Council tax premium on empty homes unfairly penalises renovators, councillor says

Young people trying to get on the housing ladder by buying derelict properties to renovate are being unfairly penalised by a council tax premium on vacant homes, it has been claimed.

In an effort to deter people from holding onto empty properties, Shropshire Council charges double the usual rate of tax on those which have been unoccupied for more than two years, rising to a 200 per cent levy after five years and 300 per cent after 10 years.

However when a property is sold, the new owner must continue paying the higher rate until the home is once again occupied – even if it is being refurbished.

Concern has now been voiced that the policy is taking the prospect of home ownership away from those who want to buy and renovate a previously vacant property.

Speaking at a cabinet meeting on Wednesday, Councillor Nigel Hartin, who represents Clun, said it was a “widespread problem” across the county.

He said: “I have become aware that this policy is having, what I assume to be, unintended consequences.

“I have two such properties in my division which have been purchased by two young people to bring back into use as first homes.

“The condition of the properties when purchased, being uninhabitable without significant updating, making them affordable for them to purchase in what would otherwise be a housing market out of their financial reach.

“They were therefore very pleased to be able to acquire these two small linked terraced homes and looking forward to being able to bring them back into habitable condition with the help of family members in the building trade.

“What they did not know until after purchase was that they would be hit by punitive council tax levies, amounting in one case to more than the mortgage payments, which they could not possibly afford to pay.”

Councillor Hartin said the new owners had appealed to the council for discretionary discounts but had been refused.

He said: “This may result in the properties having to be sold on – probably to a developer with large pockets who could afford the short-term financial hit whilst the properties were brought back into a liveable condition.”

Councillor Hartin said the policy “actively discourages long-term properties being brought back into use other than by large scale developers or the very rich”, and asked cabinet to bring forward changes “to stop this happening in the future so that other young people’s dreams of home ownership are not trashed in this way in the future”.

Councillor Gwilym Butler, portfolio holder for resources, said the council had begun charging premiums on empty homes in 2014, a year after the government gave billing authorities powers to do so.

The levy was 50 per cent for properties unoccupied for more than two years, increasing to 100 per cent in 2019. In 2020 the 200 per cent premium was introduced for properties unoccupied for five years and last year the 300 per cent charge came in for homes which have been empty for a decade or more.

Councillor Butler said: “The regulations are clear that the decision to levy the premium is based on the condition of the dwelling, and this means that any changes in ownership which would change liability for council tax would have no impact on levying the premium which must be charged once the council has agreed the charging policy for the year.

“The regulations provide for the government to prescribe classes of dwelling where the premium will not apply. They do not enable billing authorities to make their own determinations for exceptions to their policy to levy the premium.”

Councillor Butler said homes had to be “occupied or substantially furnished” for a continuous six-week period to remove the premium, adding that this information “is clearly referenced on the council’s website”.

He said: “I would imagine these cottages only came to the market because we are penalising them with a higher rate of council tax.

“Due diligence needs to be done by the purchaser and their agents and conveyors to ensure that they are fully aware of the council tax rate when they purchase the property.”

Councillor Butler said the policy currently raises more than £1 million a year for the vital council services and prevents people from holding onto properties which could otherwise be brought back into use.

He said he would not be proposing any imminent changes, but agreed to have the policy reviewed by a scrutiny committee.