UK Tax Rules on Second Homes: Can They Solve the Housing Crisis?

Owners of empty properties in England, Wales, and Scotland may face higher council tax rates, but experts are unsure if this will truly address the housing shortage.

Owners of empty properties and second homes in England, Wales, and Scotland may soon face increased council tax rates in an effort to incentivize bringing these properties back into use. The housing crisis in Europe is deepening, with shortages and rising rental prices becoming more prevalent. Vacant properties and second homes add another layer to this issue, with 1.5 million unoccupied dwellings in England alone in 2021, making up 5.4% of all housing units.

Local councils have been implementing extra council tax, or a "premium," on empty houses for the past decade, with rules varying between regions. The strengthened empty homes premium, which came into effect in April, now applies to properties that have been empty and unfurnished for 12 months, doubling the standard council tax rate. This premium can increase to as much as 300% depending on the length of time the property remains empty.

Unoccupied dwellings make up a significant portion of housing in the UK, with 6.1% in England, 8.2% in Wales, and 4.2% in Scotland. Second home owners will also face premium charges starting in April 2025, with councils required to make a determination at least one year in advance. The maximum second homes premium is 200% of council tax in England and Scotland, and up to 300% in Wales.

Integrating empty homes back into use is a key strategy to address housing needs, according to the Local Government Association. However, experts remain skeptical about the long-term effectiveness of these measures, as the number of vacant properties continues to rise despite the introduction of the empty homes premium in 2013.

A recent report by Action on Empty Homes found that while council tax premiums can be part of a solution to address low-use properties, they are not sufficient on their own. The issue of empty houses is not unique to the UK, with vacant dwellings being a common problem across Europe.

While the implementation of council tax premiums on empty properties and second homes is a step in the right direction, it may not be enough to fully address the housing crisis. More comprehensive measures may be needed to ensure that these properties are brought back into use and contribute to alleviating the housing shortage in the UK and beyond.