This item was published during the term of a previous administration that ended in April 2007
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Councils given discretion on holiday home tax
05/08/2004
Local authorities will be given discretion to reduce the current 50 per cent discount on council tax on second homes and long-term empty properties.
Any additional income generated by cutting the discount will be retained locally and used to provide new-built affordable social housing.
At Largoward in Fife today Finance Minister Andy Kerr said:
"Second home owners contribute strongly to local communities in many areas. But second homes and properties which have been left vacant over a number of years can cause problems for local areas, including limiting the supply of affordable housing for local people.
"After careful consideration of the responses to our consultation on this complex issue, we have decided local authorities should have the power to vary the council tax discount on second homes and long-term empty properties within their area by between 50 per cent and 10 per cent. All additional income raised will be retained locally and used to provide new-built affordable social housing in areas determined by councils.
"This is good news and will allow decisions to be taken at local level in the best interests of local areas. This additional income is no panacea, but I believe it has potential to provide a genuine boost to the supply of affordable housing for local people."
Minister for Communities Margaret Curran added:
"Last month I announced a range of measures that we are taking forward to improve the supply of affordable housing following our analysis of the Scottish housing market. These include additional funding for areas already under pressure, the introduction of a pilot shared equity programme and the creation of landbanks so that housing associations can afford to buy specific pieces of land for new build.
"This announcement complements these measures and presents a significant opportunity for local authorities should they wish to boost the supply of housing in particular hot spot areas."
At September 1 2003, there were around 66,500 dwellings - the majority of which will be second homes or long-term empty dwellings - on the valuation list entitled to a 50 per cent council tax discount. Potentially around £25 million could be raised if all councils chose to reduce these discounts to 10 per cent.
One of the recommendations in the Local Government Committee's Report on Local Government Finance was that full council tax should be levied on second homes. The Executive sought views on this through a consultation paper.
From the start of financial year 2005-06, local authorities will be given discretion to reduce or retain the discount between 10 per cent and 50 per cent. Local authorities will be able to take local circumstances fully into account. They will be able to vary the discount within their area, for example to target only those areas where second homes are a particular problem or to differentiate between second homes and long-term empty properties.
The Executive has decided that a minimum 10 per cent discount is necessary so that owners will have an incentive to tell their local authority that their property is a second home or long-term empty property. The additional income generated from reducing the discount for second homes and long-term empty properties can then be identified. This additional income will be retained locally and routed through Registered Social Landlords for the provision of new-built affordable social housing in areas determined by the local authority. It was clear from the responses to the consultation that one of the main concerns regarding second home ownership was the impact on local housing prices. Directing the extra money generated from reducing the discount towards increasing the provision of affordable housing will help this problem.
The Executive has also decided to retain the mandatory 50 per cent discount for certain second homes and long-term empties to ensure a consistent approach is adopted throughout Scotland. These properties are:
* purpose-built holiday homes. For these types of properties, second home owners are not competing in the same market as local house buyers.
* second properties owned by those living in tied accommodation. This would include members of the clergy, farm-workers and publicans who are required to live in the licensed premises where they are tenants. The Executive does not want higher council tax bills to discourage those living in tied accommodation from owning second homes for their future security.
* vacant dwellings which subsequently undergo extensive repair after sale. Currently, dwellings which are undergoing major repair works are exempt for up to 12 months from the last occupation day. After that they pay 50 per cent council tax. This means that if someone buys a property that has been vacant for over a year and undertakes major repair works that prevent it from being occupied they will be faced immediately with a council tax (and water and sewerage) bill. We feel it is reasonable to grant a new owner a 50 per cent discount for a further period of six months if the property has been vacant for six months or more, before opening it out to local authority discretion.
* dwellings vacant for less than 12 months. Currently, vacant properties are exempt from council tax for the first six months and then pay 50 per cent thereafter. Increasing this after six months may place undue financial pressure on some owners, particularly those who are genuinely trying to deal with a vacant property. There are many reasons why a property might be vacant (and unfurnished). Some may be local authority properties, some may be those which are proving difficult to sell. We have therefore decided that it is reasonable to maintain the 50 per cent discount for the second six months and allow the local authority discretion to start after 12 months.