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Individual HMO Rooms Charged Whole House Council Tax


We have reported a number of times in the past about 'disaggregation' – whereby individual units within a property are each charged council tax separately. So, for example, a 7-bed HMO might be charged a Band D council tax charge as a single dwelling but increasingly, they are being re-banded and billed as 7 individual Band A properties.  

What Has Changed


We have not campaigned against this issue as much as some have wished, as it was quite a specific issue – apparently only affecting previously commercial properties and large developments at the top end of the market, where units shared a kitchen but were otherwise self-contained for example. Knowing that these developments were at risk of disaggregation, we assumed that the developers would be fully aware of the risk and would price it into the overall development cost when assessing viability.

However, we are increasingly seeing examples of 'sui generis' HMO's (6 or more people) where there is some element of self-containment, say an en-suite bath or shower, where the whole property is being disaggregated and each HMO room is charged as a Band A property. 

Why Is This An Issue


A Band D (average) property will pay £1,882.35p in council tax this year and a larger Band E property will be billed £2,300.65p. Obviously this is a cost to the landlord and costs are recovered via rent – so whatever the landlord pays, is also paid by the tenant.

In a 7 bed (Band E) HMO this equates to £328.66 per tenant per year, so £27.38 a month on the rent. In the grand scheme of things, not a big deal.

However, after disaggregation, each HMO room will be charged the Band A rate of £1,254.90 – which equates to £104.57 extra rent each month. For those on benefits, the local 'shared accommodation rate' which most will be on is only £341.51p per month. At this level, most struggle to find an affordable room in the city as the going rate for shared accommodation is in the £400-450 per month range (and this includes the £27.38 towards the landlord's council tax payment). Should a property be disaggregated, the tenant's bill will need to rise by £67-68 per month meaning that many, many more will find themselves unable to find accommodation they can afford in the city.

There is a 25% 'single person discount' available, which would reduce £68/month by £17 but we have yet to see this applied in these situations.

There are calls for an end to applying CT to any room where the washing, toilet, communal space or kitchen facilities are shared. Some argue there should be a new tax band for bedsits, but the cases brought to our attention are not even self-contained bedsits. It is ironic that landlords who improve the facilities they offer tenants get penalised for doing so. 

Our View


What is worse is that there seems to be no clear guidelines about when a property will or will not be disaggregated, with seemingly near identical properties being treated differently

New rules on property advertising (including information about bills) will make it difficult if not impossible to provide accurate information for tenants and for landlord and agents to plan, cost and provide accommodation

The A band, even with a single person discount is not fit for purpose, banding en-suite HMO rooms on the same level as occupied owner one bed flats approaching £200k value

One consequence is that landlords, particularly corporate ones are providing a nominal cleaning service to demonstrate that the occupiers do not have exclusive occupation, meaning they become licence holders rather than tenants (and relying on a case from 1985, Street v Mountford) more suited to situations for resident landlords.

This forces tenants, if they have a choice at all, to choose between paying band A council tax or surrendering security of tenancy, including the rights given to them under the Housing Acts, including protection from eviction at short notice. This cannot have been what anyone intended

The result is a tenant tax lottery that comes on top of increasing demands for "bills included" rentals which are under price pressure due to the rapidly rising cost of energy

Now is not the time for any tenant tax, let alone one that seems to be applied in such an arbitrary way.

Please let us know if you have had experience of this and what effect it has had on your tenants.

Penny Mourduant, a trade minister and Portsmouth North MP described the tax rise as a "growing problem" for landlords and "arbitrary" in the Express recently.(https://www.express.co.uk/finance/personalfinance/1572928/council-tax-rise-increase-landlord-rent-UK-2022 ) 

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