Rating (Property in Common Occupation) and Council Tax (Empty Dwellings) Bill

Baroness Thornhill Excerpts

2nd reading (Hansard): House of Lords
Monday 4th June 2018 Lords Chamber

[Baroness Thornhill (LD)]

My Lords, I declare an interest as a vice-president of the LGA. Given that Clause 2 is to increase councils’ ability to charge more council tax on empty homes in the light of the housing crisis, I could simply say, “What’s not to like?”, and sit down. I totally appreciate and acknowledge that the Government have made some headway in this area, so I rise instead to urge the Government to be bolder in tackling the problem of empty homes. Does the Minister really believe that this Bill will make more than a marginal difference, since councils can already increase council tax on empty homes by 50%—and most do, including my own?

I appreciate the Minister’s intention to give councils more autonomy in this matter, which is particularly welcome. Although this is a national issue—the figures leave us in no doubt of that—we are not looking at the problem enough, which is different in different parts of the country. Largely, in the north of England, whole communities are blighted by row upon row of empty, boarded-up terraced housing, with a few residents living in between, giving rise to the label of “rotten teeth roads”. These have become areas where people no longer want to live, largely due to the loss of jobs nearby. The sad thing is that they have become a symbol of the decline and dereliction of once-thriving communities.

In rural areas, as has been mentioned, the large number of second homes is a cause for concern, though perhaps different in nature and with differing consequences. The problem in prosperous parts of the country, in particular the capital and the south-east, is that of buy-to-leave, of which we are all aware. Then, of course, there are the sporadic properties present in every council area and ward. These add up to a significant number, but they are small in number, particularly for most district councils, which I suspect is why they are not always a top priority. It is inconceivable that a small rise in council tax will affect the oligarchs and multimillionaire investors, so please let us not claim that it will make a difference to the buy-to-leave empty homes. The problems of rotten teeth roads will not be solved either, as it requires considerable political will from councils and successive national Governments to reverse this serious decline in some parts of our country.

In my view, the rhetoric surrounding the Bill will not live up to the reality, although we do clearly support it. The onus for bringing empty homes back into use lies with councils, and some are undoubtedly doing an excellent job, particularly in the north, where the problem is far more acute. From my experience of running a council, I know that while it is easy to say that we must tackle the problems of empty homes, in practice doing so is massively resource-intensive and time-consuming, with no certainty that time, effort and money will lead to a positive outcome. All too often in the two-year battle with the home owner, councils have gone to court and come back disappointed. I will never forget a case we had, where the lady in question, who lived in a rather lovely farmhouse in Surrey, used to come back to her property in Watford and sleep there with no heating, electricity or water for a couple of nights a week a year. She made sure she knocked on her neighbours’ doors so they all knew that she was still coming back. We lost that one. I would like the Government to commit to exploring ways to secure better outcomes and look at why the empty dwelling management orders, or EDMOs—the intention of the Labour Government was correct: they were meant to be easier to administer and better than compulsory purchase orders—are not working.

The Bill proposes a fiscal measure regarding council tax, so what else could have been done fiscally? I believe the premium needs to be steeper to have any significant impact at all, increasing with the length of time that the property has been vacant. I hope it is not too late to consider that. Also, lowering the rate of VAT on refurbishment and renovations would incentivise owners to get on with bringing their property back into use. Would the Government consider ending the loophole in the compulsory purchase order process, where the owners of empty properties get a bonus of up to £75,000 if councils exercise compulsory purchase orders?

Would it be possible to rationalise the law to give councils simple, consistent rules that provide an unqualified right to recover taxpayers’ money spent on enforcement and the up-front costs associated with things such as EDMOs? Current rules for cost recovery vary from one piece of legislation to another. Surely the community interest in the property should take precedence over all others, so that any debt to the local authority arising from its intervention would have the first call on any equity should the home be sold. With an EDMO, local authorities turn an unproductive asset into one that earns money for the owners, yet council tax payers are unable to recover the up-front costs.

I also have doubts about whether the data on empty homes is actually correct. As has been mentioned, since the introduction of the premium rate in 2013, there is absolutely no incentive for a home owner to declare that a property is empty. Why would you if it meant you had to pay more council tax? Your Lordships may be surprised to hear that the current fine for not declaring your property empty is a hefty £75. Surely that needs a considerable hike. Is it not a form of tax evasion? In addition, the valuations office has the power to remove many homes from council lists altogether—thus taking them out of the figure—if they are deemed derelict and uninhabitable and therefore no longer eligible for council tax. So the figure is probably much higher, and some of the worst properties could lie empty for years, having been moved off the books. Whether these properties are counted in or out could account for the discrepancies in the figures we all look at when we are doing our homework, collected either by the ONS or through FoI requests. Perhaps it is time for this loophole to be closed. The danger here is that, the worse the property gets, the less pressure there is on the owners to do anything; in fact, they can be exempt indefinitely. There is no incentive at all to improve the property.

