Tax cut urged to reduce number of empty homes

More than a quarter of a million private homes stood empty in England last year, a report said today.

The survey by the bank Halifax found 279,281 private homes had been empty for at least six months in April 2007 - although this was 9% lower than the 308,438 recorded in April 2003.

Halifax called on the Government to make tax changes to encourage a reduction in empty homes, which the survey found were more common in deprived areas.

The North West had the highest number in the recent survey, at 61,450, accounting for 22% of all the empty homes in England.

In 17 local authorities (LAs), 3% or more of homes stood empty, while the average for England as a whole was 1.5%.

The average house price in these 17 LAs, all in the north of England, was lower than the national average. Fifteen of them were amongst the 20% most deprived areas in England, Halifax said.

Halifax economist Suren Thiru said areas with a high proportion of empty homes also tended to have lower employment rates and average earnings.

He said the fall in vacant properties over the past five years was probably due to a combination of factors, such as government regeneration schemes, but the north/south divide had not changed significantly.

He thought it was too early to tell what effect the downturn in the housing market would have on empty homes, but added: "I'm not sure there will be any general link".

The bank's chief economist Martin Ellis said the fall in vacant homes over the past four years was "highly encouraging".

"Nonetheless, it is concerning that the existence of empty homes remains a significant problem in a number of areas, particularly in the north of England," he added.

Halifax, which is part of the HBOS group, would like the Government to extend the 5% rate of VAT for restoring an empty home to all properties vacant for more than 6 months, not just those properties that have been unoccupied for more than two years.

The bank thinks this would provide a more level playing field between individuals and local authorities, which typically do not pay VAT on renovation activities.

Currently, 17.5% VAT is payable for renovating an empty home vacant for less than two years.

This means the average VAT payment for restoring such a home is £5,234 - which is three-and-a-half times more than the payment on restoring a home vacant for more than two years, Halifax estimated.

"We want a blanket 5% rate to remove the incentive for homes to be left empty", Mr Thiru said.

The bank also recommended a "unified approach" to council tax reductions, with buyers of empty homes receiving a discount of up to 50% for a maximum 12-month period, up to six months of which can be after renovations are completed.

This was proposed to encourage people taking empty homes to reintroduce them into the housing stock with a year.

But Halifax said the discounts should only apply if the owner makes the property their primary residency, finds a lodger or sells the property within 12 months.

The survey also revealed 85,965 vacant public dwellings in England - 1.4% of the public dwelling stock.

Eight LAs - all but two of them in the north of England - had more than 5% of their public dwelling stock vacant.

They were Hartlepool, Alnwick, Walsall, Preston, Rushmoor, Congleton, Middlesbrough and North East Lincolnshire.