Consultation outcome

Council tax valuation of Houses in Multiple Occupation (HMOs): summary of consultation responses and government response

Updated 27 October 2023

Introduction

1. On 17 February 2023, the Department for Levelling Up, Housing and Communities (DLUHC) published a consultation seeking views on the council tax valuation of Houses in Multiple Occupation (HMOs). This followed concerns from landlords and tenants that individual rooms in HMOs have increasingly been assessed as separate units for the purposes of council tax valuation and therefore given their own council tax band.

2. The government wants to provide greater certainty and consistency in the way that HMOs are treated for council tax, and to ensure that HMOs are banded as one property and have one council tax band. It also wishes to ensure that liability for council tax remains with the HMO landlord, and that their tenants are not subject to individual council tax bills.

3. The consultation sought views on proposed approaches to achieving these objectives. It closed on 31 March 2023 and the government has considered all responses received.

4. This document summarises views received during consultation and does not attempt to capture every point made. It deals with the questions posed in the consultation grouped by topic. It also sets out the government’s response to the consultation, including its approach to implementation.

5. Enquiries about the document should be addressed to: council.tax@levellingup.gov.uk.

1. Summary of responses

1.1 Responses received

6. The consultation generated a total of 563 responses. We are grateful to everyone who took the time to respond and share their views and suggestions. All responses have been given full consideration as part of the decision-making process informing the changes announced in this document.

7. The table below sets out the breakdown of respondents:

Respondent type	Number of responses
Members of the public	34
Landlords	350
Tenants	117
Representative Groups	12
Trade Bodies	20
Local authorities	18
Companies	10
Charitable Organisations	1
Members of Parliament	1

2. Summary of responses to consultation questions

2.1 The case for change (Q1 – Q4)

Question 1: What are your views on the way that HMOs are currently valued for council tax?

Question 2: What are your views on the extent to which HMOs are currently not aggregated for council tax purposes?

Question 3: In your view, are there any particular types of HMOs that are more, or less, likely to be aggregated? Please provide evidence where possible.

Question 4: What are your views on the government’s objective to deliver consistency of outcomes to the council tax valuation treatment of HMOs and to ensure that HMOs are banded as one property and have one council tax band, other than in exceptional circumstances.

8. The overwhelming majority of respondents agreed that the current system is unfair, with broad support for the government’s proposal that HMOs should be aggregated to have only one council tax band for the whole property.

9. Landlords raised concerns that the current uncertainty around council tax liability for HMOs creates a disincentive for investing to improve or modernise HMOs. Tenants also raised concerns that they may suddenly become liable for a bill they were previously unaware of. Some tenants highlighted reports of local councils pursuing backdated payments of council tax after a property has been re-banded into multiple council tax bands.

10. The views from councils were mixed. Some councils stated that HMOs that are not aggregated are unfair on tenants and landlords, whilst creating administrative burdens on councils that are not compensated by increased revenue. On the other hand, a small number of councils expressed the view that the current approach is fair and in line with policy intentions. The Local Government Association noted that HMOs can frequently require more council services and that the government may want to consider the impact of lost council tax income for councils from having fewer bands.

11. Two-thirds of respondents did not offer a view on the extent to which HMOs are currently not aggregated for council tax purposes. Of those that responded, most point out that although HMOs tend to be aggregated, there has been an increasing trend of individual rooms in HMOs being valued as individual units and therefore attracting their own council tax band. Some respondents also considered that the process being used by the VOA is seemingly inconsistent.

2.2 Policy design and the approach to implementation (Q5-14)

Question 5: Do you have any preferences as to how to deliver the government’s objective to ensure that HMOs are valued as one dwelling, and, if so, why?

• Option 1: The government could 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.

• Option 2: Alternatively, section 3(5) of the Local Government Finance Act 1992 provides that the Secretary of State may by order provide that anything which would be two or more dwellings shall be treated as one dwelling. The government could amend the Council Tax (Chargeable Dwellings) Order 1992 to specify that HMOs are treated as one dwelling and therefore subject to one council tax band, other than in exceptional circumstances.

Question 6: What are your views on defining HMOs as set out in the Housing Act 2004?

Question 7: What are your views on defining HMOs using the definition in the Council Tax (Liability and Owners) Regulations 1992?

Question 8: In your view, is there any non-HMO accommodation that may be caught by either of the proposed definitions?

Question 9: Are there any other definitions that may be more appropriate for the purposes of identifying HMOs in the context of establishing a council tax band?

Question 10: Are there any exceptional circumstances or types of HMO accommodation that in your view should not be covered by these proposed changes and, if so, why would that be the case?

Question 11: Do you agree that, where separate areas of self-contained accommodation can be clearly determined within an HMO, the Listing Officer should be able to band each self-contained accommodation as having its own council tax band?

Question 12: Should the changes be limited to HMOs with fewer than a certain number of separately let rooms?

Question 13: Are there other approaches that you think should be considered to achieve the same outcome?

Question 14: When implementing the changes, do you agree that this should be done through the formal proposal route so that HMO landlords have the opportunity to make a proposal to alter their band?

