New Council Tax Ruling is a ‘tax on Landlords’

How will the new Council Tax regulations affect the Rental Market?

Rented property as Second Home 
If you own property that is rented you officially have a second home. If this property is furnished and empty for a period between tenancies, Local Councils have been obliged to offer discounts of between 10-50% on Council Tax, although in practice most councils only allowed a 10% reduction in fees.

This situation was already biased against the rental sector when you consider that a single occupier of a property can apply for a 25% reduction, but a Landlord could only get 10% relief.

Previous Legislation on Rented property and Council Tax
Previously if a rental property was empty and unfurnished there was no Council Tax due for six months, and after that period it could also qualify for up to 50% discount, as per the furnished property detailed above.

Second homes have long been controversial because owner non-occupiers have been accused of tying-up available living space while effectively draining the economy, by not being fully involved in the local community. However we argue that Landlords do not fall into this category. In fact they may be the only ones providing affordable housing in some areas of the country.

New Council Tax rates
New Government regulations announced last week, give responsibility to Local Councils for setting Council Tax discounts on second homes. As each Council comes under growing financial pressure it becomes increasingly likely that Councils will scrap any relief on Council Tax on second homes, and rental property.

While property undergoing major repair work or structural changes remains exempt from Council Tax bills for up to 12 months, each Local Council will chose what constitutes ‘major work’. It is unlikely to include upgrading heating systems, replacing windows, or redecorating – all of which responsible landlords will do periodically to protect their investment and to keep up the standard of housing.

No incentive for landlords to refurbish property
In a week where a landlord in Plymouth is in danger of getting an ASBO because of the condition of his properties, does this send out the right message to responsible landlords?

This new legislation does not take into consideration the financial pressures on private landlords who are often working on tight margins or indeed could be subsidising their investment now to gain long term benefits as ‘pension plans’ for the future. In effect they are being penalised for being fiscally responsible.

The Council housing sector is not able to place all the people who need to rent property, so if Councils put more pressure on private landlords they may decide to sell up and put their money elsewhere. After all being a landlord is not ‘easy money’.

Riley Marshall are Sales and Rental sector agents. Our blogs are intended to inform, and we welcome debate, please feel free to comment on this page or visit our Facebook page.