London HMO conversions now average £92,796, pushing typical deal costs to £957,105

London landlords looking at HMO conversions now face an average £92,796 bill before finance, on top of purchase costs that bring the typical London deal to £957,105. Those figures, from Rushbrook research reported by Landlord Today on 14 October 2026, are not a legal change, but they are a blunt reminder that weak underwriting can turn a promising HMO into an expensive mistake.

The headline risk is not just build cost inflation. It is the tendency to appraise a London HMO on generic national assumptions. Rushbrook’s England-wide benchmark comes out at £15,275 per bedroom, based on an average 5.37-bedroom HMO, but London deals can move well beyond that once planning constraints, licence conditions, fire precautions, professional fees and specialist finance are priced properly.

A benchmark is useful, but it is not a budget

The £15,275 per bedroom figure is a starting point for screening deals, not a substitute for a measured schedule of works. In London, costs can climb quickly once you allow for labour rates, contractor availability, fire compartmentation, alarm upgrades, acoustic works, additional bathrooms, design fees and contingency.

That matters because a scheme that looks comfortably profitable on a back-of-envelope appraisal can fail once real specifications are attached. If your numbers still assume a light refurb and a straightforward refinance, they are likely behind the market.

Planning can stop a deal before licensing even starts

Many landlords still confuse planning with licensing. They are separate regimes, and planning is often the first point at which a London HMO deal becomes non-viable.

A change from a family house to a small HMO may fall within Use Class C4 for three to six occupiers, but that does not mean the change is automatically permitted. Article 4 directions in many London boroughs remove permitted development rights for a change from C3 to C4, meaning planning permission may be required. Larger HMOs with more than six occupiers are generally treated as sui generis, which usually means a full planning application is needed.

There is no London-wide shortcut here. Boroughs including Newham, Waltham Forest, Brent, Ealing and Croydon have all taken active approaches to HMO controls, but the exact position must be checked with the local planning authority before purchase.

Licensing rules are local enough to change the numbers

At national level, mandatory HMO licensing generally applies where a property is occupied by five or more people forming two or more households and sharing facilities. In practice, that is only part of the picture.

Boroughs can also run additional licensing for smaller HMOs and selective licensing for other rented properties in designated areas. Fees, amenity standards, room-size expectations, processing times and licence conditions vary materially from one borough to the next. That means the same property can look workable in one area and awkward in another.

For investors comparing postcodes, those local differences are not admin detail; they are part of the deal economics.

Fire safety and Building Regulations are where budgets often break

The biggest appraisal failures usually appear once fire safety and Building Regulations are considered properly. Depending on the building and layout, works may include linked alarm systems, compliant fire doors, protected escape routes, emergency lighting, fire separation, ventilation upgrades, drainage changes, sound insulation and structural alterations.

These are not finishing-line extras. They can alter room layouts, reduce bedroom numbers, extend programme length and push up borrowing costs during the works. A landlord who prices the purchase accurately but treats compliance works as a loose contingency is not really underwriting the deal.

Finance and insurance need checking before exchange

A standard buy-to-let mortgage may not allow HMO use, structural alterations or a change in occupancy type without consent. Many conversions need specialist HMO finance or a bridge-to-term structure, often at a higher cost than a vanilla single-let product.

Insurance can also change sharply. A basic landlord policy may not cover HMO occupation, multiple unrelated tenants or an unoccupied refurbishment period. If the deal only works on standard buy-to-let pricing and off-the-shelf insurance, it may not work once the intended use is disclosed.

Three checks to make before committing

Before a London HMO purchase goes unconditional, landlords should do three things.

1. Build a full appraisal using the Rushbrook benchmark only as a placeholder, then replace it with borough-specific quotes and costs for planning, licensing, professional fees, contingency, voids and finance.
2. Confirm the planning and licensing position in writing with the local planning authority and housing team, including Article 4 coverage, licence fees, likely conditions and timescales.
3. Get early lender and fire-safety input so the finance structure and compliance specification are tested before exchange, not after.

The Rushbrook figures do not tell landlords whether to buy or walk away. They do make one point very clearly: in London, an HMO conversion is no longer a project that can survive lazy assumptions.

Rentals & Sales can help you verify borough HMO licensing requirements and compliance steps on a specific London property before you commit.