mortgage implications
Some lenders distinguish between "shared house" HMOs (where tenants socialise in communal areas) and "bedsit" HMOs (where rooms are more self-contained). A small number of lenders are less comfortable with bedsit configurations, particularly in properties with limited communal space. Check lender appetite before purchasing.
Mixed-Use HMOs
What it means
A mixed-use HMO has both residential HMO accommodation and a non-residential element — typically a ground-floor commercial unit (shop, office, or food outlet) with residential rooms above.
Planning
Mixed-use properties are typically Sui Generis by nature and require full planning permission for any change of use.
Licensing
The residential HMO element is subject to normal licensing rules. The commercial element is not licensed under HMO legislation but may be subject to its own regulatory framework.
Mortgage implications
Mixed-use properties significantly restrict the available lender pool. Most standard HMO mortgage lenders do not accept properties with a commercial element. Commercial mortgage lenders or specialist HMO lenders with mixed-use appetite are required. Rates are typically higher and LTV limits lower than for purely residential HMOs.
Choosing the Right HMO Type for Your Investment
| HMO type | Ease of finance | Lender pool | Typical yield | Complexity |
|---|---|---|---|---|
| C4 (3–6 occupants) | Easiest | Widest | 8–12% | Low |
| Sui Generis (7+) | Moderate | Narrower | 10–15% | Medium |
| Section 257 | Difficult | Very narrow | Varies | High |
| Purpose-built | Moderate | Moderate | 8–12% | Medium |
| Bedsit | Moderate | Moderate | 9–13% | Low |
| Mixed-use | Difficult | Very narrow | Varies | High |
For most investors, C4 HMOs with four to six bedrooms represent the best balance of yield, simplicity, and access to competitive mortgage finance.
Contact The HMO Mortgage Broker to discuss which HMO type best matches your investment strategy and financing options — we work with over 30 specialist lenders across all HMO categories.
Frequently Asked Questions
What is the difference between C4 and Sui Generis HMOs?
C4 (House in Multiple Occupation) covers small HMOs with 3-6 tenants. Sui Generis means 'in a class of its own' and applies to larger HMOs with 7+ tenants or HMOs with unusual characteristics. The key difference is planning: converting to C4 is often permitted development, while Sui Generis always requires planning permission. Mortgage options also differ — more lenders serve C4 properties.
What is a Section 257 HMO?
A Section 257 HMO is a converted building containing self-contained flats that does not meet the 1991 Building Regulations standard. Even though each flat is self-contained, the building as a whole is classified as an HMO. This often applies to Victorian or Edwardian houses converted into flats before modern building regulations. The owner must ensure fire safety, structural standards, and potentially licence the building.
Which type of HMO is easiest to finance?
Standard C4 HMOs (3-6 bedrooms, shared facilities) are the easiest to finance with the widest choice of lenders. Properties with en-suites in each room are also well-received. Sui Generis HMOs, Section 257 properties, and mixed-use buildings have fewer lending options and typically require specialist commercial or semi-read more.
Can I change an HMO from one type to another?
You can usually convert between HMO subtypes (for example, adding rooms to a C4 property to make it Sui Generis), but this requires planning permission if going above 6 tenants and may need building regulations approval. Converting from an HMO back to a single dwelling (C3) is permitted development in most areas. Always check local planning requirements and update your HMO licence accordingly.