Source: http://council-tax.com/emptyhomesdistribution2014.html
Timestamp: 2017-10-22 06:13:45
Document Index: 670607934

Matched Legal Cases: ['art 1', 'art 1', 'art 2', 'art 2', 'art 4', 'art 3', 'art 4', 'art 4', 'art 5', 'art 5', 'art 6', 'art 6', 'art 6', 'art 7', 'art 3', 'art 4', 'art 6', 'art 7']

EMPTY HOMES DISTRIBUTION 2014
Council tax statistics for September 2014 show that the number of dwellings on council tax valuation lists in England was 23,466 million. There were nearly 520,000 dwellings exempt from council tax and nearly two thousand demolished buildings. This left 22,944 million dwellings on valuation lists liable to council tax.
Chart 1 shows the distribution of dwellings between the eight council tax valuation bands (A to H). Of nearly 23 million dwellings liable for council tax, the vast majority were in the lower valuation brackets. Twenty four percent were in band A, 20% in band B, 22% in band C, and 15% in band D. Taken together the lowest four brackets contained 81% of all dwellings. The four highest bands combined therefore contained only 19% of homes and band H, the highest band, contained only 1% of homes.
Chart 1. The distribution of dwellings between the eight council tax valuation bands (A to H) September 2014.
Empty homes are regarded in council tax legislation as “dwellings which are unoccupied and substantially unfurnished”. Council tax statistics for September 2014 show that there were 461 thousand empty homes in England, which represents 2% of the total properties liable for council tax. These empty dwellings were mainly in the lower valuation bands especially band A, which is the lowest band.
Chart 2 gives a breakdown of empty dwellings by council tax band. The majority of empty properties were in the lower brackets. Forty one percent of empty homes were in the lowest band, 20% were in band B, 16% in band C and 10% in band D. Eighty seven percent of empty properties were in the lowest four bands. The top four bands combined therefore contained only 13% of empty homes and band H, the highest band accounts for only 1% of the total empty homes.
Of the 461,thousand empty homes in England less than three and a half thousand were in the most expensive bracket. However there were around 190 thousand empty homes in the least expensive bracket. This means that there were well over fifty times as many empty homes in the lowest band as in the highest band. Contrary to much of the publicity surrounding empty homes they are not characteristic of high value homes but of low value dwellings.
Chart 2. The distribution of empty homes between the eight council tax valuation bands (A to H) September 2014.
Reforms introduced by the coalition government meant that from April 2013 local authorities in England were given the power to impose a premium on homes that had been empty for two years or more. In 2014 the premium was charged on a total of 56 thousand dwellings and nearly half of these were in the lowest valuation band.
Of the 56 thousand homes subject to a premium the overwhelming majority were in the lower valuation brackets. This is shown clearly in chart 4 which shows the number of properties liable for a premium in each of the eight council tax bands. Nearly as many empty homes in the lowest band were charged a premium as all the other bands put together.
Forty-nine percent of empty homes subject to a premium were in the lowest band, 18% were in band B, 13% were in band C and 8% were in band D, giving a total of 89% in the lowest four bands. Therefore only 11% were in the highest four bands. Of all the homes charged a premium less than 500 were in band H, which is under 1% of the total.
In numerical terms, 50 thousand of the properties to which the premium was applied were in the lowest 4 bands and only six thousand were in the highest four bands. Twenty seven thousand properties in band A were subject to a premium compared with less than five hundred in band H. Around 57 times more of the least valuable properties were subject to a premium as the most valuable. For every band H home subject to a premium there were 57 band A homes.
Chart 3 shows how the empty homes subject to a premium were distributed between the eight council tax bands.
The 2013 reforms meant that, at local authority discretion, empty homes could be treated in one of three different ways as far as council tax was concerned. They could be given a discount of between 0% and 100%, they could be required to pay full council tax, or if they had been empty for two years or more they could be subject to a premium of up to 150% of the usual rate.
Chart 4 gives a breakdown of how the 461 thousand empty homes were distributed between these three categories. The majority of empty homes were liable for the full rate of council tax without being subject to a discount or premium. Of the 461 thousand empty homes, 283 thousand or just over 61% fell into this category.
