I am of two minds when it comes to things like this.

My first thought is that this is a HUGE disservice to the adult kids, and I can't imagine WANTING to live with my parents in my mid-20s (I did for a short time and couldn't get out fast enough). I also can't imagine dating someone who let their kids live at home. 

That leads me into my second thought: I wouldn't date someone who had their adult kids live at home just because the kids wanted to. However, I wouldn't knock someone if that is the choice they want to make and that's the life they want to lead.

What you have here is a compatibility issue. He likes living with his kids, for better or worse, but it's not a lifestyle you like. He either thinks living with you sans kids is better than living with his kids sans you, or he doesn't. It sounds like he like the arrangement as it stands since he's not making any moves to either move in with you or kick his kids out.

If you force him to choose, you may win the battle but lose the war. He may be happy for a short time but then try to weasel his kids back into what would be a shared home. Unless he is willing to live on his own for a while to first prove that he CAN and WANTS to live on his own, I would maintain your relationship as is. If you're wanting a mate who lives with you, or at least lives kid-free, you may need to cast your net back into the ocean and find a new fish.

He does sound like he enables them a bit....He is not unlike my husband that makes accomodations because the kids' mom is uninvolved. Their mom passing was a huge loss, understandable that it would bond them....But he is doing them a disservice enabling them from avoiding taking responsibility. Maybe frame it less about "they need to pay for this"....vs...As adults, life is about making choices and their independence as adults starts off with the little things like paying for their own hair appts (what is that about?) Maybe he's not ready to have them move out on their own....but little steps to encourage their own responsibility for their lives is a good first step.

But you see the writing on the wall.  He is always going to be overly involved with his kids.  Until his kids want him out of there lives if ever.  If you want a relationship where it’s only weekends, maybe a vacation trip every now and then.  Where you will be paying for everything because his money is going to his kid.  That great. It’s great if it worked for you.  But I would NOT expect more.  I would not sell my house. You need control!!!!  You need to say, your kids are not going to live in my house. No if ands or buts. 

I live in one of the most expensive housing markets in the world. So I fully expect kids will live with us as adults if they want to live and work in this city (for a time). They won't be able to afford anything else - at least at first. 

But even though the oldest is only 12, I've already been laying the groundwork... kids who are not in full time education pay rent at my house. I even told my son that even if I won the lottery and had a spare flat, he'd still be paying rent on it. 

My brother lived rent free for years in his own apartment in a student neighbourhood. He only just got his first real, professional job at the age of 37 or 38. He's doing ok now, but he could be doing a lot better. He just drifted... I don't want that for my son or my stepsons.