London Mayor calls for higher EHP on luxury empties

Editorial

Sadiq Khan, the London Mayor, has written to the government requesting powers to levy higher council tax on empty high-value homes. The press release does not state what level of tax should be charged but says it should be set

'at a meaningful rate that would incentivise occupation, or at the very least generate a more substantial receipt that could support investment in new affordable homes and other measures to tackle the housing crisis.'

The letter makes the powerful point that 'In the midst of a housing crisis, just one home left unoccupied is one too many.'  In support of his proposal, he cites the case of Westminster, where the EHP on a Band H property would only be £668 per annum. 

The suggested tax increment is supported by the Conservative Leader of Westminster Council, Nickie Aiken who is quoted as saying,

'Not only is it an important message to send out, it would also generate additional funds to be invested in our areas for the benefit of local residents. Along with the Mayor I have made it my priority to ensure that we have genuinely affordable housing in the heart of the capital.'

(Cllr. Aiken doesn't explain why, if funds for affordable housing are such a priority, Band D council tax is set at the level of £668p.a. in this wealthiest of boroughs.)

Sadiq Khan's letter is a welcome call to the debate around levels of taxation on unoccupied property, but does manage to skip over pretty much all the important issues that need to be addressed, which EHN policy would identify as follows:

  • why is Empty Homes Premium set at 50% maximum in England when it is set at a maximum of 100% in both Scotland and Wales?
  • why does Empty Homes Premium kick in after two years in England when it can be levied after one year in Scotland and Wales?
  • what is the point in trying to levy significantly increased rates of council tax on vacant homes when the tax can be avoided simply by introducing a few sticks of furniture into the property so that it can be registered as a 'second home'?
  • accordingly, why is there not a 'second homes premium' such as that levied in Wales, which prevents tax avoidance as described above by setting a premium at the same level as for vacant homes?[*]
  • why is there not an 'occupancy criterion' before a home can be registered as a second home, as there is in Wales and Scotland?
  • why are we so concerned about vacant luxury homes, that no one in housing need is realistically going to occupy, when vacant and second homes and housing need exist side-by-side all over the country, not least in outer London boroughs?

The absence of any strategic stance suggests that all that is really being sought is a means to extract a little bit of extra money without scaring the horses, which this proposal successfully avoids doing, as the support of the British Property Federation and the Leader of Westminster Council suggests.  But the amount of extra money that is likely to be raised through timid measures such as these is unlikely to go far far in addressing London's housing problems.

If Khan's proposals were to be followed up by central government, it is a toss-up whether this would be the thin end of a wedge that would lead to more meaningful policy and a more systematic and strategic approach to empty homes, or whether it would simply eventuate in a minor political gesture the main outcome of which would be to divert attention from what is really needed.

Picture Credit:
By US Embassy London - https://www.flickr.com/photos/usembassylondon/30885068755/, Public Domain, https://commons.wikimedia.org/w/index.php?curid=53009177


[*] In the Royal Borough of Kensington and Chelsea, where vacant homes have been much in the news in the wake of the Grenfell Tower disaster, there are over 8,800 second homes, compared to under 2000 non-exempt empty homes. For the raw data, the most detailed source at the time of writing is ‘Council Tax base local authority level data 2016’ (https://www.gov.uk/government/statistics/council-taxbase-2016-in-england).

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Comments

The original article wrongly stated that there is an occupancy requirement in Wales for second homes.

There isn't really a need for an occupancy criterion where second homes are treated the same as long-term empties as in Wales, as nothing is gained by claiming that a home is a second home.

In Scotland, however, there is (strangely, in the context of other policies) still a minimum 10% discount for second homes and of course no possibility of incurring Empty Homes Premium, so there are considerable advantages of a home being registered as a second home. The occupancy critieron goes at least some way to preventing some tax avoidance.

Only the English council tax regime fails to address any of the issues around second homes effectively.  The best that can be said is that it is not as bad as it used to be before John Prescott removed the 50% council tax discount available if a home was nobody's primary residence.