Driven by data; ridden with liberty.
Bath and North East Somerset Council narrowly passed a motion to further scrutinise placing business rates on student accommodation. The original version of the motion, proposed by Cllr June Player (Ind., Westmoreland), also considered whether students should be directly paying council taxes, or their landlords should be paying this levy instead.
In the Local Government Finance Act 1988, there are two types of properties: domestic and non-domestic. The former is defined as properties “used wholly for the purposes of living accommodation”, excluding hotels and other forms of short-stay accommodation. Any property which does not fulfil this criterion is non-domestic. Houses and other forms of domestic hereditaments are charged council taxes, whilst non-domestic properties are charged business rates. In both cases, these taxes are taken from the occupier, not the owner. From 2013, local authorities retain half of business rates raised within their boundaries, with the rest going to a national pool to be redistributed.
Houses in multiple occupation are still houses. The proposal calls for a strict application to student accommodation, establishing a separate taxation category where filling a house with students would mean non-domestic rates would be applied to the owner of a domestic dwelling. In the present system, this proposal is not just bad policy: it is nonsensical.
Moreover, this is not a question of statutory incidence, but where the effective incidence would lie. There is a wealth of literature on tax incidence of property levies, which shows that the tenants bear a partial or full burden for these taxes. Given that the housing charity Shelter calls Bath’s rents “unaffordable” , with further upward pressures on rental prices from Bath’s Article 4 Direction and Additional HMO Licensing, this trade-off should be unacceptable.
Speaking to the University of Bath Students’ Union newspaper bathimpact, Cllr Player complained her motion had been misinterpreted, declaring “the impact on students would be absolutely zilch”. When asked if there was a risk that taxation costs could simply be passed onto student tenants, Cllr Player said:
There might be, we will have to deal with it when we get to it. But it is the businesses, and these are big businesses, who are raking in the money. I never said that students should have to bear the costs.
The latter sentence is presumably why the original motion “to be moved by Cllr June Player” unequivocally stated:
But, somewhere, a contribution to the services that are received should be made by students and/or property owners.
Furthermore, Cllr Player began her speech to the council saying her most common constituent question was: “Why don’t students pay council taxes?” This is because students are typically not economically active, and so have no earned income to pay these taxes. Students are one of several groups that are exempted from paying council taxes, including student nurses, live-in carers and some apprentices.
Cllr Player’s original motion also claimed that:
Following changes to the Local Government Funding system, introduced in 2013/14, there will no longer be additional Government Grant funding for future increases in HMO/purpose build Student accommodation numbers.
This was repeated in her opening remarks, and is contradicted by the officers’ briefing note:
The grant position was effectively fixed in 2013/14 following changes to the Local Funding System and the element of “resource equalisation” will not be updated until government undertakes the next “reset”, currently planned for 2020.
Students cannot vanish between lectures, and must live somewhere. Complaining about both shared housing and purpose-built accommodation is destructive, particularly when Bath’s universities are continuing to build more accommodation. This proposal is malformed, and demonstrates independent political representatives can still play cynical games.