The Welsh Government has announced forthcoming changes to the council tax treatment of Houses in Multiple Occupation (HMOs), clarifying that property owners will be responsible for council tax liabilities rather than tenants. This reform aims to align Wales’ approach with that of England, simplifying the system and addressing inconsistencies that have caused operational difficulties for agents and landlords.

Clarifying HMO Council Tax Liability

Under the current arrangements in Wales, council tax liability for HMOs can fall on individual occupants, particularly in bedsit-style properties or units with separate facilities. This has led to confusion and uneven charges, with some tenants facing high bills while others pay nothing. The Welsh Government’s proposals will shift responsibility firmly onto landlords, ensuring that council tax becomes a defined cost for property owners rather than tenants.

This change is significant for landlords and agents, as it removes ambiguity over who should pay council tax and standardises liability across all HMOs, licensed or unlicensed. Propertymark, which responded to a consultation in November 2024, welcomed the move towards a single-band council tax structure for HMOs, highlighting the operational issues caused by the current multiple banding system.

Single-Band Valuation for HMOs

Currently, some HMOs in Wales are split into separate dwellings for council tax purposes based on their layout and facilities. This has resulted in inconsistent liabilities for similar properties across different local authorities. The proposed reforms will see HMOs assessed as single dwellings, removing the need to assign multiple council tax bands within one building.

Such a single-band approach mirrors the system in England and is expected to reduce discrepancies between local authority interpretations. Propertymark emphasises that a consistent framework will assist agents working across borders and simplify the management of council tax for HMOs.

Defining HMOs for Council Tax

One of the challenges under the current system is the lack of a clear, uniform definition of what constitutes an HMO for council tax purposes. Local authorities have discretion in this regard, leading to variation in how properties are classified and charged. Propertymark reports that this has caused some contract holders to pay disproportionately high bills while others pay none.

The Welsh Government’s proposals include a clear definition of HMOs, which Propertymark has welcomed as a positive step towards consistency and fairness in council tax assessments.

Implications for Agents and Landlords

Agents advising landlords will need to adjust their guidance and management agreements to reflect the shift in council tax liability. Council tax will become a landlord cost rather than a tenant charge, which may affect rental pricing and budgeting. Additionally, properties that have previously been disaggregated by the Valuation Office Agency will require formal applications to amend the valuation list in accordance with the new rules.

Overall, these reforms are expected to streamline council tax administration for HMOs, reduce disputes over liability, and create a more transparent and equitable system for landlords and tenants alike.

Source: Based on reporting from Property118

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