Britain is very short of housing and this is a counterproductive piece of legislation that achieves no discernible benefit. It also adds greatly to costs for landlords, and hence ultimately for tenants, further exacerbating the problem. Housing regulations need to be reasonable and proportionate: the 2004 and 2010 HMO legislation is not.
The 2004 Housing Act introduced a requirement that houses of 3 or more stories occupied by 5 or more people (other than a single household) should conform to expensive planning requirements eg installation of fire doors throughout, fire-resistant ceilings, etc. There is no evidence that this has achieved any benefit whatsoever.
A 2010 statutory instrument extended these to houses newly in multiple occupation by as few as 3 people. Fortunately the Coalition has announced a review of this latter legislation: however a better approach would be to scrap the regulations altogether.