London Borough of Newham: HMO Landlord Council Tax Counter Fraud Project

Following consultation a fresh approach was required to tackle the problem of council tax arrears in the house in multiple occupation sector. The introduction of council wide licensing, with its additional powers and intelligence, presented an opportunity to increase council tax collection.


It had been observed that houses of multiple occupancy (HMO) have the highest council tax arrears of all the main tenures. Council tax regulations make landlords liable to pay the council tax liability not the occupiers of HMOs. Holding HMO landlords liable for Council Tax has been a significant issue in Newham for a number of years due to the highly transient nature of the sector and fraudulent behaviour of some HMO landlords.

At the start of this project, of the ‘known’ 4219 licensed HMOs in Newham they had combined three year arrears of £930,373. This equated to arrears of £220 per property. It was strongly suspected that Newham had up to 6,000 hidden HMOs with incorrect licences (single family licence), these addresses had a combined three year arrears of £1,761,774.

Forcing HMO landlords with council tax arrears to pay up is vital to delivering a level playing field for good and complaint landlords and to protect unsuspecting tenants.

Issues, challenges and barriers

The project has two main aims:

  1. Collect as much council tax arrears from HMO landlords using the additional powers and intelligence offered by licensing and; Lock HMO landlords into paying the proper amount of council tax into the future.

One of the first issues was how to prioritise the large number of cases and not end up targeting low value debt. The council focused on those addresses where there were significant council tax arrears. The council’s data warehouse was used to identify those properties and council tax officers carried out deep investigation to trace and link up debts across multiple properties and multiple council tax accounts.

By in-bedding council tax officers within private sector housing (PSH) it allowed them to make full use of the additional powers and knowledge available to them from PSH’s investigations and enforcement action. This allowed them to gather evidence from PSH officers on the HMO status of addresses and identify the liable party.

A further problem was how to deal with persistent high council tax debtors who refused to pay. Investigators worked alongside council tax management to agree a joined up strategy to seek the most robust enforcement in these cases using resources across the council to effect payment. The council is also experimenting with consolidating council tax debt with other debts across the council.

Impact

High value council tax debt is being uncovered, which, without this intervention, would have meant unsuspecting tenants being made wrongly liable for council tax debt in HMOs. Leaving tenants at risk from legal action and money owed to the public purse left uncollected. The project’s success forms part of the protection of tenants and creating a fair rental market for compliant landlords. Directly, as described above, and indirectly, through publicity.

Size of Grant

£304,176, with savings in 2015/16 and 2016/17 of £2,451,000, yielding an RoI of 8.1. However savings have continued to be delivered, with £7,254,000 delivered to date.

Contact details

Anthoney Quinn, Strategic Manager- Private Sector Housing, London Borough of Newham, [email protected], 020 3373 8660.