Council tax for second and empty homes, and thresholds for non-domestic rates: consultation analysis

Executive Summary

This summary sets out key themes from the analysis of responses to a public consultation on potential changes to Council Tax for second and empty homes, and thresholds for non-domestic rates for self-catering accommodation.

The consultation ran from 17 April to 11 July 2023. In total 981 responses were received, 73 from groups or organisations and 908 from individual members of the public.

Allowing councils discretion to charge a Council Tax premium for second homes

For Council Tax purposes, the definition of a second home is, ‘a dwelling which is no one’s sole or main residence and that is lived in for at least 25 days during the 12-month period of the Council Tax charge’.

A small majority (55% of those answering the question), thought that councils should be able to charge a Council Tax premium on top of regular Council Tax rates for these second homes. Support for this position rose to 89% among organisations answering the question.

The most frequently given reason for supporting councils being allowed such discretion was the impact of second homes on local housing supply. Associated points included that second homes can be a significant driver of higher prices in some areas, including under circumstances when many people find renting or purchasing a permanent home unaffordable.

There was also reference to the impact on the wider local economy and on the sustainability of local services, such as schools. Many of those commenting saw it as reasonable to expect second home owners to make an additional financial contribution that can be used to support services and local economies or to help address housing shortages.

Respondents who did not support councils having the discretion to charge a premium often pointed to unfairness, including that it would not be reasonable to penalise people who bought a second home at a point when no premium was payable. There was also a concern that a premium would make second home ownership the preserve of the rich.

Many of those who did not support a premium being payable also saw it as unreasonable to expect second homeowners to subsidise the finances of local authorities. This was sometimes connected to second home owners using fewer of the services that Council Tax helps pay for, such as schools.

Allowing councils discretion to charge more than a 100% premium on council tax for long-term empty homes

The majority of respondents (60% of those answering) thought that councils should be able to charge more than the current maximum Council Tax premium of 100% for homes that have been empty for longer than 12 months.

Respondents referred to the potential for empty homes to have a significant negative impact on local communities, neighbourhoods and adjoining properties. It was suggested that tackling empty homes should be a national priority, and that Council Tax premiums could have a role to play. There was also a view that higher maximum premiums would provide greater scope for councils to respond to the local context and to owners’ individual circumstances.

Opposition to higher premiums was most commonly linked to the varying reasons for a property remaining empty, and an argument that higher premiums may not be effective in incentivising more owners to bring empty properties back into use. It was suggested that the current 100% premium strikes the right balance between incentivising owners and ensuring that they are not financially constrained by additional premiums, but that any further increase in premiums for empty homes would be excessive and unfair.

Premium levels for second and empty homes

In terms of the possible level of any premium, it was suggested that this should be the same for long term empty properties and second homes, including to remove any financial incentive to switch between uses.

When asked what the maximum Council Tax premium should be, the most frequently chosen option for both second and long term empty homes was 300%. In relation to second homes, it was thought that this rate of premium could discourage people from buying properties which are only going to be used occasionally.

Some respondents went further and suggested that councils should be given the discretion to charge a premium of greater than 300%, or that premiums should be unlimited.

It was also suggested that councils would be best placed to take account of their local context and set an appropriate level of premium for their area. In terms of the factors that should be taken into account when setting any premium, respondents were particularly likely to refer to patterns of supply and demand of affordable homes, the potential impact of second homes on local public services and communities, and the distribution and concentration of second homes in the local area.

Possible exemptions from premiums being payable

It was acknowledged that there are many diverse reasons for owning second and empty homes, and that there may be circumstances when it may not be reasonable for a premium to be payable. The need for exemptions or exceptions was raised both by those supporting and not supporting a premium being chargeable.

Respondents were most likely to refer to compassionate grounds, for example for a period after a property is inherited due to a bereavement, or if a property undergoing major repair or restoration work.

Views were mixed on whether financial hardship provides reasonable grounds for an exemption. One perspective was that, if you can afford to have a second home, any challenges associated with paying a premium would be minor by most people’s standards. An alternative perspective was that an exemption might be reasonable if personal circumstances and/or escalating costs mean that a property cannot be made habitable or saleable.

Letting thresholds for non-domestic rates

A small majority of respondents (53% of those who answered the question) supported a change in letting thresholds for self-catering accommodation to qualify for non-domestic rates.

Most of those calling for change wished to see an increase in existing thresholds, a view primarily linked to concerns that self-catering accommodation can exacerbate housing shortages and negatively impact local communities and economies.

Those who did not support a change in letting thresholds often saw current thresholds as reasonable, particularly in the context of additional regulatory requirements placed on accommodation owners in recent years (including a recent change to non-domestic rates thresholds). It was also argued that the existing threshold of 70 days actually let can be very difficult to achieve in parts of Scotland.

From the thresholds suggested in the consultation paper, those who supported higher thresholds were most likely to recommend thresholds of 180 days actually let and 250 days available for let. However, both in relation to days actually let and days available for let, many respondents suggested other thresholds that were higher than any of the options set out in the consultation paper. These were typically linked to a view that thresholds should be set to ensure that a greater proportion of self-catering properties pay Council Tax. However, it was also argued that more modest levels would be reasonable in view of a range of limiting factors, including Scotland’s relatively short tourist season.

A majority of respondents (57% of those who answered the question) thought that councils should have discretion to change the non-domestic rates ‘days actually let’ threshold for their local area. It was argued that councils require such discretion to address local housing issues and to respond to other local circumstances. An alternative perspective was that consistent, national standards provide certainty and that there should be a single, nationally set threshold.