What Counts as an HMO in Lambeth? Households, Tenants and the Three-Person Threshold

The HMO threshold in Lambeth trips up landlords who assume it is simply about numbers. A property with three tenants might be an HMO or might not — it depends on how those tenants relate to each other. Understanding the household test is the difference between needing a selective licence and needing an HMO licence that costs several times more.

The Household Test

Under Section 258 of the Housing Act 2004, a "household" is a single person or a group of related people living together. Members of the same family form one household, including:

• Spouses, civil partners, and cohabiting couples.
• Parents, grandparents, children, grandchildren, siblings, uncles, aunts, nephews, nieces, and cousins (including step-relatives and half-relatives).
• Foster children living with foster parents.

Anyone who does not fall into these categories is a separate household. A couple sharing a flat with an unrelated friend creates two households. Three unrelated professionals sharing a house create three households.

When Three Tenants Triggers HMO Status

A property occupied by three or more people forming two or more households is an HMO. In practical terms:

• A married couple and their two children — one household, not an HMO regardless of how many people that is. In a designated selective licensing ward, this property needs a selective licence.
• Three unrelated friends sharing a house — three households, and the property is an HMO. It falls under Lambeth's Additional HMO licensing scheme (borough-wide, running until 8 December 2026).
• Five or more people from two or more households — the property crosses into Mandatory HMO licensing territory. A house shared by five unrelated students is a mandatory HMO.

Children and infants count as individual occupants. A couple with a baby plus two unrelated lodgers means five occupants and at least three households — that is a mandatory HMO.

Additional vs Mandatory: Where the Line Falls

Lambeth's licensing hierarchy works like this:

The mandatory scheme takes priority. If a property qualifies for mandatory licensing, the additional scheme does not apply. And an HMO licence of any kind displaces the selective licence — you never hold both for the same property.

The Two Exempt Wards

Two of Lambeth's 25 wards — Vauxhall and Waterloo & South Bank — are excluded from selective licensing. An ordinary single-household let in these wards does not need a selective licence. A Section 257 building-level licence can still apply to a converted block. But if that same property houses three or more people from separate households, it becomes an HMO and needs an additional or mandatory licence regardless of the ward — the HMO schemes are borough-wide.

Why It Matters for Fees

A selective licence costs £1,025 flat. An additional HMO licence costs £550 per room used for sleeping; a four-bedroom HMO with no other sleeping rooms costs £2,200. Living and dining rooms are not counted for the fee. Getting the household count wrong means applying for the wrong scheme, paying the wrong fee, and potentially having the application refused with the non-refundable Part A fee gone.

The Lambeth Landlord Licensing Guide includes a step-by-step decision tree that takes your property address, tenant count, and household structure and tells you exactly which licence you need.

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