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The Empty Homes Farce As Councils Rake In An Additional £540m

The Empty Homes Farce As Councils Rake In An Additional £540m

Councils across England could make an additional £540m a year in council tax on empty homes after new rules came into force at the beginning of April.

Since April 2013, billing authorities have had the power to charge council tax premiums of 50% on homes that have been unoccupied for two years or more. In April 2019, this was adjusted so that premiums of 100% could be applied to homes that have sat empty for two years or more.

However, from 1st April this year, the power to charge a premium of 100% of a property’s council tax bill will now apply to homes that have been empty for 12 months, although in some cases exceptions will apply.

Analysing the data

Ahead of the changes, we analysed the current level of long-term empty homes across England that have been classified as such for a minimum of six months, to reveal where councils could potentially see the biggest boost to council incomes from empty homes with the new legislation in place. Research shows that across England there are some 261,189 homes that have been classed as empty for six months or more. With the average cost of council tax coming in at £2,065 per property, this means that councils across England currently collect an estimated £540m in council tax on empty homes each year.

Should these homes continue to sit empty for up to 12 months or longer, this would see the council tax charged per property climb to an average of £4,130, netting councils a total of £1.1bn in council tax on empty homes over the course of a year.

The North West to see the biggest boost

The North West is where councils stand to see the biggest boost to council tax incomes on empty homes. With some 42,454 empty homes, councils in the region already collect an estimated £91m per year in council tax on vacant properties, with the new legislation seeing this potentially double to £182.1m per year.

In the South East, council tax collected on empty homes could potentially double to £146.3m, up from the £73.1m that’s currently collected.

London ranks third, where an estimated £65.2m is currently collected in council tax on an annual basis from the 36,210 empty homes found across the capital, with this figure potentially set to double to £130.4m.

The scandal of empty homes

We’re yet to see the government attempt to resolve the housing crisis in a meaningful way. Not only have they neglected the issue of supply for many years, but it’s quite frankly scandalous that so many homes are sitting empty across the nation when we’re in desperate need of more housing stock. While new changes to the council tax premiums charged on empty homes show that they are aware of the problem, it’s fair to say that it’s unlikely to act as the deterrent they expect when it comes to forcing these empty homes back into circulation.

However, these changes do have the potential to bring a sizable boost to the coffers of our local councils and we can only hope that this additional income is utilised to help address the issue of housing availability.

When you consider the money they stand to make, it highlights the benefit of using these empty homes to at least address the issue of supply within the rental sector. Rather than pay a 100% council tax premium, these properties could be generating rental income, while also providing tenants with the homes they desperately need.


Convert empty homes to social rent housing

Shelter is calling for empty homes to be converted into social rent homes to help solve the housing crisis. According to the housing charity, there are 261,000 empty homes in England.

The charity is urging the government to build 90,000 new social rent homes per year across England.

Turning empty homes into social rent spaces is better for the environment
According to a report by Shelter, converting an empty home takes around 1/3 of the time compared to building from scratch taking around 8 months, instead of 2-5 years to build.

The charity also claims that turning empty homes into social rent homes is better for the environment, cutting carbon emissions by 50-75% per unit on average.

Shelter has listed 10 key recommendations to make their plan a reality.

The recommendations include increasing council tax premiums for empty properties and exempting sellers of long-term empty homes from a proportion of Capital Gains Tax if selling to a council, housing association.

Some of the other recommendations include:

  • Invest £1.25bn grant in a long-term empty homes programme to bring suitable empty homes back into use in the target 10 cities. Back this with a clear strategy to convert them into social rent homes and include potential to expand funding beyond this geography once proof of concept is established.
  • Ringfence empty and second home Council Tax premiums for LEH acquisition and conversion.
  • Support for local authorities and social landlords to boost capacity – with resource funding to expand councils’ empty homes teams; knowledge sharing roadshows between councils already taking action and those that want to; and a central compulsory purchase and empty homes ‘flying squad’ to support ambitious local authorities across the country.
  • Tighten the definition of the long-term empty home category to ensure empty homes that are meaningfully empty but misclassified as second homes are correctly classified. Put the onus on the owner to prove regular use.

