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Local Authorities accused of “trying to make money off the back of the poorest” as Government consultation ends

by | Mar 30, 2023

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cost of living

government consultation is currently live — ending Friday, 31 March — into the way Homes in Multiple Occupation (HMOs) are valued for council tax in England.

It is in response to a growing number of Local Authorities (LAs) assessing HMO properties “in such a way as to attract a council tax band for each individual unit”, which one professional portfolio landlord says effectively amounts to “cash-starved councils trying to make money off the back of the poorest in society”.

This is because the tenant then needs to pay the council tax, not the landlord. He adds that this growing practice could be “the Sunak government’s Poll Tax moment if not tackled immediately”. We asked sought the views of brokers and landlords on this controversial – and increasingly common – practice.

Kundan Bhaduri, Property Developer and Portfolio Landlord at The Kushman Group: “Cash-starved councils are trying to make money off the back of the poorest in society. HMOs across the country provide essential housing for those on the lowest rung of the rental ladder, so by re-banding individual rooms in HMOs, the Valuation Office Agency, encouraged by local councils, is driving poorer tenants to destitution, as tenants become responsible for paying council tax on their room when this happens. With 3m people currently living in HMOs in England, this could well turn out to be the Sunak government’s Poll Tax moment if not tackled immediately. It’s no wonder several high-profile MPs are now taking up the gauntlet on this issue, including the Leader of the House of Commons, Penny Mordaunt, and the Conservative MP for Gosport, Caroline Dinenage who represents many of the affected areas of Portsmouth where HMOs have been re-banded. It’s nothing short of a disgrace.”


Rob Peters, Principal at Simple Fast Mortgage: “This is yet another example of local government making snap decisions to increase revenue without considering the wider ramifications. Currently, HMO landlords are responsible for the council tax, which, together with utilities, is usually covered by the rent the tenant pays. The change would see the liability for council tax passed from landlord to tenant, effectively increasing the cost of living for those who often cannot afford to own or run a property of their own. Poorly thought-out decisions like this cause great harm to tenants, landlords and the housing sector as a whole. With many already priced out of home ownership and the severe drought of rental property this country has, co-living HMOs are arguably the future. Local government should be looking at ways to stimulate and support this much-needed sector rather than loot it.”

Justin Moy, Managing Director at EHF Mortgages: “This is another example of Local Authorities seeing landlords as some kind of cash machine to support shortfalls elsewhere in their budgets. 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. The Government need to be strong with this and help landlords plug the housing gap, not widen it.”

James Vince, Managing Director at Castle View Finance: “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.”


Rob Gill, Managing Director at Altura Mortgage Finance: “The rebranding of HMOs is creating significant extra regulatory and cost burdens for landlords, some of which is inevitably passed onto tenants. This move to raise additional council tax will be yet another blow to tenants. The plans need rethinking and a holistic approach applied rather than simply adding more cost and regulation in this piecemeal way.”

Austyn Johnson, Founder at Mortgages For Actors: “The good HMO landlords out there are going to be penalised due to the actions of the bad ones. I have many clients with big HMO portfolios and they are very good to their tenants — even the tenants who have not been good to them. But this new council tax plan will do one of two things. It will either cause landlords to have trouble finding tenants to fill the rooms, or it will mean that, once again, rents go up to cover the cost. Rents going up is another thing that the Government doesn’t want to address at the moment and it could end up with some emergency measures being put in place.”

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