Notice of Motion – HMO landlords and business rates
Tracey Hill – Full Council 20th October 2016
Mr Mayor, as we all know, Brighton and Hove has a high number of houses of multiple occupation. This is due to a combination of factors including student numbers, high numbers of young people who move around frequently, and high rents, which mean that for many people a shared house is the only affordable way to live here.
Our HMO licensing schemes have given us a new visibility onto the HMO market, and we can see that many HMO landlords have portfolios of properties, some substantial in size. Mr Mayor, the management of HMOs in our city is a business, sometimes big business, and in our view should be taxed as such, just like shops, pubs, hotels and guest houses, all of which are subject to business rates.
HMOs are a necessary part of our housing mix. But some areas are seeing huge concentrations, and this is having a negative impact on neighbourhoods. Not all HMOs present problems: many are very well run and cause no problems at all. But in areas where the density is high, the problems are well documented. In the Lewes Road area many HMOs are student lets: councillors hear regular reports of noise in the street, late night parties and issues with refuse and recycling and end of tenancy fly-tipping.
Addressing private rented housing issues for both tenants and neighbours of tenants are a priority for this administration, which is why I am the first ever lead councillor for the private rented sector. We are determined to do everything we can with the resources available. We are stepping up planning enforcement, cooperating with the universities to address street litter, fly-tipping and noise, and through the HMO Forum finding ways to enable local people to take action.
But it all costs money and we would love to do more. Much more would be possible if we weren’t having to face the never-ending challenge of trying to do more with less.
In terms of funding, HMOs are a double whammy for the council. While the universities and students contribute enormously to the city culturally and economically, this is not a direct contribution to the council because of students’ exemption from council tax. It is right that students should not pay council tax, and in theory the council is compensated for this, but in practice the grant from government is capped, and the total cost to the council of exemptions is estimated at £5.4m a year.
Mr Mayor, some people have responded to the idea in this notice of motion by assuming that the additional costs to the landlord would be passed directly to the tenant. There is nothing inevitable about this. It’s the landlord’s decision whether to put the rent up or not. In fact, every measure to regulate the historically under-regulated buy-to-let sector is met with this same argument. The truth is that the pressure pushing rents higher and higher is not coming from regulation or tax normalisation but from ever-increasing house prices pushing up the cost of borrowing, and the same thing together with severe constraints on social housing pushing people into the private rented sector because they have no other option. There is a chronic lack of supply. Backing away from regulation and management of the sector is not the answer. The structure of the housing market in general needs to change.
With the proportion of private renters getting higher and higher, it is more important than ever that we have a more professional buy-to-let industry with investors coming in for the long term, prepared to pay their dues and reap a reasonable return over time. We need to move away from expectations of a quick buck, massive returns within one or two years which tempt some of our landlords to play fast and loose with planning regulations, pile tenants into poorly maintained properties and fail to provide a proper service. The government has indicated through the Housing and Planning Act that it is on board with a better managed private rented housing sector, and our proposal fits with this overall ambition to professionalise the buy-to-let world.
All we are asking for is a small contribution from HMO landlords to use to mitigate some of the effects their business is having. This will help HMO tenants as well as their neighbours, and even out inconsistencies in terms of who pays business rates. It may even help to reduce some of the resistance to HMOs we are hearing about today.
Mr Mayor, I am asking all members to support this notice of motion for a better managed city.