Of the remaining 178 thousand empty homes, 121 thousand were subject to a discount and only 56 thousand empty homes were subject to a premium. This means that the changes resulted in only 12% of empty homes being charged a premium. However the data do not show how many of the 461 thousand empty homes had been empty for over two years. Therefore the data do not allow us to determine the percentage of long term empty homes that were subject to a premium.
Chart 4 empty homes subject to premium, subject to discount, subject to usual rate.
Chart 5 shows how these categories were applied to properties in the eight council tax bands in 2014.
There was a disproportionate number of band A homes subject to a premium. Twenty four percent of all dwellings liable for council tax were in the lowest band, 41% of empty dwellings were in this band, but 49% of homes subject to a premium were in this band. The lowest value properties were more likely to be empty and more likely to be charged a premium than homes in the other bands.
Council tax has been a regressive tax since it was first introduced and although the council tax premium has been broadly welcomed as a progressive measure, one of its effects has been to make the tax even more regressive by obtaining even more revenue from the lowest value homes.
Chart 5 empty homes subject to discount, subject to premium, and subject to usual rate by council tax band.
Chart 6 expresses the numbers of empty homes subject to discount, subject to premium and subject to usual rate as percentage of total numbers of homes in each band. It also shows the number of empty homes as a percentage of the total number of homes in each band.
It can be seen that the distributions for the most part are u shaped. The lowest and highest bands have the highest percentages of empty homes, with the intermediate bands having lower percentages of empty homes. The distributions for empty homes subject to premium and subject to usual rate are similarly u shaped. The only exception to this general pattern is the distribution for empty homes subject to discount which is highest for band A then flattens out from band B to the remaining bands.
Chart 6 shows that 3.4% of homes in the lowest band (band A) are empty. This is followed by band H where 2.6% of homes are empty. The percentages for homes in the intermediate bands range from 2.1% for band B to 1.2% for band E.
Chart 6 shows that homes in the lowest band (band A) have a 3.4% likelihood of being empty. This is followed by band H where there is a 2.6% likelihood of a home being empty. Properties in bands in between these extremes have probabilities ranging from 2.1% to 1.2%.
Any explanation of the reasons for empty homes needs to take into account that there is a higher likelihood of a property being empty if it is in the least expensive and most expensive bands than in the intermediate bands.
Discussions of empty homes tend to focus on the owners of these properties. If a property is empty it is generally assumed that it is because the owners want to leave it empty. The owners are often said to be property bankers using the homes as investment vehicles or piggy banks, or that they simply can’t be bothered letting or selling them. The owners of empty homes tend to be stereotyped as affluent people. Implicit in most discussions is the assumption that empty homes are the result of decisions of the property owners. It is rarely considered that a home may be empty because no-one wants to live in it.
This stereotyped view has some plausibility. The demand for homes, the high property prices, and high rental values suggests that People could easily make better use of properties than leave them empty. This might explain the high percentage of empty homes in band H.
But the theory that empty homes are deliberately left empty does not explain why such a high percentage of band A homes are empty. These are low value properties and are unlikely to be suitable as investment vehicles. A more plausible explanation perhaps is that the dwellings are unoccupied simply because they do not attract prospective tenants or purchasers.
Although the statistics don’t show why these homes are empty it is worth considering the many reasons which could cause or make it likely that a property will be unoccupied. For example a property could be empty because it is uninhabitable; or it might be undergoing conversion or improvement. It could consist of low amenity accommodation such as a bedsit above a shop or in an HMO. The accommodation could be small in size, or it may have to share a bathroom or kitchen with other households. A unit of accommodation does not even have to have a lockable door to be legally classified as a dwelling. The fact that a unit of accommodation satisfies the legal definition of a dwelling does not mean that it will satisfy the requirements of people looking for a place to live.
In addition empty dwellings are not concentrated in property hotspots as they would be if they were being used for profit. They are mainly concentrated in areas of comparatively low demand.
Stories about empty mansions in expensive locations could therefore give a misleading picture of the reality of empty homes.
Turning to the results for homes subject to a premium, a similar pattern emerges. Again we get the same U shaped distribution, with the highest percentages being for band A and band H. 0.49% of properties in band A were subject to a premium and 0.36% in band H, with properties in the intermediate bands having percentages ranging from 0.23% for band B to 0.12% for band E.
