A Liverpool council led initiative to introduce business rates for student landlords could create a disastrous situation for both students and landlords.
As it stands right now, local councils receive funds from the government that. This, in effect, covers for all students (who do not pay council tax). In Liverpool this is just under 9,000 homes.
This is calculated through a formula grant called the Revenue Support Grant (RSG), but is to be phased out by 2020. It will then be incumbent on councils across the country to fill this funding gap. It is inevitable that should Liverpool Council succeed with this, other councils will likely follow suit.
Will it affect all student tenancies?
As far as we can tell from the proposals from Liverpool City Council it is targetting all landlords involved in letting to students. Should it go through, we don’t see any reason why councils up and down the country would not adopt it.
This means that it will affect all student landlords including:
- HMO student properties in Liverpool
- Corporate investors
- Investors of student rooms
The £0.28m relief for those in halls of residence could be protected if it is University owned stock.
But there is no reason as to why investors in private halls of residences will be exempted. This also includes student pod investments, of which there are many in Liverpool.
It is clear from the council brief that the onus is being put on student landlords to pay more while the students are recognised as a ‘welcome part… of our local economy’. Naturally, the temptation from landlords would be to increase the rent.
Grouping student landlords in with business rates is unfair
For most of us involved in property in one way or another, it is fair to suggest that uncollected council tax for student properties is an obvious area to target for councils across the country that are struggling with government cuts. It may have been reasonable to argue that council tax in line with current banding rates are to be introduced. This alone would have been unwelcome news for property landlords.
But to suggest bringing “student landlords within the scope of business rates” is a recipe for disaster. It is simply unfair to align business rates with residential dwelling. Liverpool council have tried to compare student lets with “hotels, self-catering and holiday lets” but the categorisation is unfounded. What next? Assured Shorthold Tenancies (AST) to be grouped in with commercial leases?
With clause 24 and the change in stamp duty, landlords must rightly be feeling that they are a soft target with very little representation.