Natural England

response to consultation on proposed changes to council tax charges on second homes (AP02/07)

FOR DECISION

Background

It is estimated that there 80,917 second homes in the country, of which 58% are in rural areas. However, in some parts of the country, particularly popular rural areas, the numbers are much greater with some villages recording proportions of second homes between 30-40%. 

The high incidence of second home ownership in some rural areas, together with other constraints on supply, has had an adverse effect on local people: those on low incomes are unable to compete in the local housing market. Second home ownership can also have an impact on the local economy and leads to the loss of local services, making it even more difficult for those who are unable to access services located beyond their immediate locality.

Currently, owners of second homes and long term empty properties are only liable to pay 50% council tax as a recognition that they make lower use of local services. However, many feel that they should in some way compensate for the additional cost that others have to pay, the loss of services they experience, and the impact on the lack of housing, especially affordable housing, in the area. As a result there has been considerable pressure on the Government to introduce legislation to enable local authorities to increase the level of council tax charged on second homes and long-term empty properties to 100%. There has been some support for a much higher, more punitive charge to be allowed. Generally, there is agreement that the additional revenue should be retained locally to be used either to assist the provision of affordable housing or to support vulnerable local services in the areas affected.

The Rural White Paper the Government gave a commitment to consult on this issue.

Government Proposals

The Government published its proposals for change in November 2001 in the document 'Council tax: a consultation paper on proposed changes for second homes and long-term empty properties'. Responses are sought by 15 February 2002.

The document sets out three proposals which would give local authorities discretion to:

• remove or reduce the existing 50% discount for second homes (defined as a furnished dwelling which is no-one's main residence);  

• remove or reduce the existing 50% discount for unfurnished long term empty properties and to determine how long a property remains empty before council tax is due;  

• grant additional council tax exemptions or discounts that are not already covered by the current national exemptions, in response to local factors (e.g. flooding) on a case by case basis.  

In addition the paper seeks views on four options on how the additional funds, accruing from these potential changes to council tax arrangements, should be used:

• Option One: national retention by local authorities shared across England  

• Option Two: billing authorities, which end the discount, to be able to retain the additional proceeds and be free to spend them on housing and/or any other local priorities, such as bus or tourism services  

• Option three: billing authorities retain the additional proceeds which are ring fenced for housing purposes  

• Option Four: the additional revenue to be identified and spent on affordable housing through the Housing Corporation's Approved Development Programme (ADP). The size of the ring-fenced allocation for each authority's area would be roughly equivalent over time, with the ADP investment subject to clear evidence of demand and suitable bids.  

Countryside Agency response

We have welcomed the consultation paper, as this is an issue which we have raised with the Government on a number of occasions. We have previously said that we support the principle of local authorities being able to charge full council tax on second homes where the incidence of them causes problems, particularly the impact of affordable housing to rent or buy in the areas concerned. The proposals to include long term empty properties are also helpful as they can present a problem in some areas, particularly in market towns.

Since this issue has been around for some time and in the light of recent well-publicised proposals by some National Parks, most notably the Exmoor National Park, to limit second home ownership in its area, we have commissioned research by the University of London to provide us with information on the nature and extent of second home ownership in rural areas, and its impact on the local housing market and economy, about which there is little detailed research at present. (Most commentators believe it is a problem but have been unable to quantify it.) The study will also advise on planning and fiscal measures which might be adopted to mitigate some of the adverse impacts of second home ownership. Unfortunately, the study is not due to report until June, which is after the present consultation period. However, DTLR are aware of our work and have shown some interest in discussing it, so we propose to make an interim response to the present consultation but to suggest that they may wish to defer reaching final decisions until our study reports.

In the meantime, we propose to respond to the detailed proposals in the consultation document as follows:

Local authorities discretion:

• Welcome the proposals to give local authorities discretion to charge 100% on second homes and long term empty properties. We support the principle of local authorities being able to charge a higher rate of council tax on second homes than the 50% currently applied. We believe the charge should be raised to at least 100% , but think the case for allowing a still higher rate should be further investigated. We agree that long term empty properties should also be included in the proposal.  

Use of the proceeds:

• Option one: we do not favour national retention of any additional proceeds raised; the impacts vary from area to area and the consequences need to be addressed locally. If the proceeds went into a national pot, those areas most affected would be likely to lose out;  

• Option two: proposes retaining funds locally and by ring-fencing for affordable housing, it focuses on the main problem caused by a high incidence of second home ownership. However, the additional revenue raised could be quite small in some areas and even if used to support housing association investment and so lever in additional funds, it might not produce many extra homes;  

• Option three: ensures the funding is retained to overcome the problems in those areas most affected. It also provides flexibility in the way funds are used. This could be particularly helpful where the proceeds are insufficient to support new affordable housing provision, but could be used to support services which are adversely affected, for example contribute towards an additional teacher at the local school, support a local bus service. However, it should be ring-fenced in some way so that it does not lead to leakage of funded into a totally unrelated service provision;  

• The fourth option, to channel funds through the Housing Corporation's ADP, has the advantage of increasing resources for affordable housing, as it levers in private finance. However, this would also be the case if local authorities invested proceeds in housing association development. The main drawback is that option four could result in the proceeds being used in areas other than those most affected. The Housing Corporation have said that they could not identify which sums should go into the Rural Programme and so there could be leakage into the general housing pot as with option one.  

• On balance we would favour a mixture of options two and three, that is, the additional revenue should be retained by the local authorities and used primarily to increase the supply of affordable housing in the local areas affected, but that there should be scope to extend this to support for local essential services, where the need arises or where the funds will not be sufficient for housing provision.  

The proposals for additional council tax exemptions are helpful but we are concerned that their cost will have to be met by the authority. This could be problematic for under-resourced rural local authorities who may in consequence be unwilling to give a discount, thus discriminating against rural residents affected by such problems as flooding. We therefore support the discretion to offer discounts but costs should not be solely borne by the local authority.

We also propose to urge the Government to defer a final decision on the terms of the legislation until the results of the Countryside Agency's research into second home ownership are available.