Agenda item

To submit a report by the Head of Function (Resources)/Section 151 Officer.

The report of the Head of Function (Resources)/Section 151 Officer on the first year’s operation of the Council Tax premium during the 2017/18 financial year and to date for 2018/19 was presented for the Executive’s consideration. The report sought to establish whether the premiums applied in 2017/18 (25% of the standard rate of council tax for both long-term empty homes and second homes) met the aims of the Executive and the Council and whether, as a consequence, the premium levels need to be varied or revoked when the Full Council sets its Council Tax requirement for 2019/20.

The Portfolio Member for Finance reported that when the Welsh Government gave discretion to local authorities to charge a premium on top of the standard rate of Council Tax it was meant as a tool to bring long-term empty homes back into use and to support local authorities in increasing the supply of affordable housing and enhancing the sustainability of local communities. The Portfolio Member said that all the various options for the future application of the Council Tax premium have been considered as they are outlined in the report having regard to a number of factors in relation to the operation of the premium following its implementation in April, 2017. The Portfolio Member referred to Appendix A to the report which provides details of the estimated income that would apply for different premium percentages for both long-term empty homes and second homes and to Appendix B which provides information about the premiums applied by other local authorities in Wales and their future plans where known. Taking into account all the information provided by the review of the premium’s first year of operation, and in light of the fact that there remains many long-term empty homes across the Island which the Council is keen to see being brought back into use, the recommendation is that a full public consultation be undertaken on raising the premium for second homes to 35% of the standard rate of council tax and to 100% for long-term empty homes.

The Head of Function (Resources)/Section 151 Officer said that the review shows that the decision to levy the premium and its application since have not had a significant effect on the number of second homes or long-term empty homes in terms of prompting owners liable to pay the premium into taking action to market or sell their properties or seeking to transfer properties to business rates to claim an exception, nor has the application of the premium had a noticeable effect on the Council Tax base. Although there is £13,988 outstanding as unpaid Council Tax premium for 2017/18, the collection rate for 2017/18 at 98.5% is very good. Increasing the premium for 2019/20 will generate more income thereby allowing additional funding to be allocated to schemes designed to assist first time buyers if the Council is so minded. However, increasing the premium also brings with it the following risks -

•           Owners of second homes could seek to avoid paying the premium by transferring use to business rates. Should that happen the Council will lose Council tax income as well as income from payment of the premium. Owners of properties transferring to business rates use could also claim small business rates relief meaning they would not pay business rates either.

•           Owners of a second home normally resident in England where there is no second home premium could claim that their second home in Anglesey is occupied as their main dwelling. Although this can be confirmed or rejected by process doing so means additional administrative work for the Council’s Revenues and Benefits Service.

•           Second home owners could refuse to pay the increased premium. Notwithstanding it is possible for the Council to recover unpaid Council Tax/Council Tax premiums it will have an impact on cash flow as it follows that if second home owners are not paying the premium they are not paying the Council Tax either.

•           Owners could take action to sell their properties possibly leading to a glut of homes coming onto the market with a knock-on effect on house prices. Neither is it certain that such homes would be accessible to local people and could be sold to buyers from outside Anglesey willing to pay the premium.

The Executive in noting the risks involved in raising the premium as proposed also highlighted the following –

•           That the review of the first year of operation of the Council Tax premium shows that under the Empty Homes scheme supported by the additional income raised from charging the premium, 7 properties have been returned to use with a further 7 currently under renovation and that by the end of December, 2018 it is anticipated that 18 empty properties will be brought back into use. The scheme will therefore have supported 18 first time buyers across Anglesey to purchase their own home thereby confirming that the Council Tax premium has met the primary objective for which it was applied.

•           That there are over 600 long-term empty properties on Anglesey affecting nearly all communities which is disheartening for local young people seeking a place of their own. Economic initiatives on the Island bringing with them opportunities for employment require a supply of housing so schemes that bring properties back into use for young local people to live in or to purchase are important.

•           That an increasing trend for commercial or business interests to purchase residential properties for occasional/leisure or holiday use sometimes affecting the amenities of the residents in the locality and depleting the available housing stock is a cause for concern and should be addressed at national level.

•           That there are over 2,500 second homes on Anglesey and it is reasonable that their owners be expected to contribute towards the provision of local services. Second homes also reduce the stock available for local people so it is only fair that they make a contribution towards local housing needs and to help the Council provide social housing.

For the reasons above, the Executive was supportive of consulting on raising the Council Tax premium as recommended by the Portfolio Member for Finance with the following proposals -

•           That the public consultation be conducted simultaneously with the consultation on the 2019/20 Budget proposals.

•           That representations be made to Welsh Government to press for action to be taken to close the legal loophole that currently allows second home owners to transfer their properties to business rates if they are commercially let for 70 days in a 12 month period thereby leading to a loss of premium income for the Council as well as a loss of standard Council Tax income. It was suggested that the Chief Executive and Head of Function (Resources)/Section 151 Officer in consultation with the Portfolio Holder write to Welsh Government to this effect.

•           That additional funding generated from the premium to the amount of £170k per annum for the next two years (£340k in total) should be allocated to the schemes designed to assist first time buyers as requested by the Head of Housing Services in the report under Appendix C.

It was resolved –

•           To note the content of the report reviewing the first year’s operation of the Council Tax premium during the 217/18 financial year and to date for 2018/19.

•           To undertake a full public consultation on raising the Council Tax Premium to 100% on long-term empty homes and to 35% on second homes. This to be undertaken as part of the public consultation on the 2019/20 Budget proposals.

•           To recommend that an additional £170k per annum generated from the premium should be allocated for the next two years (£340k in total) to the schemes designed to assist first time buyers in order to increase the number of applicants that can be assisted.

•           That the Chief Executive and Head of Function (Resources)/ Section 151 in consultation with the Portfolio Holder write to Welsh Government to highlight the need to close the legal loophole whereby second home properties in the Council Tax system are transferred to business rates.