Council Tax Premiums and the Housing Crisis: Efficacy and Scepticism

In response to a deepening housing crisis characterised by severe shortages and escalating rental prices, the UK has introduced measures to incentivise property owners to bring vacant homes back into use. These measures involve imposing council tax premiums on empty properties and second homes. Despite these efforts, experts remain sceptical about the long-term efficacy of these strategies.

Current Measures and Their Impact

Council Tax Premiums:

  • Empty Properties: As of April 2023, properties that have been empty and unfurnished for 12 months face a council tax premium of 100%, effectively doubling the standard rate. This premium can rise to 300% depending on how long the property remains empty.

  • Second Homes: Starting from April 2025, second homeowners in England and Scotland will face a council tax premium of up to 200%, while in Wales, it could be as high as 300%.

Statistics on Vacant and Second Homes:

  • 2021 England had 1.5 million unoccupied dwellings, making up 6.1% of the total housing stock.

  • Wales and Scotland had unoccupied dwelling rates of 8.2% and 4.2%, respectively.

  • England had 154,970 second homes, Wales had 17,575, and Scotland had 24,300 as of 2022.

Expert Opinions and Challenges

Effectiveness of Council Tax Premiums:

  • Adam Cliff of the Empty Houses Network believes that while these premiums might lead to short-term successes, they are unlikely to significantly reduce the number of empty homes. He notes that increased council tax is unlikely to deter those who can afford to leave properties empty.

  • Paula Higgins, CEO of HomeOwners Alliance, concurs, suggesting that while these measures may alleviate the housing crisis in specific areas in the short term, they will not address the fundamental issues of affordability and insufficient new housing supply.

Behavioural Responses and Reclassification:

  • There is a concern that property owners might reclassify second homes to avoid the premiums, particularly as domestic business rates for holiday lets do not face these charges. We also anticipate an increase in the reporting of occupied properties to local authorities as a strategy to avoid the premium.

Broader Context and Comparative Analysis

European Housing Crisis:

  • The issue of vacant properties is not unique to the UK. Countries like Spain, Portugal, France, Austria, Ireland, and Denmark also face high rates of unoccupied dwellings. For example, over 10% of dwellings in Spain and Portugal were vacant in 2022, according to OECD data.

Comprehensive Solutions Needed:

  • Reports indicate that while council tax premiums can be part of a broader strategy, they are not sufficient on their own. Effective solutions must include measures to increase the affordability of buying homes and significantly boost the construction of new homes.

Conclusion

The introduction of council tax premiums on empty properties and second homes aims to mitigate the housing crisis by bringing unused properties back into the market. However, experts express scepticism about the long-term impact of these measures. The underlying issues of high house prices and inadequate new housing supply remain unaddressed. Comprehensive strategies, including but not limited to council tax premiums, will be necessary as the housing crisis continues to evolve to create a more sustainable and equitable housing market.

Defoes