Thursday, 2 February 2012

My amendments to the Local Gov't Finance Bill to better tackle housing problems in Hyndburn

Yesterday I tabled a number of amendments to the Local Government Finance Bill to make the Bill more effective and better able to tackle certain housing problems facing areas such as Hyndburn. Regrettably the debate ran out of time and the amendments were not voted upon, but they still reflect concerns I have about certain details of the Bill.

My amendments concerned changes to the setting of Council Tax and issues surrounding long term empty homes. This issue is particularly relevant to Hyndburn – Hyndburn Borough Council currently has 2400 empty homes. I hoped to push for the Council Tax premium on long term empty homes to be raised to 200% to incentivise landlords to fill them as quickly as possible, and to better refine the definition of long term empty unfurnished dwellings to minimise loopholes.

I also wished to draw attention to the danger of applying Council Tax policies uniformly to different types of local authority structures – two tier local authority structures like in Lancashire will be disadvantaged if attention is not paid to the different structure. I hope to urge the Government to take these concerns into account as the Bill progresses.


Amendment 63 - increase the empty homes premium from 150% to 200%.

The most significant of the amendments I made was to increase the Council Tax premium that is applied to long-term empty homes from 150% to 200%. My amendment was a reasonable amendment. My own personal view is that the level should be left for local Authorities to determine; for them to be responsive to local conditions. An amendment that would not have received government support.

The arguments behind this move are very simple. Members on both sides of the House agree with the principle that empty homes – and by this is meant long-term empty, unfurnished properties – should be charged a high level of Council Tax. I simply called for the rate to be raised higher to 200% to have an even more powerful impact.

The high Council Tax premium is an opportunity to ease the burden on householders who live in their homes as the Council can gain more income from these empty homes. I want to stress that it is not a tax on homeowners; rather it serves to encourage landlords who have empty unused properties to put them back into use.

The second important reason for raising the premium is to provide a disincentive to leave the properties vacant. This will have the effect of putting downward pressure on rent levels. When faced with a 200% tax on empty properties, landlords will be even keener to gain a tenant and more willing to accept lower rent levels to gain them.

In today’s housing market – and particularly considering the Government’s housing benefits cap – we can all appreciate the value of turning empty, unused properties into more affordable.

Thirdly, the move would give greater flexibility needed to allow areas to respond to local housing markets and local housing issues where they vary from the national trend – such as in Hyndburn.

Amendment 82 - set the determination an empty home for purposes of EH premium after 12 months.

Another amendment I called for was to reduce the qualifying period to be considered a ‘long term empty dwelling’. The current definition of a long term empty dwelling is being vacant for 6 months. In the proposed Bill, the Government proposes to extend the qualifying period for a property to fall into this category to 24 months for the purposes of the EH Premium and Council Tax rates above 100%. Current legislation allows for any discounts after 6 months and this position remains unchanged.

I believe the 24 months for the premium charge, a charge above 100%, is too long a qualifying period and should be shortened to better reflect the existing definition. In reality, many constituencies affected by prevalent empty homes – like Hyndburn – find the problem persistent and having long-term damaging effects. The quicker the premium has an impact on bringing these empty homes back into use, the better for communities. Beyond 6-12 months empty dwellings start to have a detrimental effect on the surrounding community and beyond this point the properties deteriorate rapidly and the cost of repair increases.

Only c.1/3 of the long term empty homes in Hyndburn have been vacant for beyond two years. If the Government’s proposal to extend the limit at 24 months goes ahead, approximately 1000 landlords in Hyndburn will avoid the premium. Why not encourage them to fill the properties as soon as possible, before waiting until the property and community have suffered?

Amendment 64 – 80:20 split Shire-District

This amendment intends to address a severe oversight in the Bill in that it does not make allowance for the different incentives the Council Tax changes have for unitary as compared to two-tiered local authorities. In unitary authorities, the arguments as I made for increasing the Council Tax on empty dwellings apply. However, in a two-tier local authority, the income from Council Tax accrues to district councils far less than it does to the Shire councils. For example, in Lancashire, 15% of Council Tax income goes to the District Councils and 85% to the Shire Councils. This reflects the expenditure on services as provided by the two tiers but in this instance, it significantly complicates the incentives it creates as concerns long term empty dwellings.

