Wales leads the way with Second Homes Premium

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With the approval on 8th of July by the Welsh Assembly of the Housing Wales Bill, Wales has taken the lead with its approach to council tax on second homes by introducing what is effectively a "Second Homes Premium" to sit alongside the Empty Homes Premium.

Second Homes Premium

The flexibility introduced by the provisions of Part 7 of the Housing Wales Bill include the power for local authorities to charge a council tax premium of up to 100% on homes where:

"(a) there is no resident of the dwelling, and

(b) the dwelling is substantially furnished."

This immediately closes the loophole available in England whereby some sticks of furniture can be introduced into a long-term empty (or might already be there) so that the Empty Homes Premium does not apply. Indeed the opposite will be likely to happen as there is no grace period with the Second Homes Premium - it will kick in straight away, so that owners of true "furnished empties" will be inclined to remove any furniture rather than putting furniture in.

The Empty Homes Network had previously proposed that furnished and unfurnished properties be put on an equal footing, with the Premiums applicable to both after the same lenght of time. The Welsh Bill goes further, is simpler and harder for owners to circumvent.

Interestingly, too, the Second Homes Premium does not shilly-shally around with "periods of occupation" - either there is a resident or not. The criterion of "residency" can be assumed to be tougher than someone - anyone - merely occupying the home for a period of time.

Empty Homes Premium

The Bill also introduces an Empty Homes Premium in Wales, similar to Scotland in that the rate can be up to 100% and it can kick in after 1 year, rather than the 50% and 2 years stipulated by the half-hearted English version. As with England and Scotland, the Premium applies to empties that are "substantially unfurnished" and periods of occupation of less than 6 weeks are discounted.

The Welsh provisions also allow for a stepped approach to EHP, with an increasing amount over time (up to the maximum) rather than a single fixed level of premium. But unlike the Scottish legislation there is no requirement for the tax collected to be re-invested in affordable housing.

Periods of vacancy prior to the provisions of the Act coming into effect are ignored.

Flexibility for Welsh Ministers

The Welsh Ministers can, by regulation

  • increase (but not reduce) the minimum period of 1 year associated with the Empty Homes Premium
  • change the lenght of the "6-week" occupancy criterion applicable to Empty Homes Premium
  • change the level of the premiums (either up or down)
  • specify classes of dwellings or circumstances to which either premium would not then apply

Such changes would be subject to ratification by the Welsh Assembly.

The provisions discussed here will not come into effect until dates still to be specified by the Welsh Ministers. After commencement, it seems any premium can be introduced with 21 days notice given via a local newspaper. But once introduced local authorities can only revoke or change their determinations of premiums and local discretionary provisions prior to the commencement of a financial year.

No National Empty Homes Strategy

During the passage of the Bill through the Assembly a number of interesting amendments were proposed and susbequently dropped or voted down including

  • a requirement for the Welsh government to produce a National Empty Homes Strategy
  • a requirement for additional revenue collected by local authorities as Empty Homes or Second Homes Premium to be allocated to affordable housing or regeneration
  • a requirement for local authorities to provide returns to the government on the number of long-term empty homes and for the government to publish the figures.

Next step

The Bill is currently awaiting final scrutiny in London to establish that it is not ultra vires. Technically the government's Secretary of State for Wales can also refuse consent according to our superficial reading of processes around . This is a period of up to 28 days after which it can go for Royal Assent.

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Photo: Pierhead building, Cardiff. Credit: National Assembly for Wales under creative commons attribution 2.0

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