Left-leaning think-tank the Institute for Public Policy Research is pushing for local authorities to be given more flexibility about how and when they charge the Empty Homes Premium. Key flexibilities being proposed include:
- a higher rate of Premium (on a sliding scale)
- the ability to introduce the Premium earlier
- flexibility around what counts as "occupation" (compared with the current disregard of periods only if they are briefer under six weeks).
The IPPR is widely seen to have close ties to the Labour party, and has indeed been criticised by the Charity Commission for being too close to it, as recently reported in the
Daily Telegraph. Thus there are some grounds for seeing the IPPR report as likely to have some influence on the Labour manifesto or its policies in the event it gains power at the May election.
The case for change
The report, entitled
Back on the Market - Bringing Empty Homes Back Into Use and written by Bill Davies, a research fellow at IPPR North, focuses on empty homes as a wasted resource in the context of severe housing need, noting that the number of long-term empty homes represents as a mininum a year's worth of housing supply. The Conclusion to the Report notes:
While empty homes account for only a small proportion of the total English housing stock ... their exclusion from the market is a serious social problem in places where homelessness is prevalent, council house waiting lists are long, and affordable housing is in short supply.
Rate of Premium
The report notes that the amount chargeable in EHP in Scotland is 100% of the normal rate of council tax (as compared with 50% in England and Wales) and simply proposes that the cap of 50% be removed. The implication (though it is not followed up in the rest of the report—perhaps to avoid frightening the horses) is that councils would have unlimited flexibility to set the Premium at whatever rate they might like. This might include on a ratchetting scale, at say 50% a year.
How long empty?
The IPPR suggests the threshold for charging the Empty Homes Premium might be reduced "for example" to 1 year. Their costed example combines this period with a premium at an average rate of 70% to calculate the financial benefits. (The 70% appears to be an arbitrary figure selected because based on a the average Band D council tax rate it would produce about £1,000 a property transparent).
Financial implications
The report calculates that this would produce £108million annually though it is not entirely clear how they arrive at that figure from any of the figures supplied. The assumption seems to be that half the long-term empties would remain empty "after a further six months". The total national figure of long-term empties quoted by the report is 216,050 so half that figure would produce 108,025 empties subject to the Premium having been empty for 12 months - thus £108million at £1,000 p.a.. This overlooks the fact that to generate £108million every one of those empties would then have to remain empty for the full duration of the following year, remaining empty for two years in total. It also overlooks that longer term empties tend to be down at the lower end of the council tax banding.
But then the 70% figure is itself arbitrary and authorities might choose to charge more, which would partially offset the reservations just noted.
When does the clock start?
The IPPR report usefully notes that for a home to count as occupied for council tax purposes it need be occupied for no more than 6 weeks continuously. If that criterion is met the clock is restarted - it would be another 6 months before a home became a long-term empty again and two years before the premium would be due under current rules in England.
The IPPR suggests that this period should be left to council discretion and points to the fact that in Scotland the threshold for occupation is three months. The IPPR's justification for council discretion seems a bit wobbly, as the report ties the need for local discretion to variations in local housing markets. Even taking low-demand housing markets into account, it is hard to see why a house should be considered occupied for one period of time in one authority and a different period in another authority. The Scots seem to have the right approach - the threshold simply needs to be increased. Whether 3 months is enough is another matter.
Wider implications
The bigger picture is that the IPPR report is proposing how to raise an extra £108million from long term empty homes. In our policy document we have identified that the government is currently spending about £124million a year on New Homes Bonus reward for bringing empty homes back into use. In the world of soundbites, the two figures just quoted are close enough for a political party to argue that increasing EHP as proposed by the IPPR report is an alternative to funding from the much-criticised NHB.
However, the difficulty with higher levels of council tax on empty homes is that it gives councils perverse incentives to allow them to stand empty: higher EHP works in the diametrically opposite direction to NHB. It is also makes tax avoidance more attractive and from this point of view it is regrettable that the report does not engage with the issue of penalties for avoidance and also with the issue of how second homes are taxed.
Thus, while we are happy to see the idea of increased Empty Homes Premium gaining traction we must address the danger that councils may start to ask themselves why they should bother employing empty homes practitioners. Either a council gets more money from empty homes by virtue of them standing empty or the owners bring them homes back into use under the pressure of the fiscal measures and without any further effort by the local authority. We need to promote the need for empty homes practitioners to negotiate and facilitate return-to-use earlier rather than later rather than relying on the blunt and unreliable instrument of fiscal policy.
In fact we would say that, if the IPPR proposals were to be adopted, the best way to rebut any claim that they offer councils perverse incentives to ignore empty homes would be to provide the match-funidng of empty homes officers we have suggested in our policy document as part of a proper national initiative to tackle empty homes.
As regards the idea of an open-ended Empty Homes Premium, without any ceiling, this has the potential to exceed the legitimate scope of taxation. Whilst it is recognised that tax regimes may be constructet to induce changes of behaviour (for example variable road tax related to carbon footprint, levels of duty on alcohol and tobacco etc) there is a point beyond which they may not reasonably go: if entirely open-ended the premium would become punitive.
You can find the report via our library
here.
