Government HMO council tax banding

25 Nov 2022

The government has made a general commitment to work with those who want council tax reforms for Homes in Multiple Occupation.

Earlier this week Conservative MP Dame Caroline Dinenage moved an amendment to the Levelling Up Bill currently going through the House of Commons to stop the Valuation Office Agency splitting HMO properties into multiple separate dwellings for the purpose of council tax.

The VOA has had powers to ‘disaggregate’ properties for decades, but agents and landlords have reported more widespread use of the power in the last few years, leading to rising costs for tenants and landlords.

Normally, where a landlord is letting a property on a room only agreement then they are responsible for paying the council tax bill. However after disaggregation, it becomes the tenant’s responsibility to pay the room’s council tax bill while they live in the room.

Because most properties aren’t disaggregated this can mean the landlord’s property is less attractive as the tenant has to pay the additional council tax charge.

It also means landlords face significantly higher council tax bills during void periods.

The Dinenage amendment wants a ban on, amongst other things, on any rooms or bedrooms within a licensed House of Multiple Occupancy being eligible for separate council tax. The amendment is “intended to prevent the imposition of Council Tax individually on tenants of a room in a house with shared facilities, or in a licensed House of Multiple Occupancy.”

Dinenage made her point in the lengthy Commons debate on various amendments to the bill and told MPs: “It is placing a huge financial strain on people, often young professionals at the very start of their careers, who are suddenly landed with a council tax bill of up to £1,000, even after they have been allocated the single person discount. In some cases, it has even been backdated three years, so there could be a bill of up to £3,000. 

“We can imagine how this is causing untold distress and misery, especially at a time when other living costs are rising. There have even been incidents of previous tenants being chased for a council tax bill they did not know they owed after they had moved out, due to reclassifying and backdating—a dreadful situation.

“Shared housing is a core pillar of the housing sector. In 2018, HMOs provided up to 3 million sharers with rental accommodation across England and Wales. It is a significant contribution to the housing sector, so this issue has the potential to become a major problem. If these bedrooms start to be classified as dwellings and become band A, where the tenant is legally liable for paying the council tax, goodness knows where it will end.”

At the end of the debate a junior minister at the Department of Levelling Up, Housing and Communities – Dehenna Davison – told MPs: “I want to say how grateful I am to my hon. Friend the Member for Gosport (Dame Caroline Dinenage) for her positive engagement on the issue of council tax for houses of multiple occupancy. We have reached a good position and I look forward to working with her and her constituent … throughout the consultation and beyond to ensure that we get it right.”

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