Propertymark has submitted a response to the Department for Levelling Up, Housing and Communities’ consultation reviewing council tax bandings for Houses in Multiple Occupation (HMOs).
The public consultation seeks views on how HMOs in England are valued for council tax as well as proposing changes to ensure housing in multiple occupation are banded as one property under one council tax band, rather than individually.
The current system allows some HMOs to be banded for council tax purposes per room, meaning that some tenants will be liable for council tax on a room in a shared house. Whereas in other areas council tax liability is applied to the whole HMO as a single property.
The new proposals would require local authorities to band a HMO as one property, with the landlord liable for council tax. This is something that Propertymark supports as it is the fairest and easiest approach.
Propertymark regional executive, Sophie Lang, who specialises in student lettings in the Cornwall area, believes taxing per room rather than per dwelling can cause issues for both tenants and landlords. She says there needs to be consistency in the message the UK Government is sending, to ensure all councils apply the same rules.
She said: “In Cornwall for example, the council does not adopt this stance, but two hours up the road in Somerset they do.
“Adopting a council tax room by room is not fair, and will increase costs for landlord and tenants, leading to higher rents.
“HMO is usually for people who cannot afford to have a flat on their own and is considered a cheaper way to live, but this will change if council tax is increased to this level.”
Propertymark agents believe it is important to note that taxing per room could also result in artificially inflating the number of dwellings per borough without establishing any additional housing.
ARLA Propertymark President Elect, Greg Tsuman, also specialises in working with HMOs and says clear and concise guidance needs to be adopted by the UK Government to ensure landlords and tenants aren’t paying inflated fees, and more housing needs to be developed.
“Whilst it may be reasonable to expect council tax to be linked to fair usage of the local amenities, the unintended consequences must be considered carefully,” he said.
“Firstly, it is important to ensure that this reclassification does not result in an artificial increase in the number of dwellings. The same six-bedroom building should not inflate the statistics by 600 per cent in terms of additional dwellings created.
“We need to build more homes, not carve them up into smaller and smaller units. Secondly, the pressure on landlords from multiple directions is well documented and has already resulted in a loss of 500,000 homes from the private rented market since 2018 (English Housing Survey).
“Increasing overheads for landlords of HMO properties further, by charging more council tax on top of the licence fees they are already paying, will add more to that pressure and will do nothing for the most vulnerable tenants who will have to pay for the rises through higher rent.
“The reality is that higher council tax costs will directly impact the tenants who are already struggling and having to share facilities as a result of rising rents.”
Propertymark appreciates that all properties must be looked at on a case-by-case basis. However, the UK Government should look at creating clear guidance for valuation officers and clear definitions to distinguish between a HMO and self-contained units and so everyone understands the requirements.
A HMO is comprised of rooms with shared facilities, whereas self-contained units are more like small flats or studio apartments, and should be banded as individual units for council tax purposes.
Propertymark’s head of policy and campaigns, Timothy Douglas, said: “Propertymark is pleased that the UK government has reviewed the outdated council tax banding system for Houses in Multiple Occupation. We know from our member agents that there is currently a lack of consistency in banding assessments that doesn’t take into account current property valuations and modern adaptations taking place within the sector such as energy efficiency improvements.
“We are supportive of the UK Government’s objective to deliver consistency of outcomes in HMO banding assessments. Agents and their landlords, tenants and local authorities will benefit from having one cumulated council tax band for an entire property. We will work to ensure the sector understands any changes to the law and how it impacts them.”
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