Walk down Commercial Road as night draws in and look up at the residential tower blocks that crowd in, canyon-like. How many have their lights on as residents busy themselves with food and leisure? Not many – in some blocks, barely 10 per cent. Maybe people are still on their way home from work, are at the gym or seeing friends. Or maybe not.
Try it on any block in Zone 1 and 2 and draw your own conclusion. Mine is that few of these “units” are regularly occupied. They count towards London’s housing targets, but few are actually lived in by Londoners. As research from 2020 by the Greater London Authority found, this “is the area of prime interest to the most discerning of international buyers and developments are designed, built and priced accordingly.”
In the jargon, many properties appear to be “safety deposit boxes” for foreign investors. Let’s not be shy about this phenomenon. Developers are quite open about it. They say they need to sell units “off plan” in order to help finance the development, and selling off plan often means through their offices in Dubai, Hong Kong, Shanghai, Singapore or Bangkok. So if an investor buys a property and that helps to get the development moving, regardless of whether the property then stays empty or not, that’s just how our warped housing market works. We’ve become numbed to it.
Empty homes are dwellings which are unoccupied and substantially unfurnished. Since April 2013, local authorities have been able to charge an Empty Homes Council Tax Premium (EHCTP). Powers were strengthened in 2018, and since 1 April 2021 the premium can be up to 100 per cent for dwellings that have been empty for between two and five years (recently revised to being empty for one), up to 200 per cent for dwellings that have been empty for between five and 10 years, and up to 300 per cent for dwellings that have been empty for 10 years or more.
An FoI request on the EHCTP to all London boroughs (and the City) produced a wide variety of replies. Those that responded were able to provide information on the number of empty residential properties, some on the number charged the premium and some the total value of the premium for a particular year. Some boroughs helpfully put all this information together in a table that was simple to read. But not all.
One sent an empty spreadsheet, one a series of spreadsheets so complicated it would take a forensic accountant to interpret, and one applied a Section 12 exemption to the request, saying it would cost too much to work out the value of their empty property premium. Tower Hamlets initially sent a link to a national government website, with 86,658 cells-worth of data and left me to my own devices. According to this site, Tower Hamlets only charges the EHCTP on 184 properties, despite there being nearly 1,500 long-term empty in the borough.
Across London there are 87,763 properties classified as empty for council tax purposes, with 36,210 deemed long-term empty, meaning unoccupied for over six months. Top of the list for long-term unoccupied properties are Southwark (2,932), Newham (2,053), Barnet (1,905), Lambeth (1,886) and Kensington & Chelsea (1,720). While not all of these properties are charged the premium because of exemptions granted, in the latest year, Southwark has raised £1.3 million from the EHCTP, Newham £3.1 million, Barnet £2.9 million, Kensington and Chelsea £2.6 million and Lambeth £1.5 million.
But is there any evidence that the premium is helping to draw more vacant properties into the housing market? Sadly not. Since 2018, the number of long-term empty properties in the capital has actually gone up by 62 per cent, from 22,481. While the additional revenue will be useful for hard-pressed councils, it doesn’t appear that the premium is helping to reduce the number of long-term empty properties as it was designed to.
Since 2006, local authorities have had the power to take over management of certain residential premises that have been empty for at least six months by seeking an Empty Dwelling Management Order (EDMO). This is seen as a measure of last resort and seems to be rarely used. In 2022, London Assembly member Sem Moema asked Sadiq Khan about the use of such orders across London, but was told that the Mayor does not hold data on the number of Empty Dwelling Management Orders that have been issued by local authorities or approved by Residential Property Tribunals. The government doesn’t publish such data either. So we are none the wiser.
Canada, particularly in Toronto and Vancouver, has, like the UK, been suffering from intense housing affordability issues. But its authorities have taken a more muscular approach, from which the UK, and London in particular, could learn. A series of measures have been introduced at federal, provincial and city level to try to take the sting out of ever-rising property prices. These include a federal ban on foreign ownership of Canadian housing – recently extended until 2027 – and the introduction of non-resident speculation taxes and vacant homes charges.
In 2017, the City of Vancouver (roughly the size of two London boroughs) created the Empty Homes Tax (EHT), also known as the Vacancy Tax, in an effort to address the housing affordability and availability challenges and to increase the supply of rental housing in Vancouver. The EHT is levied on empty and under-utilised residential properties on an annual basis. The rate of the tax was set at one per cent of the property’s assessed taxable value in 2017, increased to 1.25 per cent in 2020 and then to the three per cent in the 2021 vacancy reference year.
Most residential properties are not subject to the EHT, including homes that are principal residences for at least six months of the year, homes that are rented out for at least six months of the year, or homes that are eligible for an exemption, as set out in the Vacancy Tax bylaw. Net revenues from the EHT may only be used to support affordable housing. Other cities have followed suit.
But that’s not all. In 2018, the province of British Columbia (BC), of which Vancouver is the largest city, introduced a speculation and vacancy tax (SVT). The SVT is an annual tax based on how owners use residential properties in areas in BC, affected most by the current housing shortage crisis. It targets not only vacant homes but also fully-occupied homes whose owners have mostly foreign income. Such foreign owners are subject to the highest annual tax rate of two per cent of a residential property’s assessed value, while domestic owners of vacant homes are subject to a rate of 0.5 per cent.
It is always difficult to isolate the impact of one particular policy on something as complex and dynamic as a housing market, but a number of reports have identified positive effects. The quantity of properties declared vacant in Vancouver has fallen year-on-year since 2017, and the Canada Mortgage Housing Corporation (CMHC) noted a significant shift toward long-term rentals in Vancouver from 2018 to 2019, with an increase of 5,920 apartment units in the long-term rental stock.
This increase exceeded the number of new units added to the stock during that period, indicating a move toward long-term rental from a previous use – an effect directly attributed to the newly introduced taxes. Furthermore, since the tax launched, more than $142 million (roughly £80m) of net revenues from the tax have been allocated to support affordable housing initiatives in Vancouver, such as providing non-profit housing providers with capital grants towards the development of new social housing projects.
In his recent analysis of why building permissions were not translating into new homes, Dave Hill asked where the money would come from. Well, here’s one possible avenue to explore anew.
X/Twitter: Richard Derecki and On London. Support On London and its writers for £5 a month or £50 a year and get things for your money too. Details HERE. Photo: Residential block in Canary Wharf, Tower Hamlets.