Council Tax on HMO Rooms

If you are a HMO landlord and haven’t been hit yet with the Council trying to band HMO rooms individually for Council Tax, then know that it will surely be coming at some point in the future.

The motivation for Councils to do this is clear, it can change the income for one property from approximately £1,500 to £6,000 for a 5 bed HMO.

As well as being deeply unfair and having a negative impact on those least able to afford it, this could have a long-term impact on the HMO market and its viability for landlords.

While room-based Council Tax is the tenant’s responsibility to pay, not the landlord’s, the reality is that landlords will need to take some of the financial burden of this additional cost. If they don’t then they risk tenants leaving the property to live in HMOs where rooms have not been individually banded and seeing greater void periods for rooms between tenancies (voids where the landlord is liable for the Council Tax bill).

The Local Government Finance Act is quite contradictory and confusing on the details of whether HMO rooms can be banded individually, but the Valuation Office Agency (who determine Council Tax banding) have taken a stance that they can do this. They are not doing it for all HMOs though and it is not clear why they do for some and not for others.

This does not create a level playing field between HMOs.

The reality is that this will lead to some HMO landlords repurposing their properties, maybe splitting up into flats, renting to families or removing them from the rental market entirely by converting to serviced accommodation. If they keep them as HMOs then some of the costs will need to be passed on to the tenants.

This will definitely push up the rents for HMO tenants, tenants who are often on the lowest wages to start with.

If your Council does apply room Council Tax to your HMO make sure you do not just accept it. There are a number of things you can do

1. Challenge the room bandings with the VOA, and take the matter to Tribunal if this fails
2. Raise the issue with your Council directly, letting them know that this will only serve to raise rents for the lowest earning private renters
3. Write to your MP and local councillors and outline all the reasons why this application of the Council Tax is unfair and hits those who can least afford it
4. Sign the national petition in support of raising this issue with Parliament - https://petition.parliament.uk/petitions/596175
5. Get your tenants involved in signing the petition and writing to their MP and local councillors

The more noise we can raise on this issue then more chance we have of getting it resolved, so do take action maybe even if this has not happened to you yet.