Home advantage: The call for punitive taxation on owners who leave houses empty is justified when the cost to society is so high

There is something poignant as well as oxymoronic about the phrase “empty home”. At a time when so many are finding it difficult to find any sort of shelter – not least the homeless veterans who are the subject of our charity appeal – it is galling to think of the thousands of habitable properties often purposely vacant. A home should be occupied. Property owners have a perfect right to do what they will with their homes, within the law; but the whole community has an interest in making sure the public good is protected, and there is a strong argument for intervention in this case.

So Tessa Jowell’s suggestion that wealthy property owners who leave places empty should be subject to punitive tax penalties is worth taking up. Of course she has an interest, as a prospective Labour candidate for Mayor of London, but the general point runs across the country, to properties left vacant by all manner of people, not just absent-minded billionaires or offshore investment funds. Whether they are flats over run-down shops or mansions on elegant boulevards, all are equally at risk of vandalism, squatting and general decline as a result of neglect. All, therefore, have an impact on the value of homes and habitability of the surrounding areas: classic “externalities”. Another reason, then, they should be subject to intervention.

Punitive taxation is quite easily avoided by untraceable offshore entities or landlords who have simply disappeared. There is a case, too, therefore, to strengthen local authorities’ existing powers to take possession of such homes and restore them to social use. If the properties are sold, then the proceeds can be retained on behalf of the owners in case they ever turn up, maybe for decades. The threat of having a valuable property taken under compulsory purchase should be sufficient incentive for even the most shy of offshore funds to come forward, and either pay their taxes or dispose of the house.

Such strictures need not be confined to the private sector, or residential property. Empty office blocks, boarded-up shops and other disused commercial property could and should be converted to alternative use, either via conversion or demolition and rebuilding. Land owned by public bodies can also be reassessed for alternative use. Of course, adding punitive taxation to commercial property has to be done with care – in the past, owners have taken the roof off premises rather than pay the rates or council tax. Yet the same principle remains; public action to secure a public good where there is clear market failure.

Some quarter of a million homes have lain idle for more than six months; adding in commercial property that could be converted to homes, the boost to the active housing stock would be substantial.

How neat it would be if such an improvement in housing supply could be funded by taxation on those who have done well out of the property boom, via a new higher rate of council tax. This idea, now proposed by Lord Mandelson, is a much more rational approach than the blunt instrument of a mansion tax.

More radically, the time has also come for residential property to be brought into the orbit of capital gains tax, payable on sale, as with other valuable assets. That too would restore some sanity to the property market, and push investment out of property and into capital investment in business, and the productive potential of the country. Otherwise our economy will continue to be driven by housing booms and busts. And look where they got us.