Under the current rules, the Valuation Office Agency has the discretion to split an HMO up for council tax purposes, creating multiple bills for one dwelling. Under the current rules, if a landlord lets a property by the room – even if the rooms are not self-contained in any way – the VOA will usually have enough to justify creating multiple council tax bills.

“With such a heavy reliance on private landlords to provide adequate housing for people on benefits, as well as private tenants, why drive these landlords out of the market and make that environment unattractive for investment? For HMO investment, the mortgage deals in this market are not a million miles away from the early 2022 costs, but increasing other taxes and associated costs just makes the effort unrewarded” he adds.

Another finance company managing director – James Vince of Castle View Finance – adds: “HMOs are being treated differently from one Local Authority to the next, and now that’s happening in taxation and banding. This issue is not a new challenge for landlords, it’s a battle that has been going on for years in some areas, with lengthy appeals and legal challenges. 

“These costs are ultimately passed onto the tenant in the form of rent increases at the worst time for both single-unit tenants and landlords under pressure from rising interest rates. Landlords are already being tempted away with more lucrative property strategies, such as service accommodation, putting more stress and strain on the entity that needs single-unit availability the most: the Local Authority.”

The government’s current consultation proposes amendments to the council tax regulations via two options, each of which will see HMOs taxed as a single dwelling for council tax purposes with exceptions only for properties physically split into distinct self-contained units.

The first option involves changing the Council Tax (Chargeable Dwellings) Order 1992 so that listing officers must treat an HMO as a single property unless there are exceptional circumstances. The second option is that the government would, by an order, declare that all HMO properties are one singular dwelling for council tax purposes.