“London: the City that Ate Itself” screamed the Guardian this morning before regurgitating, semi-digested, some familiar arguments about “Asians” buying investment properties in London to leave empty as “safety-deposit boxes in the sky”.
All of us who love London will care enormously about the pressure on housing stock that leaches colour from our city. But it’s important to diagnose the disease before we prescribe its cure.
Long term vacant properties (empty for six months or longer) in London have declined from 42,600 in 2004 to 20,795 in 2014 (see Table 615). Expressed as a percentage that decline is sharper still. London’s total housing stock in 2004 was 3.158m and in 2014 3.428m (Table 125).
Looked at in this light, the modesty of Government’s response to ‘the problem of empty properties’ is hardly surprising. Government introduced the Council Tax: Empty Homes Premium which (as of 1 April 2013) permitted Local Authorities to charge a Council Tax premium of up to an additional 50% on properties which have been unoccupied and unfurnished for more than two years (and with a period of occupation of six weeks or more resetting the two year clock). And the IPPR has pointed out that the premium is applied in only 1 in 4 properties included in the above ‘long term vacant’ figures.
However, data from the 2011 Census suggests a rather different problem. The figure for “household spaces” in London which are either unoccupied or used as second homes is 121,100. Expressed as a percentage this ranges from 0.5% in Waltham Forest to as high as 28.6% in Knightsbridge and Belgravia. Nationally, this figure rose 21% between 2001 to 2011.
This is not the place for a description of all the challenges (and opportunities) that second-home ownership creates for policy-makers. These will, of course, differ between markets. But demand for housing in London is substantial; supply is constrained; and if competition between buyers takes place on a playing field defined only by the ability to pay the initial asking price there will be inevitable consequences for that which we love about London.
Not so long ago Councils routinely offered discounts to second home owners. But the Empty Homes Premium jettisoned the link between use of local infrastructure and liability to pay local property taxes. Is it time to ask whether we should go further? Might we give local authorities further powers to reshape – through the imposition of Council Tax premiums – the competition for housing stock between those who choose to keep a second home in London and those on whom the life of the city depends?
Waiting for Godot 
HMRC’s former site at 375 Kensington High Street has been redeveloped as high density blocks of flats – and this continues to raise large amounts of tax: a £2m, 2 bedroom, 1,000 sq.ft. flat is liable to stamp duty of £153,750 (and there are a lot of flats on the site). ATED , if applicable on a £2m flat, would be £23,350 annually. But council tax, even on a £15m penthouse, would be no more than £2,124.66 per year or about 1/3 of the service charge on the 2 bedroom flat.
Raising the council tax on second homes (which, given the location, some of these flats are likely to be) is thus unlikely to have much of a deterrent effect to leaving properties unoccupied – and who is to say that someone living in a property for a few weeks per year adds less to London life than someone else who lives here year round? Even if the higher council tax on second or empty homes were to be several times the standard rate, the most it would likely do is reduce the asking price slightly…. would that have any trickle- down effect on the affordability of London property for the vast majority of people who can neither afford new build nor qualify for social housing.