Estate agency group Propertymark has backed a proposal for England’s HMOs to be banded as one property, rather than separate rooms.
HMOs can be banded separately when there are separate facilities, making it far more expensive for tenants and landlords, especially if there are a number of rooms.
The current rules can also hinder development from landlords, who fear their properties can be rebanded separately if they are altered.
Propertymark was responding to a public consultation from the Department for Levelling Up, Housing and Communities’, which proposed changing the system so HMOs are classed as one dwelling for council tax purposes.
Timothy Douglas, Propertymark’s head of policy and campaigns, said: “Propertymark is pleased that the UK government has reviewed the outdated council tax banding system for Houses in Multiple Occupation.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.”
Sophie Lang, regional executive of Propertymark, who specialises in student lettings in the Cornwall area, says there’s a lack of consistency in how the rules are applied, meaning the UK government needs to send clearer messages.
In Cornwall she says the council doesn’t tax rooms separately, but in Somerset they do.
She said: “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 say that taxing per room could also result in artificially inflating the number of dwellings per borough without establishing any additional housing.
Greg Tsuman, president elect of ARLA Propertymark, said: “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.
“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% 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 added that appreciates that all properties must be looked at on a case-by-case basis.
However, it said the 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.
