Local authority officers have found three tenants living inside a shed in the garden of a three-bedroom semi-detached house in Brent, north London.
Brent council's enforcement team raided the converted semi in the Dollis Hill area shortly after 6am yesterday following tip-offs from neighbours.
They found 16 people crammed inside the unlicensed HMO, including the three in the shed.
One family of four told officers that they were paying the landlord £800 a month to live in a single, windowless room on the ground-floor.
The tenants said that they had no written tenancy agreement from their landlord or any cash receipts for their rent payments.
The council says the landlord is estimated to be raking in £68,400 a year through exploiting the people living in this property.
A spokeswoman for the council says: "The landlord of this property faces a hefty fine for breaking the licencing laws around houses in multiple occupation. We will do everything in our power to protect vulnerable tenants from this kind of gross exploitation. Every renter in Brent deserves to live in a home that is safe and maintained to a decent standard."
The house also lacked a working fire alarm system, good maintenance and ventilation.
Fly-tipping and the constant coming and going of different people from the property had led neighbours to complain.