Ending unfair taxation
Under the current rules, Council Tax is ‘disaggregated’ and each unit in an HMO is billed as a separate dwelling. This means that contract holders living in HMOs pay more than other residents on the same street, which is unfair and inconsistent. Higher Council Tax for a property also places the landlord at a competitive disadvantage and may deter them from using void periods to improve the property.
Propertymark members operating in Wales report that because Local Authorities have the discretion to define what an HMO is for the purposes of Council Tax, there is variation between different areas, with some contract holders paying high bills and others not paying at all. Therefore, we are pleased to see a clear definition included in these proposals.
HMOs should be banded as one property for Council Tax
Propertymark broadly agrees with the UK Government's proposal to review bandings for Houses in Multiple Occupancy (HMOs) in England so they are banded as one property with the landlord liable for the bill, which is the fairest and easiest system to manage.
Raising landlord awareness
If the proposals go ahead, they will impact both licensed and unlicensed HMOs, and property agents will have an important part to play in ensuring landlords and contract holders understand the new regime.
Importantly, if a property was assessed and disaggregated by the Valuation Office Agency (VOA) before the proposed changes come into force, they will need to apply to the VOA to alter the valuation list.
Tough restrictions on small HMOs
Concerns about the amount of available housing, pressure on local services, and a perceived threat to the area's character are behind the decision by Rugby Borough Council to use new powers to stop the spread of houses of multiple occupations in the town.
Simpler and cheaper
Bills are likely to be reduced for contract holders in most cases, as a single bill will be calculated and shared amongst occupants. It was estimated that shared housing tenants in England would save as much as £1,000 a year after the UK Government ended the practice banding individual rooms.
The system itself will also be less complicated and enable landlords to pay the Council Tax and proportion the final cost to each contract holder as part of their rent rather than separate bills being issued. Furthermore, the change will remove the issue of people moving away and leaving behind unpaid tax bills which authorities find difficult to recover.
Single council tax bands for HMOs by end of 2023
Shared housing tenants in England may save as much as £1,000 a year after the UK Government announced it is ending the practice of council tax banding individual rooms in houses in multiple occupation, a move Propertymark supported in our response to the consultation in March 2023.
Making the system fit for purpose
Propertymark made additional recommendations which should be considered before finalising their proposals. Firstly, it is important that the Welsh Government and the Valuation Office Agency (VOA) work with Local Authorities to identify properties which fall outside the definition of an HMO and agree how these will be treated under the new system.
Secondly, retrospective re-banding must be ruled out to prevent landlords becoming liable for unpaid contract-holder bills from previous years.
Finally, the Renting Homes (Fees etc) (Wales) Act 2019 should be amended to enable landlords to charge the cost of Council Tax to the contract holder as a permitted payment. This would guarantee that landlords can be reimbursed and that the cost can be fairly divided between residents.
