Monday, July 23, 2007

Housing Green Paper - New Homes From Empty Property

Yvette Cooper launched the Housing Green Paper a couple of hours ago and I'm pleased to report that the empty homes issue is well covered. In fact chapter 4 is devoted to it almost entirely. There’s some good stuff in here, but some important omissions too.

Firstly the good stuff; Government is acknowledging the problem. The occupation rates of housing are important as the numbers of homes. Building lots of new homes won’t solve housing undersupply problems if large proportions of them are left empty. The government makes some proposals here about resolving it. It centres around enabling local authorities to use EDMOs more effectively The heavy hint here is that government looks like it might be rethinking the housing planning and delivery grant mechanism to include a financial reward for local authorities to get empty homes back into use. The government consulted on revising the housing planning and delivery grant last year. It proposed to offer grants to local authorities for approving planning applications to build more homes. At the moment local authorities are rewarded only for their efficiency of processing planning applications not the wisdom of their decisions. You might argue that giving a financial reward for judging an application in one way and not the other rather takes away local authority’s planning impartiality, but we’ll leave that argument for others to make for now. My real problem was that the government’s proposals would have rewarded local authorities for allowing new homes to be built, but would offer no reward for work they did to get empty homes back into use. Skewing thinking and action towards new build as the only way of creating new homes. Thankfully sense seems to be prevailing and unless I’m reading too much into it, there is a suggestion that we could get a mechanism that rewards all ways of creating new housing supply and thereby providing some much needed funding to help local authorities to get on with the job of turning empty property into new homes.

There are however omissions. To give the government credit this document was put together in record time with very little warning from our new PM that he wanted it. But omissions there are; whatever view you take about the effectiveness of local authorities, I don’t think anybody believes that they are capable of sorting the empty homes problem out single-handed. Empty homes are a housing market failure and any real solution must include incentives to make the housing market work more effectively. Here are two suggestions I would like to see:

Take away the incentive for speculators to buy to leave by abolishing the council tax discount for empty homes and giving local authorities the flexibility to double the council tax on long-term empty homes.

Harmonise the VAT on refurbishing empty homes and building new homes. Making it more affordable and cost effective to renovate derelict homes. Currently new homes are zero rated for VAT, refurbishing most empty homes is rated at 17.5% VAT.
These ideas will certainly be the Empty Homes Agency’s response. But we’ve now got the summer to have a proper debate about what we need.

4 comments:

  1. Yet another way from the robbing governent to rip people off.
    Makes you sick eh...
    From Steve B (Hull)

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  2. A stealth tax

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  3. A tax on who? you guys. Investors are leaving properties empty to make money at the expense of everybody else. A bit more council tax might disuade some them.

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