Mayor’s call for council tax hike on empty homes is small piece of bigger picture

by Dave Hill

Sadiq Khan has called on the government to give London’s boroughs greater powers to impose higher council tax bills on the owners of residential properties that he describes as “left empty”. The aim is to incentivise those owners to either sell or let those homes so that someone lives in them or, should that not happen, at least enable boroughs to increase the council tax income raised on them.

In announcing this wish for change, the Mayor highlights expensive examples of such properties in Central London. His move has the significant support of the British Property Federation and the leader of Conservative-run Westminster City Council. It is a reasonable request which, if granted, would have some good effects. But it also underlines that unoccupied homes are not the largest housing problem London faces and that there is strong case for a far bolder reform of council tax in the capital.

Outrage over “empties” forms part of the populist Grand Narrative about housing in London, a crowd-pleasing trope which does good business for those perpetuating it but ignores at least as much as it reveals. Filling empties would be good, but it would make little difference to the big picture.

The number of dwellings in Greater London defined by the government as “long term” empty, meaning they’ve gone unoccupied for more than six months, currently stands at around 20,000. That is a tiny proportion of the nearly 3.5 million dwellings the metropolis contains and only about 40% of the number of additional homes London is estimated to need every year just to keep up with its growing population.

The existence of empty homes in London, especially those branded “luxury” and owned by foreigners, is often emotively juxtaposed with its rising number of homeless households. That is a bit too easy.

Firstly, not all long term empty homes are expensive ones. In his letter to communities secretary Sajid Javid , Khan acknowledges that “it is clear that the issue of empty homes goes beyond foreign investment and newly built proprties”. Indeed, a substantial number are council homes.

Secondly, as research done for Khan by LSE London and York University has found, the number of homes bought in London by overseas investors – who aren’t all foreigners, by the way – left wholly empty for a long time is very small indeed, contrary to widespread belief (though there is a problem in the very wealthiest areas with homes left mostly empty, which don’t show up in the same set of figures).

Thirdly, even were it straightforward to requisition the long term ones and allocate them to the homeless – and it wouldn’t be – there would be well under half the amount needed to go round. Moreover, the number of such homes in Greater London is less than half it was in 2004, the year the figures were first compiled, and has been falling steadily. Compared with the obstacles to getting far more new homes built at prices most Londoners can afford, empties are a fairly small and diminishing concern.

Still, even one long term empty that could be occupied instead is one going to waste. So if Khan gets what he’s after, how much use would it be? He is asking for an extension of a power that already exists. At present, the boroughs, along with the rest of England’s local authorities, have the option of adding a 50% premium, or levy, to the council tax band rate relevant to the property in question. It was bestowed by the coalition government and has been in effect since 2013. The premium as it stands can only be imposed after the property concerned has been unoccupied and substantially unfurnished for over two years, which means that only very long-term empties have qualified.

Khan’s letter to Javid does not go into particulars about the changes he would like to see. It doesn’t say, for example, how high the Mayor would like the premium to be allowed to climb or if he would like the two year period before it can be raised reduced, though these would certainly be matters he and borough leaders would like to discuss adjusting. I’m told Khan is asking for any enhanced powers to apply only in London, though he recognises that any legislative change might also apply elsewhere in England or across the country as a whole.

In contrast to Boris Johnson, who once gaily bellowed that people who “buy homes as assets” and keep them empty as “a sort of bank balance in the sky” should be punished with a council tax of ten times the standard rate, Khan restricts himself to suggesting exploring options and launching a pilot scheme – the difference, perhaps, between a pragmatic politician and the showboating variety.

But larger council tax premiums on empties, useful though they might be, would be nothing like a substitute for a comprehensive revaluation of all council tax bands, which has not occurred since the tax was introduced way back in 1993. Tony Travers wrote three years ago that “the eight valuation bands are set in such a way that the most expensive London homes pay peanuts in relation to their current values”. That’s expensive homes, empty or full.

Were council tax reformed along the lines Travers suggests, the extra money – there would be lots of it – would go direct to London’s boroughs and could be used by them to increase the supply of social and other affordable housing locally. And, yes, all of them would like to do that. But only last year the then housing minister ruled out the idea. Property taxes are not popular with the voters. Getting round that problem is a far larger challenge for London than tweaking the levy on empties.

Updated on 5 September 2017 to include more detail about what Khan is hoping for from the government. Photograph by Max Curwen-Bingley. 

Be the first to comment

Leave a Reply

Your email address will not be published.


*