It is still the case that homes can remain exempt from council tax following the death of an owner until probate is granted. In my experience, some of the worst eyesore properties are in this category, as a result of deliberate inaction by whoever was responsible for securing probate. Coincidentally, I was door knocking in my patch on Friday night and a gentleman on Kingsfield Road said to me, “Don’t knock next door, the old lady’s died”. I said, “When was that?”. “Six years ago”. I inquired further, knowing that this is an interest, and it is a family dispute. They are not settling and they are not prepared to move things on. Is it time for a time limit for such situations, rather than allowing them to continue indefinitely?

Finally, does there not have to be an acceptance that housing is an essential part of the nation’s infrastructure and that maintaining it and improving it to an adequate standard in some cases requires central government investment—perhaps, in some parts of the country, significant investment? Otherwise, councils, particularly smaller district councils, at a time of severe budgetary pressures, will inevitably feel that tackling empty homes is a high-cost activity with low and uncertain rewards.

Rating (Property in Common Occupation) and Council Tax (Empty Dwellings) Bill

Baroness Thornhill Excerpts

Committee: 1st sitting (Hansard): House of Lords
Tuesday 19th June 2018 Lords Chamber

[Lord Kennedy of Southwark]

My Lords, the previous couple of debates have highlighted why this amendment is needed. We have talked about the effects of the Bill—although it is a small Bill—particularly with regard to council tax payers and empty properties. I think it is worth having in the Bill a clause that enables the Government to review—my amendment suggests within 24 months—what has happened in respect of Clause 2 and the impacts of the decision. My amendment also requires that after the review a report is laid before Parliament.

The noble Baronesses, Lady Pinnock and Lady Thornhill, have tabled a very similar amendment. Subsection (2) of their new proposed new clause suggests that,

“the Minister may also consider the impact of any penalties imposed on persons for failing to register their dwelling as empty”.

I am happy to support that as well. Considering the debates we have had on the previous groups, having a mechanism whereby the Government can look at the effects of the Bill, small though it is, is a good thing to do. I beg to move.

[Baroness Thornhill (LD)]

My Lords, I declare my interest as a vice-president of the Local Government Association. I fully support the words of the noble Lord, Lord Kennedy. I thank the Minister for the very detailed and informative letter he sent all of us after Second Reading; in particular, his response to my comments on fiscal incentives and deterrents with regard to empty homes. I really appreciated that and took on board what he said. Perhaps he will indulge me by allowing me to hang on to the one measure that he did not elaborate on—that is, the matter of penalties.

It is probably little known that councils actually have the ability to levy a civic penalty on an owner for not informing councils that their home is empty. It is not surprising that it is little known; the maximum penalty for doing so is actually £70, so it is no surprise that it is rarely, if ever, used, and that the general public are oblivious to it. In fact, I suspect that if we talked to the general public we would find they believed that by informing the council that their home was empty they would actually pay less or no council tax, so that shows that we have a long way to go. As the average council tax, the band D monthly payment, is now around £165 a month, a penalty of £70 is nothing—it is neither a penalty nor a deterrent. So this is a small matter but I feel that the two should have been taken together. If we are going to, justifiably and rightly, hike up council tax premiums, the penalty that goes with not informing the council should send the same level of message—£70 is, frankly, derisory.

I see both these measures—the penalty and the increased premiums—as really important in motivating councils to move this up their agenda. I say this with a degree of experience in local government, particularly in district councils where this is not a priority, largely because of costs. At Second Reading we heard a lot about powers not being used because of costs, but I think that together these two things would encourage councils to publicise the need to not leave homes empty, and to make it a publicly unacceptable issue so that people would be enraged by it and want us to do something about it. If there were to be a review, would we also review penalties in this regard, as I feel that it would be a missed opportunity if we did not? I beg to move.

[Lord Bourne of Aberystwyth]

I am very grateful to the noble Lord, Lord Kennedy, and the noble Baroness, Lady Thornhill, for their contributions on this group of amendments that relate to how we seek to address the penalty point just covered by the noble Baroness and the issue of the review, which was raised by the noble Lord.

The amendments would require the Government to review the impact of the increase in the maximum permitted level of the empty homes premium. I pause briefly to say that I think I am going to organise a list of all the things that the noble Lord, Lord Kennedy, has asked us to do reviews on. I know that he very often says that we have so many things out for review and then we have a critique of that, but we have had a couple of issues today at least where he has asked for reviews. I am only teasing.