The owners of empty properties could have to pay double the council tax due on them, Philip Hammond announced yesterday.
Currently, councils can levy a premium of up to 50 per cent on residential properties they classify as lying empty.
Yesterday, the Chancellor handed authorities the power to increase this empty homes council tax premium to 100 per cent – doubling the bill. The premium applies to both vacant houses and flats, to dissuade property investors from allowing homes to sit empty while many struggle to find somewhere to live.
Earlier this year, it was reported that tycoons, foreign royalty and oligarchs were leaving properties empty in the London borough where the Grenfell Tower fire left scores homeless (file photo)
Empty is typically defined as a property that is ‘substantially unfurnished’ and has been unoccupied for two years or more. Periods during this time when the property has either been occupied or furnished for six weeks or less are disregarded.
Earlier this year, it was reported that tycoons, foreign royalty and oligarchs were leaving properties empty in the London borough where the Grenfell Tower fire left scores homeless. There were said to be more than 1,500 unoccupied homes in Kensington and Chelsea.
Mr Hammond said yesterday: ‘I want to address the issue of empty properties. It cannot be right to leave property empty when so many are desperate for a place to live, so we will legislate to give local authorities the power to charge a 100 per cent council tax premium.
‘We will also launch a consultation on barriers to longer tenancies in the private rented sector and how we might encourage landlords to offer them to those tenants who want the extra security.’
Despite the rise in the premium, experts said the likely target of the policy – foreign owners of unoccupied homes in London – were unlikely to sell or rent their properties because of what would be a relatively small increase in tax.
Council taxes on the most expensive homes in Kensington and Chelsea would be about £4,300 a year if the local authority doubled the charge for unoccupied properties.
Tim Walford-Fitzgerald of HW Fisher & Company chartered accountants said: ‘For wealthy buyers who snap up UK property just to hold as a rapidly appreciating investment, the measure is likely to be an annoyance that will come off the bottom line rather than persuade them to let properties they see primarily as an asset rather than a home.’
Others suggested they would get around the rules fairly easily, although the government has previously denied this, saying: ‘There has been a suggestion that taxpayers are avoiding paying the premium by installing furniture.
There were said to be more than 1,500 unoccupied homes in Kensington and Chelsea. File photo of residents of Grenfell Tower demonstrating outside Kensington and Chelsea town hall earlier this year
‘This is notionally because property which is unoccupied but which is not “substantially unfurnished”, is a second home rather than an empty home, and the premium does not apply. ‘However, the Department for Communities and Local Government has no evidence that billing authorities have difficulty applying the legislation, nor that they are experiencing difficulties with avoidance.’
Instead, experts say the changes are more likely to affect people with second homes in the countryside.
There are certain exemptions for properties that have been put up for sale, where a property is an annex to another property, or for those that are in the Armed Forces.
Almost 1.6 million people living in England and Wales have a second address in another local authority. However, it is not known how many of these are empty.
Council tax receipts are forecast to soar by 26 per cent in six years, according to the Budget red book.
It stated that council tax is expected to rake in £38.3billion by 2022-23, compared with £30.4billion in 2016-17. The Treasury was unable to explain the rise, but it could be due to both inflation as well as the Government promise to build new homes.