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Empty homes tax could ‘generate £1bn a year’ for councils

Empty homes in an HMR area of NewcastleAn empty homes tax could generate £1.2bn a year for local authorities, reduce demand from foreign investors and increase housing affordability, a study suggests.

Researcher Jonathan Bourne at University College London investigated the relationship between ‘low use’ properties (homes that don’t have a permanent resident) and housing affordability in different parts of England and Wales.

His findings are published today (February 13) in the journal Palgrave Communications.

The researcher collected data from 112 local authorities, representing 32% of total local authorities in England and Wales, and covering 40% of the population of England and Wales (23.2 million people).

This data included 340,000 low-use properties. Analysis revealed that low-use properties were worth £363,000 on average, which is 18.5% more expensive than the average home (£306,000).

Bourne also aimed to identify areas that could be responsive to one of two ways of reducing house prices; increasing the supply of housing, or decreasing property demand by introducing an empty homes tax.

‘One of the goals of this research was to get an idea of the fraction of the population of England and Wales living in areas where low-use properties are more expensive than homes occupied by full time residents, which suggests that the most desirable properties are being bought for purposes other than use as a home, for example as investment opportunities or holiday homes,’ Bourne explained.

The author added: ‘The data shows that low-use properties are very concentrated in small numbers of desirable areas. In such cases simply building more homes is not going to solve the problem, as the issue is intense competition for property, not a lack of places to live.

‘An empty homes tax may be more effective, with the potential to generate a not inconsiderable income for local authorities, whilst taxing people who are typically not eligible to vote in local elections, or encouraging them to rent out their properties.’

Based on these findings and the current council tax base, the author suggests that an empty homes tax of 1% would raise an additional £1.2 billion in taxes, which is equivalent to 11% of the council tax currently collected in the areas included in the dataset.

Chancellor Philip Hammond announced in the 2017 Budget that local authorities could ‘incentivise’ owners of empty properties to put them back into use by charging them a council tax premium.

Since 2018, an empty homes tax has been applied to domestic properties with no regular occupant by the city of Vancouver.

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