Tax rules on second homes in the UK: Will it help mitigate the housing crisis?

Europe is grappling with a deepening housing crisis characterized by severe shortages and escalating rental prices. One significant aspect of this issue is the prevalence of vacant properties and second homes. In England alone, there were 1.5 million unoccupied dwellings in 2021, representing 5.4% of all housing units, according to estimates from the Office for National Statistics (ONS).

Empty Homes Premium

To address this, many local councils have implemented an extra council tax, known as a “premium,” on empty houses for over a decade, though the specifics vary by council. This policy was strengthened in April, now applying to properties empty and unfurnished for 12 months, reduced from the previous two-year threshold.

The premium equals 100% of the full council tax charge, effectively doubling the standard rate. For properties that remain empty longer, this premium can increase to as much as 300% of the regular rate.

Proportion of Vacant Houses in the UK

Unoccupied dwellings make up a significant portion of housing in the UK. These units have no regular residents, some serving as second homes for short-term stays or visitors, while others are entirely vacant. In 2021, unoccupied dwellings comprised 6.1% of all dwellings in England, 8.2% in Wales, and 4.2% in Scotland. Variations in data collection methodologies may cause slight discrepancies in these figures.

Second Home Owners to Face Premium Charges from April 2025

Starting in April 2025, second home owners will also face premium council tax charges. Councils must decide at least a year in advance before introducing this premium. In England and Scotland, the maximum second homes premium is 200% of council tax, whereas in Wales, it can be up to 300%.

A second home is defined as a dwelling that is not a person’s sole or main residence and is substantially furnished, occupied periodically. Council tax, funding local services, varies by property type and size, typically ranging between €1,850 and €5,600 per year. Some councils have already voted to introduce premiums on second homes, significantly increasing annual costs for owners.

In 2021, England had 154,970 second homes without regular residents, Wales had 17,575, and Scotland had 24,300 in 2022.

Bringing Empty Homes Back into Use

Integrating empty homes into active use is a crucial part of local strategies to meet housing needs, according to the Local Government Association (LGA). The LGA emphasizes that empty homes not only waste resources but also generate complaints, community frustration, and can lead to crime and degradation.

Expert Skepticism

Despite these measures, experts remain skeptical about their long-term effectiveness. Data indicates that the number of vacant properties continues to rise in England, Scotland, and Wales, even after the introduction of the empty homes premium in 2013.

Adam Cliff, policy lead for the Empty Houses Network, believes these strategies may yield short-term successes but doubts their long-term impact. “A double council tax bill is unlikely to financially affect someone who can afford to leave a property empty,” Cliff told Euronews. He predicts that increased awareness of these changes might lead property owners to falsely report occupancy or reclassify second homes as business properties, particularly holiday lets, where the premium does not apply.

Paula Higgins, CEO of HomeOwners Alliance, thinks doubling council tax could help alleviate the housing crisis in some areas, especially coastal and tourist towns, in the short term. However, she believes it will have little long-term impact. “The fundamental issue is that buying a home remains unaffordable for many due to high house prices and insufficient new home construction over the past 30 years,” Higgins explained. Additionally, there are no rules ensuring that money raised from these premiums is reinvested into housing.

Report Findings

A recent report with Action on Empty Homes found that most interviewees agreed that council tax premiums could be part of a broader strategy to address low-use properties but would not suffice on their own. “You don’t just purchase a £450,000 house that you’re not going to live in if you can’t afford an extra £1,000 a year. I don’t see that as being an actual disincentive to people purchasing them,” one interviewee noted.

Empty Houses Across Europe

The problem of vacant dwellings is widespread across Europe. OECD data shows that in 2022, the percentage of vacant dwellings, excluding seasonal and holiday homes, exceeded 10% of the total dwelling stock in both Spain and Portugal.