Summary of responses

Defining HMOs for the purpose of council tax valuations

12. Respondents did not offer a firm view on how the proposed change to the valuation method of HMOs should be implemented through legislation or whether a definition based on the Housing Act 2004 or Council Tax (Liability and Owners) Regulations 1992 is preferred. A small number of local authorities stated that they are content with either approach, so long as there is clarity and consistency.

13. There was broad support for the use of a definition that maintained consistency across planning, licensing, and building regulations. Of those that did offer a view, most agreed that using the Council Tax (Liability and Owners) Regulations 1992 definition would not be comprehensive enough to maintain consistency across the different sets of legislation.

14. Some respondents provided support to an amendment to the Levelling Up and Regeneration Bill to change the Local Government Finance Act 1992. Others suggested creating a new definition, for example one that only applies to council tax valuations, or one that uses a combination of the two definitions in the Housing Act 2004 and Council Tax (Liability and Owners) Regulations 1992.

15. A small number of respondents also suggested that the government should develop a new method of valuing HMOs where banding is based on the number of occupants.

Exceptional circumstances

16. In general, most respondents did not offer a view on non-HMO accommodation that would be at risk of being caught under any of the definitions proposed in the consultation. A small number of respondents identified bedsits, hostels and care homes as being potentially affected.

17. The majority of respondents did not believe there should be any limit based on the number of rooms. Of those that did suggest size limits, the size varied between eight and 20 individual rooms, though there was no consensus.

18. In relation the question regarding types of HMO accommodation that should not be covered by the change, the most frequent response was that properties which are self-contained should not be included. Local authorities and the Local Government Association suggested a range of properties that could be excluded from the change, including self-contained accommodation; self-contained units in domestic violence refuges; former office blocks or converted hotels; individual floors on a multi-story property; caravan plots; and properties exceeding a certain number of rooms.

19. It was also noted that, regardless of the option chosen, any exceptional circumstances must be clear and concise and VOA decisions must be transparent so council tax payers and billing authorities are able to understand why an HMO has been banded the way it has.

3. Government response

3.1 Approach to council tax valuation of HMOs

20. The government recognises the issues raised during the consultation on the way HMOs are currently valued for the purposes of council tax. The government will make changes to deliver a framework that ensures that all HMOs are valued as a single property for the purposes of council tax.

21. A small number of councils noted that the proposed changes to the banding of HMOs may result in a reduction in council tax income. However, the Valuation Office Agency has estimated that only a small proportion of HMOs are currently not aggregated into one property. The amendment to legislation will ensure that HMOs will be valued as a single property, creating consistency in the sector, and provide certainty for councils and households moving forward. This should also help ease administrative burdens for councils as the council tax liability should remain with the landlord in the usual way, rather than moving to individual tenants who may only occupy the property for a short period of time.

3.2. Amendments to legislation

22. The government will amend legislation to ensure HMOs are valued as a single property for the purposes of council tax. This will be achieved through amendments to existing legislation, including the Council Tax (Chargeable Dwellings) Order 1992 and related regulations. These amendments to legislation will apply to all HMOs (including both licensed and unlicensed HMOs).

3.3 Definition of HMOs, and exceptional circumstances

23. The majority of respondents stated that they preferred a definition that provided consistency. The government will adopt the well-established definition of HMOs as set out in the Housing Act 2004. This is already used by councils for the licensing of HMOs.

24. The government believes in the principle that any property with access to shared facilities, as included in the Housing Act 2004 definition of HMOs, should be valued as a single property for the purposes of council tax valuations. This will ensure a consistent outcome for the valuation of HMOs.

25. In using the Housing Act 2004 definition of HMOs as a basis for implementing the changes set out in this consultation response, the government does not consider it appropriate to extend the exemptions in schedule 14 to the Housing Act 2004 to legislation implementing the change in the way HMOs are valued.

26. The great majority of respondents agreed that, where a property is self-contained, the property should have its own council tax band. The Housing Act 2004 definition of HMOs includes converted blocks of flats that consist of self-contained flats (see section 257). As such flats are self-contained, and facilities are generally contained within individual flats, converted blocks of flats covered by section 257 of the Housing Act will be excluded from these changes in council tax valuation.

27. Where a HMO contains annexes or self-contained units, the change will ensure that where a unit within a HMO has shared facilities and is included as part of the HMO, then the whole HMO property should be valued as one property. Annexes and self-contained accommodation that do not form part of a HMO as defined by the Housing Act 2004, will continue to be valued in the usual way.

3.4 Approach to implementation

28. The government objective is for HMOs which are currently not aggregated to be brought in line with new legislation as soon as practically possible.

29. In order to deliver the policy objective, the VOA will work with councils to proactively identify licensed HMOs that have not been aggregated and re-band affected properties. The VOA will aim to make such changes within two months of the legislation coming into effect. It is not possible for the VOA to proactively identify unlicensed HMOs in the same way due to limitations in data. However, the government is keen that unlicensed HMOs that have not been aggregated are also brought into line with new legislation as soon as possible. Landlords or tenants of unlicensed HMOs will be able submit a proposal to the VOA to re-band affected HMOs and bring their council tax banding in line with the new legislation. The VOA will have a statutory four-month deadline to respond to such proposals.

Next steps

30. Through this consultation response, the government is setting out its policy intention with regards to the council tax treatment of HMOs. The government will lay regulations later this year, with the intention that the policy change comes into force before the end of 2023.