November, 2023
On February 17, 2023, the Department for Levelling Up, Housing and Communities (DLUHC) initiated a consultation aimed at addressing concerns raised by landlords and tenants regarding the council tax valuation of Houses in Multiple Occupation (HMOs). The primary issue was the increasing practice of assessing individual rooms in HMOs as separate units for council tax valuation, leading to multiple council tax bands within a single property. The government sought to create consistency and fairness in how HMOs are treated for council tax, ensuring that they are banded as one property and that the liability remains with the HMO landlord.
This blog post provides a summary of the government's response to the consultation, detailing the views received, the proposed changes, and the timeline for implementation.
Summary of Responses
The consultation attracted a total of 563 responses from various stakeholders, including members of the public, landlords, tenants, representative groups, trade bodies, local authorities, companies, and charitable organizations. The overwhelming majority of respondents expressed agreement with the government's proposal to aggregate HMOs into one council tax band.
Landlords emphasized the need for clarity and consistency in council tax liability for HMOs, as the current uncertainty can deter investment in property improvements. Tenants voiced concerns about unexpected council tax bills. Some mentioned reports of local councils pursuing backdated payments after properties were re-banded.
Views from local councils were mixed, with some expressing concerns about administrative burdens without increased revenue, while others believed the current system was fair.
Policy Design and Implementation
The consultation also solicited views on various policy design options. Respondents did not offer a unanimous preference for legislative amendments. However, most agreed that a definition consistent across planning, licensing, and building regulations was essential.
The government received support for using the definition in the Housing Act 2004 but noted that some responses suggested creating a new definition specifically for council tax valuations. The majority of respondents did not favour limiting the changes based on the number of rooms in an HMO.
Exceptional circumstances were also discussed, with the consensus that self-contained properties should not be included. Local authorities and the Local Government Association recommended excluding various property types from the changes, emphasizing the need for clear and transparent decision-making.
Government Response
The government acknowledges the concerns raised during the consultation and is committed to implementing changes that ensure all HMOs are valued as a single property for council tax purposes. The Valuation Office Agency (VOA) has estimated that only a small proportion of HMOs are currently not aggregated into one property.
To achieve this, the government will amend legislation, including the Council Tax (Chargeable Dwellings) Order 1992, ensuring that all HMOs, both licensed and unlicensed, are valued as a single property. The well-established definition of HMOs as outlined in the Housing Act 2004 will be adopted, providing consistency across different regulatory aspects.
Self-contained properties and annexes within HMOs will be considered separately. Flats within converted blocks of flats, as defined by the Housing Act 2004, will be excluded from the changes in council tax valuation.
Implementation
The government aims to implement these changes as soon as practically possible. The VOA will work with councils to identify licensed HMOs that have not been aggregated and re-band them. For unlicensed HMOs, landlords or tenants can submit proposals to the VOA to re-band affected properties. The VOA will have a statutory four-month deadline to respond to such proposals.
Next Steps
Through this consultation response, the government outlines its policy intentions concerning the council tax treatment of HMOs. Regulations will be laid later in the year, with the goal of the policy coming into force by the end of 2023. This reform aims to provide clarity, consistency, and fairness in the council tax valuation of HMOs, benefiting both landlords and tenants.
Inquiries about the document can be addressed to council.tax@levellingup.gov.uk
This government response underscores the commitment to creating a more equitable and predictable system for HMOs' council tax valuation. It should provide landlords and tenants with a clearer understanding of how these changes will be implemented and what to expect in the near future.
