Lords amendment proposes Empty Homes Premium escalator

The House of Lords has inserted an amendment into the Rating (Property in Common Occupation) and Council Tax (Empty Dwellings) Bill that introduces an escalator into the amount of Empty Homes Premium payable according to how long a dwelling has been empty.  The amendment was supported by the government which suggests that it will be accepted in the Commons.

Following the amendment, a premium of up to  100% of the normal council tax rate for the dwelling - as originally proposed by the Bill - could be imposed if the property had been empty between 2 and 5 years; between 5 and 10 years the premium could be up to 200%;  and beyond 10 years, the premium could be up to 300% (or quadruple the normal council tax rate).

The 200% and 300% rates would be available from 2020 and 2021 respectively, with the 100% rate coming into play from  April 2019 as originally planned.

Up to the maxima, the amounts chargeable would continue to be set by local authorities according to their own policies, and there is an assumption that the government will  produce Guidance to help owners avoid hardship, which can confidently be predicted to open a whole can of worms. Lord Bourne of Aberystwyth, speaking for the government, noted

In particular, we will look to ensure, through the revised guidance, that premiums are applied with due consideration to issues facing low-demand areas and cases of hardship. We anticipate that we will look to strengthen the wording of the guidance to set out the Government’s clear expectation that premiums are not applied where home owners can demonstrate that their properties are genuinely on the market for rent or sale and appropriately priced. We will also look to ensure that the guidance takes account of individuals who are struggling to complete or to afford renovations that are necessary before the property can be occupied or sold on, and where progress or hardship can be demonstrated.

Fair enough, but if we are going to consistent then let's see tribunals set up to start dealing with individuals' 'hardship' caused by income tax and VAT.

Measures to deal with long-term empties are welcome and an EHP escalator can be expected to  have a positive impact in reducing empties. But the lack of a wider vision around what is involved in tackling empties and a disregard for what is needed to address the full range of situations remains a concern for practitioners.  To take a very simple example, hiking the premium is also likely to have a 'positive' impact on the incidence of council tax avoidance by owners taking advantage of the 'second homes' loophole.

Whilst Empty Homes Premium offers useful PR when it comes to claiming that things are being done about empties, in reality meaningful action should be possible long before a home has been empty for five years. Some obvious contenders for change in policy or legislation would include

  • the indefinite council tax exemption for  homes that have been left in limbo following the death of an owner as a result of deliberate inaction by the putative heirs (upon whom the amendment will have no effect)
  • the Basic Loss Adjustment payable to neglectful owners when local authorities seek to compulsorily purchase properties that may have been a blight on their communities for years
  • the farcically loose definition of 'second homes' which provides a ready-made option to avoid Empty Homes Premium 

As for negative equity, let's see the burden of loss fall on the lenders whose due diligence around valuations failed when they encouraged their customers into unsustainable debt; this would allow affected owners to hand back their keys sooner rather than later.

Council-tax-based measures exacerbate the regressive nature of council tax, whereby poorer people with cheaper properties can pay the same as - or more than - richer people with far more valuable properties (thinking here of the low-council-tax boroughs in central London). Whilst we won't waste too much  sympathy on people who keep homes empty for five years, the disparity between the impact on rich and poor nevertheless offends the sense of natural justice. Other countries impose empty homes taxes that work off the value of the property: this would be a much fairer approach. 

Concerns about EHP being viewed by local authorities primarily as a source of extra revenue rather than as an effective measure for tackling empties were expressed by some participants in the debate in the House of Lords. Certainly, amongst the local authorities that impose EHP at current rates, many are not doing nearly enough about empty homes. An appropriate response here would be to implement a requirement that EHP could only be imposed where there was a credible empty homes strategy in place, perhaps with an element of hypothecation from the amounts of EHP collected. Expressing such a requirement in legislation would not be straightforward, but nor would it be outside the realms of possibility: with a national Empty Homes Unit to set standards it would be relatively easy to implement.

As regards mechanisms to prevent 'hardship', it might be better to start by helping people who have been impoverished by the series of government welfare amendments rather than property-owners who have managed to keep a home empty for five years. This said, there are circumstances where exceptions would be entirely appropriate, for example in areas blighted by local planning and regeneration policies. The infamous strategies of 'managed decline' pursued by some local authorities under Labour's Housing Market Renewal programmes would be a grim example. But these are exceptions that should be enshrined in local policy (challengeable by individuals), not negotiated case-by-case according to the circumstances of individuals.

The reality for empty homes owners needs to be presented more starkly than the hand-wringing about hardship implies: if you have two homes, if you can't use one of them, sell it - sooner rather than later - instead of faffing around for years and then pleading with a local  authority for a tax break when a Premium becomes due.

In summary, whilst the amendment expresses a worthy but vague desire to 'do something' about empty homes, it also highlights impoverished thinking and low ambition at national level and exposes the absence of a strategy to take the issue by the scruff of the neck.

The Lords debate on the amendment can be found here.

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This article was amended 8.00 a.m. Friday morning to include more discussion of policy.