End housing emergency
The report concludes that converting empty homes is one piece of the puzzle to solve the housing crisis.

The report says “we need a national suite of mechanisms to urgently ramp up the delivery of social rent homes to 90k per year. This is how we will end the housing emergency. Empty home acquisition and conversion is a fast, cost-effective, and greener way for the next government to quickly increase the delivery of social rent homes early in its term and reduce the number of empty homes. The more central government puts in to address empty homes, the more social rent homes we will get out.”


£50bn price tag for London's empty homes

Southwark, Barnet, Camden, Croydon and Newham are the top five London boroughs with the highest number of vacant properties amid a worsening shortage of homes in the nation’s capital. According to our analysis of data from all 33 local government authorities, 87,763 houses stood empty across London in 2023. The total value of these properties is worth an estimated £50 billion, with a quarter of the city’s empty homes concentrated in these five boroughs.

Yet London is seeing increasing demand from prospective buyers along with lengthening waiting lists for social housing. Across the country, the government has set targets of building 300,000 new homes per year in order to tackle the housing crisis.

Empty homes block housing supply

Empty homes continue to be a major obstacle for London’s housing supply, but we have recently seen an increase in efforts to get vacant properties back on the market and unlock the £50 billion tied up in empty homes across the city.

Such efforts include the ability for local councils to impose heavier premiums on properties that have been vacant for a year or more, and there may be more regulatory changes to come. If these changes do succeed in encouraging owners of long-term vacant properties to sell or rent, there may be opportunities for property investors and property managers.

Here we look at the top five boroughs, and the investment opportunities they offer:

Southwark’s empty properties valued at £2.77bn

Southwark had the highest number of empty homes of any London borough in 2023, with 5,143 properties sitting empty last year. The combined value of these properties is estimated to be £2.77bn, which is the third highest of any London borough.

In recent years, Southwark has become an increasingly attractive place to invest, with regeneration bringing more people and businesses to the area. The borough has several first-rate attractions like Borough Market and the Tate Modern, as well as plenty of options for restaurants and nightlife, all within walking distance of central London as well as ongoing development.

Barnet has second highest number of empty homes worth £2.75bn

With 4,614 vacant dwellings, Barnet had the second-highest number of empty homes of any London borough last year. The estimated combined value of Barnet’s unoccupied properties was £2.75bn, representing the fourth highest total of any borough.
The outer borough is known for its strong transport links to central London and convenient access to the surrounding Hertfordshire countryside. Regeneration schemes like Brent Cross Cricklewood are also helping to create new jobs and bringing more people to the borough.
Camden’s empty homes estimated at £3.5bn

Although third on the list Camden’s 4,320 empty homes are valued at an estimated £3.5bn, second only to Kensington and Chelsea (£4.2bn) among all London boroughs. A hot spot for locals and tourists alike, Camden has some of the highest house prices of any London borough. Along with Camden Market, the borough boasts leading live music venues in the form of KOKO and Roundhouse as well as ample green space with Regent's Park on its doorstep.

Croydon’s £1.58bn is lowest worth of the top five

The outer borough of Croydon had 3,946 vacant dwellings recorded in 2023. It has some of the lowest average house prices of any London borough and so does not appear in the top ten for estimated value of vacant properties (£1.58bn). Known as a commuter hub, Croydon offers excellent transport link with four rail stations and quick access to central London, Gatwick Airport and the M25. Investors can also benefit from plenty of green space, great shopping facilities and a thriving food and drink scene with venues like BOXPARK.

Newham’s vacant dwellings worth £1.65bn

With 3,812 vacant dwellings, Newham ranks fifth. Like Croydon, Newham’s house prices are low relative to the rest of London, with the total estimated value of its empty homes (£1.65bn) falling outside the top ten. The borough offers strong rental yields, which can make it an attractive prospect for buy-to-let investors.

Newham has benefitted from considerable investment in the last 15 years, most notably from the 2012 Olympic Games. It also offers easy access to the Thames and a short commute to central London, making it a convenient place to live.