From April 1st this year, local authorities in England have the power, under the Levelling Up and Regeneration Act 2023, to charge a Council Tax Premium of 100% on second homes. Many councils have availed themselves of the opportunity.
The Justification
The move to charge a premium is driven by a number of concerns about public services and the cost and availability of housing. It has been suggested that the council tax premium will provide additional funding for public services. In addition, some argue that by attaching a premium to a second property, councils are in effect discouraging second home ownership with a view to making more houses available for local people to buy, who, it is claimed, have been ‘priced out’ of the market in the areas in which they have grown up and which they work, owing to the inflated prices occasioned by the purchase of second homes by wealthier buyers.
The Opposition
Against the new measures, many have argued that charging a premium on properties, the owners of which are absent for some – or much – of the year and who therefore do not use local public services to the same extent as full-time residents, is simply unjust. Others contend that by letting their properties to holiday-makers, second home owners are encouraging local tourism which brings money into regional economy, a proportion of which will, of course, find its way to the council in taxation.
In addition, it is argued, such measures, if they do deter second home ownership, will do little to provide additional housing stock, particularly in popular tourist areas, because second homes, often being character or luxury properties, are not typically the kinds of houses that are within the reach of many local buyers – particularly first-time buyers. Thus, buying such properties as second homes is not the cause of high house prices in the area; rather, the problem is the result of insufficient availability of housing more generally, which ought to be addressed by local development plans. Some even suggest that since not all second homes are habitable and often require considerable renovation at the owners’ expense, ultimately those buying second homes are adding to the stock of available housing. After all, they are unlikely to own the property forever and when it is sold in the future, a previously derelict building will be returned to the market as a useable home.
A Sumptuary Law?
The use of such premiums invites comparison with the sumptuary laws found throughout history, such as those of the Roman Republic and the imperial period which restricted spending on feasts or women’s jewellery. Such laws were usually aimed at deterring – or at least registering disapproval of –the indulgence in luxuries considered contrary to good morals, though in their attempts to limit displays of wealth by the upper orders, it is also likely that on occasion, their purpose was also to temper the resentment of the poor. One might see certain similarities with council tax premiums attached to second homes and wonder whether they will do less to address any real problems surrounding housing or public services than to express disapproval.
Difficulties and Assessments
Sumptuary laws have not proved easy to enforce and have frequently been avoided by their intended targets. More significantly, they often have unforeseen consequences, as a recent example from China shows. When, in 2012-13, the President launched a drive to cut back on lavish spending and tackle corruption, over 50 hotels soon sought to drop their five-star ratings in order to survive because local government officials could no longer stay in luxury hotels. One tourism group saw a fall in revenue of 18 per cent at its hotels, business declined at many private clubs and restaurants and luxury brands witnessed significant declines in sales (around 30% in one case) – yet many of the rich and powerful were able to move and conceal their wealth using offshore holdings (both legitimate and questionable).
Sumptuary laws are not only difficult to enforce: they are also complicated to assess. By what standard are we to measure whether they have achieved their objectives? Where they are aimed at preventing excess and restoring traditional virtues, which particular moral standard or virtue are we to identify as being the target of the legislation, and how are we to establish whether it has been successfully defended or re-established? The most likely concrete measure would consist of statistics indicating a satisfactory number of successful prosecutions for breaches of such laws, but these do not in themselves demonstrate an improvement in morals or restored personal virtue. Citizens are more likely simply to have kept the manifestations of vice sufficiently private, with no reduction in excess.
Similarities and Differences
Similar difficulties arise with regard to council tax premiums. In the first instance, there are suggestions that the premiums will simply be avoided, such that the charges will frequently miss their targets. For example where a second home is let for a certain proportion of the year – as is often the case with properties that also serve as holiday lets – owners might be able to register for business rates rather than council tax. In such circumstances, it has been claimed, local authorities might actually suffer a decline in council tax revenue.
How will their success (or otherwise) be ascertained? This is likely to be a subject of disagreement, but based on the justification for their introduction, measures of success for council tax premiums would surely include better-funding for (and perhaps improvements in) public services and, perhaps more significantly, greater availability of housing for local residents in a particular area, or at least lower prices. Doubtless there will be debates surrounding the interpretation of data when it emerges, but advocates and critics of the new measures are likely to look carefully for evidence of both in the coming years.
The major question that must be addressed when seeking to establish whether the council tax premium is a modern sumptuary law, is how it bears on morality. The laws of the past were often concerned at a decline in traditional virtue. Leaving aside the question of whether it is for governments to determine and enforce morality, which virtue, which ethical principle, which moral law has been breached by those who have invested their earnings in a second home? If none can be identified, then in the absence of evidence establishing their success in policy terms, council tax premiums will be increasingly hard to justify.
Neil Jordan is Senior Editor at the Centre for Enterprise, Markets and Ethics. For more information about Neil please click here.