The comparatively high percentages of band H homes subject to a premium could be explained by these being expensive homes possibly owned by affluent people who may be impervious to a small amount of additional tax and so they continue to leave the properties empty despite having a premium imposed on the properties.
The high percentage of band A homes subject to premium could mean that the properties are so unattractive to potential occupants that the owners can’t get people to live in them so they continue to remain empty despite the owners having to pay additional tax.
A policy of incentivising the occupation of empty homes will not work unless these homes are attractive to potential occupants and if the incentive is sufficient to result in behavioural change in the owners.
It should be borne in mind as well that even though 0.36% of homes in band H are subject to premium this is a very small amount in absolute terms. Much of the publicity surrounding empty homes has focused on expensive properties that are left unoccupied. But this has resulted in less than 500 dwellings in band H having a premium and over 27 thousand in band A. In fact nearly as many band A properties are subject to a premium as all the rest of the bands put together.
Not only is the greatest percentage of empty properties in band A but a greater percentage of properties within band A are empty.
Chart 7 shows the number of empty homes subject to a council tax premium as percentages of the number of empty homes in each band. Again the distribution resembles a U shaped pattern. Over 14% of empty homes in bands A and H were subject to a premium and for the intervening bands the percentages hover around the 10% - 11% mark.
This paradox might again suggest that while for properties in the medium range increased tax may be effective in motivating owners to find occupants for empty homes, premiums may be less effective for owners of the most expensive and least expensive properties. For owners of expensive homes the premium may not be sufficient incentive because the owners could be so affluent and for the owners of inexpensive properties the incentive may be ineffective because the dwelling does not attract potential occupants.
For an incentive to have any effect at all two conditions must be satisfied. Firstly the incentive must be sufficient to motivate the owner of the empty home to find occupants for it, either by selling or letting the home. Secondly the owners must find people willing to occupy the property.
If a person owns a band H property which even in 1991 was deemed to be worth £320,000 and could be worth millions of pounds now they are likely to be quite wealthy especially if they don’t even need to live in that home. The average council tax rate for a band H home is around £3,000 and even the maximum premium is only about £1,500. The premium may have little effect in motivating the owner to find occupants for it. For a house worth a million pounds a council tax rate of £3,000 is 0.30% of it value and the maximum premium of £1,500 is 0.15% of its value. Because of house price inflation the increasing value of the property is likely to be considerably greater than the empty homes premium. The owner is likely to gain more from the increasing value of the property by retaining it than they would pay in council tax. The logical decision for the owner of such a property, however unethical, would be to keep it rather than sell it.
Even if the property is still only worth £320,000 a council tax rate of 3,000 would be 0.94% of it’s value. A council tax premium of £15,00 would be 0.47% of it’s value. And even the full council tax plus premium amounts to £4,500 which is only 1.41% of the value of the home. Given the current state of house price inflation it would be more logical to keep the house than to sell it. Therefore, much higher council tax premiums would be needed to encourage owners of empty expensive homes to sell them.
In order to motivate the owners of such properties to make better use of them much more radical measures must be used than the council tax premium, especially if the owners are wealthy enough not to need the money from renting them out.
Secondly the dwelling must be capable of attracting potential occupants. Although the owner of a property may be motivated to make better use of it they may have difficulty in getting people to live there. This could possibly apply to band A homes. Band A properties have a 1991 value of up to £40,000 and the average band A council tax rate is around £1,000 which is 2.5% of the value of a £40,000 property, and the maximum empty homes premium of about £500 is accordingly 1.25% of the property value.
Expressed as a percentage of value the lower value property worth £40,000 is being charged both in usual rate of council tax and in premium a much higher rate than the higher value property.
For additional information see empty homes distribution 2014 charts.
Chart 3 . Empty homes subject to a premium by council tax band September 2014
chart 4 empty homes subject to discount, subject to premium subject to usual rate of council tax September 2014
Chart 6. empty homes, empty homes subject to discount, subject to premium and subject to usual rate as percentages of total numbers of homes in each council tax band September 2014.
Chart 7. Empty homes subject to council tax premium as percentages of number of empty homes in each band September 2014.