Landlords who let properties to more than three unrelated people need to apply for a licence for a House of Multiple Occupation (HMO).
But many are put off - because a licence can cost ??1,000 - despite facing a fine of up to ??20,000, Southampton City Council said.
The authority estimated a total of 1,500 unlicensed HMOs in the area.
Shelter helpline adviser Nadeem Khan said fear of eviction and living in poorly maintained properties are frequent concerns raised by HMO tenants.
"Because of the huge shortage of affordable homes people are being forced into rented homes which are unregulated. We receive about five or six calls a day about this," he said.
Nationally, mandatory licensing for HMOs is aimed at houses of three storeys or more and occupied by five or more unrelated people.
In Southampton, the licences affect properties in Bargate, Bevois, Portswood, Swaythling (Designation 1 - introduced in 2013) and in Shirley Freemantle, Millbrook, and Bassett (Designation 2 - introduced in 2015).
A council spokesman said: "Landlords have generally co-operated with the regime, but a small minority have resisted applying for their licence."
The council said it had so far gained prosecutions against one firm and 13 individuals.

The incident happened in Forbes Road at about 10:25. The van driver had picked up the thief in Yeaman Place in his red Renault Trafic van.
As he dropped him off in Forbes Road, the thief pulled out a knife.
He took a two-figure sum of money and left in the direction of Bruntsfield Place.
He was about 30 years old, white, about 6ft tall and of medium build. He was wearing a dark jacket with a white stripe on the sleeve and dark jeans.
Police have appealed for witnesses.
Det Con Joyce Gunderson said: "Thankfully the van driver was not injured during this robbery but he was left understandably shaken.
"We are pursuing various lines of inquiry to trace the man responsible and we are keen to hear from anyone who can assist us in identifying him.

The number of pedestrians and cyclists hurt in accidents fell by more than a third between 2012 and 2016 - but the rate was lower in 20mph zones, the city council said.
The council said it will now evaluate the effectiveness of existing zones.
It also agreed to spend the Â£687,000 road safety pot on alternative schemes.
Since 2014, a 20mph limit has been introduced on more than 1,000 roads and around 138 schools in the city.
This has cost the council about Â£640,000, according to a BBC Freedom of Information request.
It led to an average speed reduction of 0.7mph in these areas but the "amount of accidents experienced in 20mph zones has not fallen as quickly as initially hoped", the council said.
For example, casualties of cyclists on the city's roads fell by more than 40% between 2012 and 2016 but the drop in 20mph zones was notably lower - 16% in Gorton and 12% in Miles Platting, Newton Heath, Moss Side and Fallowfield.
Last year, one person in Greater Manchester was convicted for exceeding the speed limit in a 20mph zone, police said.
While the review is undertaken, money for road safety will be spent on other traffic calming measures and pedestrian crossings.
Councillor Rosa Battle said: "It's important that we fully understand how effective these zones have been in terms of reducing accidents so far."
Rod King, director of 20's Plenty for Us, welcomed the report but said it was "incorrect to use early, small number datasets which are not statistically valid and compare them to whole city totals".
Tenants in Southampton may face eviction because landlords are holding incorrect paperwork, Shelter claims.
[NEXT_CONCEPT]
A thief who stole money at knifepoint from a van driver he had just caught a lift from in Edinburgh is being sought by police.
[NEXT_CONCEPT]
A plan to expand 20mph zones across Manchester is to be reviewed after their impact on reducing the number of accidents was called into question.