Agents slam ‘postcode lottery’ of tax imposed on HMOs

The letting agents’ trade body Propertymark has slammed the current lack of consistency of council tax on HMOs.

It describes today’s system as a “postcode lottery”.

In response to a government consultation on the process, Propertymark says: “There appears to be a national postcode lottery on whether or not an HMO will be aggregated for council tax purposes. We have seen evidence from our members that HMOs are generally aggregated in areas across the country such as Cornwall, Leicester and Leeds, yet in Somerset HMOs are banded by room. The discrepancy is concerning as a lack of consistency across the country leads to confusion and a mismatch in costs to tenants, who are penalised if the council tax is not aggregated.”

It goes on to say:  “Larger HMOs, which are subject to licencing schemes, are more likely to be identified and, therefore, more likely to be reassessed as separate units. Councils can generally only identify HMOs that have licenses, those with five beds or more, or in areas with selective or additional licencing schemes. 

“Therefore, properties with less than five bedrooms will be less likely to be picked up as a HMO by local authorities. The Valuation Office Agency will only reband a property which has been flagged as potential individual units, it is possible that in an area where many HMOs are banded by room, only the larger properties will be affected.”

The comments were made in a formal response to the consultation, which has now closed.

Propertymark advocates that instead of the current inconsistency, the government should change the Council Tax (Chargeable Dwellings) Order 1992. 

This would amend article 4 of that Order to require listing officers, where they are assessing an HMO, to treat the property as if it were a single property. 

This would mean that the VOA would always amalgamate council tax bands for HMOs. HMOs would, for the purposes of council tax, be considered as one property, and have one council tax band, other than in exceptional circumstances. Such circumstances might include, for example, where there is self-contained accommodation within the HMO. 

The consultation process was triggered by the Department for Levelling Up, Housing and Communities following lobbying by trade bodies and others. 

All domestic properties, including HMOs, are given a council tax band by the Valuation Office Agency which is used to calculate the amount due based on a number of factors including number of bedrooms and location. Historically HMOs have been valued as a whole property with one council tax band - however in recent times some VOA officers have levied tax by room rather than entire building.