Councils are seeking to reclassify HMO properties as multiple single dwellings for council tax purposes to raise additional revenue, it has been reported.

penny mourduant mp

Conservative MP and former cabinet member Penny Mourdaunt has criticised the wave of revaluations in comments to The Telegraph newspaper, saying that: “This is a growing problem, and it is arbitrary. It is stopping homes from being built because developers’ business models become unviable.”

Many of the 500,000 HMO landlords in the UK offer rooms within their properties via a single monthly charge including rent, bills and council tax.

This is usually calculated and paid based on the property size but now councils are changing the way they interpret the rules and treating the HMO rooms as individual homes with separate council tax bills.

It is claimed that the revaluations mean that, in many cases, if landlords are forced to pass on the extra cost, tenants face a 20-25% rise in rent to cover the extra cost.

A rising number of landlords are now facing a tough decision over whether to foot the bill themselves or hike their rents to cover the shortfall.

Read advice about council tax and landlords

The Telegraph cites one landlord told by the Valuation Office Agency that his HMO’s council tax bill would rise from £1,821 to £7,287, while another was reported to have filed for bankruptcy after his pair of 12-bedroom HMOs were re-classified.

The British Property Federation claims councils are targeting areas of their boroughs where HMOs are at their most dense in a bid to raise extra funds as central government funding dwindles year on year.

Read the Telegraph article (requires subscription).

14 COMMENTS

  1. I will be giving my HMO tenants notice asap. My cheapest rooms are £66 pw and I know my tenants can’t pay the increase that the CT would incur. So sorry for the tenants as I’ve no idea where they’ll go now.

  2. The VoA will destroy the viability of any HMO where there are individual AST.

    This effectively means the end of the HMO business model.

    This will cause many LL bankruptcies.
    I doubt many lenders will offer HMO mortgages anymore.

    I predicted ICTB would occur years ago.
    .
    One reason why I never ventured into HMO.

    Apparently the VoA has always been able to assess any room as an individual dwelling for CT purposes.

    I guess if tenants can afford an increase in rent as suggested of 25% etc then perhaps the HMO remains viable.

    Very few HMO have ever bern assessed for CT etc.

    It only takes the Council to advise the VoA of every HMO for ICTB to occur.

    LL will have to return to single household letting.

    Nobody cares where the evicted HMO tenants will go.

    The only real way round things is for a group of friends etc to have a Joint AST.

    So one household.
    But this is not how most HMO operate.

    Most HMO LL will lose 50% of their income if returning to single household occupancy.

    This is of course what councils want.

    They have millions of homeless families who need those big LL properties to rent.

    HMO LL face financial disaster and millions of HMO tenants will face homelessness unless they can afford massive rent increases.

    Is a 25% rent increase viable?

    I guess HMO tenants WON’T have much choice.
    It is either that or be homeless!!

  3. So govt continue its war against landlords… Result = the poorest in society being made homeless (Those better off tend not to live in HMO’s) Just as a teenager I too lived in a Rigsby style bedsit house.

    Govt will be in serious trouble down the line as the govt has already requisitioned many hotels to house Afghan resettlement refugees and in PMQ’s today the govt said that there would be “Generous” allowances for the amount of refugees coming from the Ukraine. Soon the govt are going to run out of Premier Inn hotels to requisition.

    Result… The UK HMO homeless pushed onto the street by UK anti landlord actions will simply be at the “Back of the queue” as Obama once said, with no room at the Inn !!!

    • God knows when the Government is going to see sense and realise the problem they are stoking for the near future.

  4. Is there ANYONE in local government with more than two brain cells? No, there isn’t. Do they think this is going to increase or decrease homelessness? That’s not even crossed their tiny minds.

  5. I will have to get rid of my HMO licence and reclassify the home for a family. The students will have to go. This is a dumbass move by the council and it won’t work. Students and working professionals already struggle to find decent accommodation and bills are soaring. This is down to greedy councils. They always seem to be short of money despite extortion ate rates of council tax and lazy deadwood in the back offices that never do any work but on good wages. Really fed up, target the rotting woodwork instead of raiding peoples pockets like pirates.

    • ICTB ONLY applies where there are individual AST.
      Having ONE AST for multiple occupants avoids ICTB.

      Obviously such a group AST tends to only work with associates or friends.

      This is not how the usual HMO business model operates.

      But yes the HMO business model is severely undermined.

  6. Not that I really know anything about HMO but surely to avoid ICTB makes letting to DSS tenants unviable.

    Would an occupant who isn’t a welfare scrounger going to want to be on a joint and several liability AST with a DSS occupant!!!???

    I predict many HMO will be converted to flats.
    With PD rights it could be possible to squeeze 3 flats out of a 5 bed HMO.
    Even Councils will like the 3 new dwellings that would be created.
    They receive more Govt grant the more dwellings they create.

  7. If this stupid rule becomes the norm then all the LL has to do is exlude Council Tax from the AST agreement. The council will then have to recover any arrears from tenants, most of which are on low incomes or UC so good luck with that.

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