Empty Homes Premium to fund roads, social services

The government is currently consulting on how the council tax collected in the form of Empty Homes Premium should afffect the finances of local authorities. No doubt many Empty Homes Practitioners will have hoped that the council tax collected would be ring-fenced for empty homes work or at the very least for housing. Regrettably that is not proposed to be the case.

In fact for districts in two-tier authorities (ie where there is also a shire or county authority running education, social servics, roads etc) the position is much worse than that, as most of the additoinal council tax will be passed on automarically to the higher tier authority and will simply not be available to the housing authority. This is business as usual. Exaclty the samehappened with additional money raised by changes to the discounts for second homes, contrary to what had been indicated originally by John Prescott when the reduction in second home discounts was first mooted back in 2002.

Members in unitary authorities - larger towns and cities, London boroughs and the like - may not realise just how little council tax accrues to the housing authority in two-tier areas. For example, in Exeter, which falls within Devon, the City Council collects the council tax (ie it is the billing authority), but most of the revenue goes to other authorities. For each £1 collected in 2011-12 the split was as follows:

  • 8p Exeter City Council
  • 11p Devon and Cornwall police: 11p
  • 5p Devon and Somerset Fire & Rescue
  • 76p Devon County Council

For a Band D property where the normal council tax rate payable is, say, £1500, the Emtpty Homes Premium for a two-year long-term empty property would be £750. On the above example, the amount retained by the housing authority would be just £60.

That will certainly encourage district housing authorities to retain their focus on income from New Homes Bonus rather than any income from Empty Homes Premium but it does not support the development of strong local initiatives to tackle empty homes.

We will argue for the split of income to be consistent with the New Homes Bonus regime where 80% is retained by the billing authority. This will have no effect in unitary authorities but would make a big difference to districts. Links to the government's consultation can be found here. The distribution of council tax revenues follows on as a consequence of the income being brought into the calcuation of the Council Tax Base. In the Council Tax Base, a Band D dwelling on which 50% Empty Homes Premium is being charged will counta s 1.5 homes in the CTB calculation.

And this approach has yet another consequence in that the Empty Homes Premium will not provide any extra revenue at all, because it will be taken account of in the funding settlement (Revenue Support Grant) that Councils will get. This can be contrasted with the way that it works for second homes discounts where all the revenue over 50% is retained by councils (ie is not taken into account when calculating revenue support grant).

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