Leveraging Taxation to Activate Empty Homes

In a decisive move to combat the escalating housing crisis, the UK government has introduced a policy that doubles the council tax on properties left vacant for more than 12 months. This policy, set to take effect from April 1st, represents a significant shift in the approach to tackling the paradox of housing scarcity amidst a backdrop of over 260,000 long-term empty homes. By reducing the eligibility period from two years to one, the government signals its intent to aggressively pursue measures that encourage the utilisation of existing housing stock, thereby alleviating some of the pressure on the housing market.

The rationale behind this policy is clear - vacant properties contribute to the housing shortage, inflate real estate prices, and deny local families and young people the opportunity to secure housing within their communities. The decision to implement a steeper council tax is not merely punitive; it serves as a financial incentive for property owners to bring these homes back into the housing ecosystem, whether through sale or rental.

However, the policy is nuanced, with exemptions carved out for properties undergoing extensive renovations, those with planning restrictions limiting year-round use, and homes recently inherited. These exemptions demonstrate a thoughtful consideration of circumstances where increased taxation could be unduly burdensome or where vacancy is not a matter of choice but of necessity or temporary circumstance.

Critically, this policy empowers local councils by granting them the authority to levy this tax premium and use the proceeds to fund housing initiatives. This local control is crucial for tailoring solutions to community-specific housing needs and challenges. For areas particularly hard-hit by housing shortages, this additional revenue can be a lifeline, supporting the development of affordable housing or subsidising renovation projects to make more homes habitable and available.

This strategic pivot in housing policy aligns with broader initiatives to manage and optimise housing stock. For instance, the creation of a national register for short-term lets and the empowerment of councils to regulate these in tourist-heavy areas demonstrate a holistic approach to housing policy. Such measures acknowledge the complex ecosystem of housing and the need for diverse strategies to make homes more accessible.

Internationally, similar measures have been adopted with varying degrees of success. For example, the Scottish government's proposal to allow councils to charge up to double the council tax on second homes from April 2024 is indicative of a growing trend to utilize fiscal policies as tools for housing management. The effectiveness of these policies in stimulating the return of empty homes to the market will be closely watched and will undoubtedly influence future housing policy decisions.

The doubling of council tax on long-term empty homes marks a bold step towards addressing the UK's housing crisis. It underscores the government's commitment to leveraging fiscal policy as a mechanism to encourage the efficient use of housing stock. As this policy unfolds, it will be essential to monitor its impact on housing availability and affordability, as well as its influence on broader housing policy strategies. This approach, if successful, could serve as a model for other regions grappling with similar challenges, heralding a new era in the use of taxation as a tool for social and economic policy.