Although the Shire Councils clearly spend more on services, it is the District Councils that remain responsible for dealing with the numerous problems that surround persistent empty dwellings. Empty homes use relatively little of Shire services such as education and social services, whereas the demands of planning and regeneration programmes fall on District Councils – this difference in the cost of empty dwellings on the two tiers is very clear. It appears logical, therefore, that any attempts to increase the income that is gained from the increased Council Tax should be directed at the District Councils – they bear the costs of empty dwellings so presumably should receive the relief to enable them to deal with the problem.

It is on these grounds of fairness consideration that I proposed my amendment – I do not think it right that in two tier local authority areas the legal responsibility, the cost and the burden of long term empty dwellings falls directly on the district councils but that this is not the case in unitary authority areas. In constituencies such as Hyndburn, the assistance the Bill intends to provide to deal with empty dwellings should go mainly to district councils.

My amendment was to follow the model used to encourage the building of new homes. To encourage new home building, the Government has acknowledged the more complex incentive structure of two tier authorities and has, under the New Homes Bonus, adopted a principle of aggregating the local authorities and splitting the funding 80:20. I propose that the Government applies this policy to dealing with empty homes in the way it does to building new homes, and so the income generated from the Council Tax is divided 80:20 across the County in favour of the District Authority.

Amendment 81 – to make an exempt classification for houses subject to CPO

The Bill also covers provisions for certain dwellings to be charged a discounted level of Council Tax, for a number of reasons. I believed it important to make an allowance at this point for houses that are subject to a compulsory purchase order (CPO) to have an exempt classification.

This amendment was intended as a probing amendment to draw attention issue on the grounds of fairness – the Bill does not currently take into account ‘two tier authorities’. As I described above, the impact a Council Tax raise has on two tier authorities is disproportionate when compared to unitary authorities – District Councils who own properties pay 100% Council Tax on them but this is then divided between the Shire Councils and the District Councils – the District Council then only receives around 15% of this income from Council Tax. District Councils who own properties therefore suffer disproportionally from the increase on Council Tax when compared to unitary local authorities.

Lower-tier authorities may increase their own tax liabilities by owning properties, even if they own the properties for the purpose of making improvements for the community.

An example of this occurring is when the authority may own properties as part of a regeneration programme, where the authority is trying to improve a run -down area of the community. I have in mind communities such as Woodnook, where the Council are in ownership of some 90 properties and where the regeneration programme, from start to finish, may take four years.

This is extremely unfair. Often District Councils have the best intentions in owning properties. This is particularly the case in run down areas where the private sector is not interested in regenerating – it often falls to councils to fill the gaps where private developers have ignored or abandoned. In areas where the community desperately needs regeneration, councils are frequently the developer of last resort.

It seems deeply unfair to me that these local authorities pay 100% Council Tax but only receive 15% of it, despite the fact that it is District Councils that take on the responsibility for community regeneration. I believe the Government should be doing everything it can to be encourage local authorities to take on exactly the sort of regeneration projects this Council Tax discourages.

For unitary authorities, the exemption would simply be cost neutral and would not create any disincentives. The disincentive to undertake development programmes would only occur in the two-tier authorities with which I am concerned. Without an exemption for properties bought through a CPO many councils will step back from essential development programmes.

My intention was to resolve the creation of these perverse incentives and I hope that the Government will look into the idea of making an exempt classification for properties where there is no intention to bring an empty property into use whether due to unfitness or due to low demand. This situation is clearly seen in Hyndburn, where there are 2400 empty properties, particularly in areas of high demand. In areas such as Woodnook we can see that the Council must intervene if it wishes to see regeneration as there is simply no interest from the private sector.

Community projects are often loss-making and I do not want to see councils financially penalized for undertaking them.

New Clause 13

6. To charge interest after 30 days at base +2

I pushed for a clause to be included in the Bill mandating that local authorities could charge interest if payment has not been made within 30 days, adding that the level of interest should not exceed the base rate plus 2%. My reasoning for this is simple – this measure would act as an incentive to pay local authority charges promptly, and discourages a situation where the burden of chasing unpaid debts falls on those members of the community who pay punctually.

7. To remove unfurnished from the definition.

I tabled this amendment to draw attention to the potential lack of clarity that may occur as a result of the subjective nature of the definition of ‘furnished’. It costs very little outlay to furnish a home to a basic level and I am concerned that landlords will be tempted to do so and exploit this potential loophole.

This is a vagueness which may enable many landlords of long term empty dwellings to avoid the Council Tax. Now is the best time for the Government to tighten the wording of the Bill so as to ensure that the aims and intentions of the Bill are achieved as speedily and efficiently as possible.