Empty Homes Premium to double in England

EDITORIAL

Most practitioners will by now be aware that the Chancellor, Philip Hammond, has decided to allow local authorities in England to increase the Empty Homes Premium to 100%, bringing the maximum rate in line with Wales and Scotland. Better late than never: this is a welcome move.

Giving back

The amounts of money that the Empty Homes Premium can bring in are significant, and an emerging Empty Homes Network policy is that if local authorities are charging this premium they also have an obligation to re-invest some of the revenue raised into their local empty homes initiative. Otherwise, the possibility exists that some local authorities might respond to the EHP option as a perverse incentive, enjoying the additional revenue generated by long-term empties rather than doing anything to address the waste of housing that the empties represent. 

Hypothecation along the lines being suggested here is normally resisted by both local authorities and central government, but that should not deter us from arguing for it, The average citizen would probably understand and support the thinking behind it.

Lies, damned lies and newspaper reporting

As regards the reporting of the proposal, it is as woeful as anyone could wish for. In a typical headline, the Financial Times announces: 'UK Budget: Council taxes to double on empty properties'. Actually, the increase is a third, from 150% to 200% of normal tax rates.

The story immediately goes on to the next widely-broadcast nugget of misinformation, claiming that it is a move 'that will hit people with second homes'. Of course, by any accepted definition the premium will have no relevance for 'second homes' as they are excluded from the Empty Homes Premium,  which in England only applies to homes that are 'substantially unfurnished.'

The baloney sandwich is completed with the comment that the revised levels of EHP are unlikely to have any impact on foreign buyers in central London. In this case, the comment is undoubtedly true but essentially irrelevant as far as the tens of thousands of long-term empties affecting communities up and down the country are concerned. The fact that this issue keeps getting focus in the media shows the disproportiionate influence of the metropolitan elite, though admittedly it usefully plays into more populist narratives that suggest that somehow foreigners are to blame for whatever mess it is that we happen to be focusing on today.  Who needs UKIP when you can get the Guardian's  Polly Toynbee to waste precious column inches blathering on about foreign property owners

Whilst the FT story has been highlighted here, any quick websearch will show it to be a typical example; and unlike most reporting the FT's story does contain at least some of the small print that corrects its own headline.

Impact on public finances

One puzzling aspect of the new measure is the way it shows up in the companion Policy Costings document. Page 11 shows the new measure having a zero impact on the Exchequer through to 2021-22. At that point, it is suddenly shown as having a £5million positive impact.

Perhaps this implies a reduction in Formula Grant to local authorities to take account of increased revenue from EHP. If anyone has a better idea, answers on the back of a postcard please. Meanwhile, we will make some enquiries.

EHN policy

This may be the place to highlight EHN policies which would include:

  • introducing a Second Homes Premium at similar levels to EHP (as in Wales)
  • EHP to be chargeable after a year (as in Scotland and Wales)
  • ring-fencing of some EHP for empty homes initiatives

 

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Comments

Nick has usefully pointed out that the 50% figure is in primary legislation and therefore cannot be changed just via a statutory instrument.

I supposed one obvious time to introduce such a change to primary legislation would be in the annual Finance Act.  But those normally deal with national finances, whilst local finances (including historic changes to council tax) have been dealt with in Local Government Finance Acts as far as I know. The last of those seems to have been in 2012. I don't have any idea when the next such act will be introduced.

The foregoing comments are of course not based on any deep knowledge, but if we run with the idea that there has to be primary legislation and the first EHP will not bite until say 2020 we are not too far off the possibility that the government will save £5million by reducing formula grant to take account of the increased revenue being collected by local authorities through EHP from 2021-22.

Our email to the government (at 'public.enquiries@hmtreasury.gsi.gov.uk') read:

Dear Sir or Madam

Please could you provide some explanation of how the change in the maximum level of Empty Homes Premium that local authorities can charge has zero impact on the Exchequer up until 2021-22 when it suddenly jumps to £5million p.a. (p.11)

The background information provided does not offer any explanation.

Specifically, why is there any impact on the Exchequer at all given that it is a local tax?

No acknowledgement of this email has yet been received.

We have now received a reply to our query to the Treasury about the £5million impact of EHP in 2021-22. The letter is available in our Information Library (Full Members and Library Subscribers only).

Perhaps the most important thing it reveals is that the government intends to introduce the necessary legislation in time for the new 'freedoms' to be used for 2019-20. This would imply legislation during 2018, with sufficient time for councils' decision-making processes to have been completed for EHN to be increased by April 2019.