National Landlords Association: Response to Consultations on Changes to Council Tax Benefit and Proposals for Local Council Tax Support Schemes

Transcription

1 National Landlords Association: Response to Consultations on Changes to Council Tax Benefit and Proposals for Local Council Tax Support Schemes August

2 Introduction 1. The National Landlords Association (NLA) exists to promote and protect the interests of private residential landlords. 2. With more than 20,000 individual landlords from around the United Kingdom and over 100 Local Authority Associates, we provide a comprehensive range of benefits and services to our members and strive to raise standards in the private rented sector. 3. The NLA seeks a fair legislative and regulatory environment for the private rented sector while aiming to ensure that landlords are aware of their statutory rights and responsibilities. General Comments 4. We fully understand that the changes to Council Tax Benefit coming into force in April next year will have a significant impact upon local authority finances. We agree that in this time of austerity where local authorities are being expected to provide more services while having their central Government funding reduced, it is not sustainable for Councils to continue funding Council Tax Benefit at its current levels. 5. The NLA would therefore like to make several recommendations for what we believe should be included in Local Council Tax Support Schemes: Short-Term Empty Homes (Class C) 6. Landlords do not leave properties empty. They buy properties to them rent out as business investments. Leaving a property empty does not generate rent and with mortgages, maintenance, etc. doing so could cost landlords thousands of pounds per year. The only time a private rented property is likely to be empty is either whilst new tenants are being sought or when a landlord is undertaking repairs, maintenance or improvement works. During this time, landlords benefit from the Class C exemption at present. 7. Landlords undertake repairs, maintenance and improvement (such as decorating, installing new kitchens/ bathrooms or undertaking energy efficiency improvements) during void periods between tenancies when the property is empty. This is to ensure the property is in a suitable condition for a new tenant to move in and so that such works do not interrupt a tenant s right to the quiet enjoyment. During this period, a landlord is not receiving any rent and spending money on the works. 8. It will impede a landlord s ability to finance their property during void periods if this exemption is withdrawn; diverting money that would otherwise have been spent on repairs, maintenance or improvement works. Such a course of action is likely to result in landlords trying to reduce the time a property is empty between tenancies. This could result in landlords either undertaking maintenance 2

3 works whilst tenants are still in occupation or through reducing the frequency of routine maintenance, or by landlords not commissioning improvement works. 9. Removing this exemption is also likely to hinder uptake of other Government initiatives such as energy efficiency measures under the Green Deal and Energy Company Obligation; especially in the case of solid wall insulation which could take several days to install during which the property uninhabitable. 10. At a time when everyone involved in the industry (local authorities, landlord organisations such as the NLA, tenant bodies, housing and homeless charities and the Government) are looking for effective methods to improve the quality and condition of private rented stock, to impose additional tax burdens during void periods will only hinder progress towards this fundamental goal. 11. It is therefore the view of the NLA that Class C exemptions should be maintained at existing levels. However, if local authorities feel they need to reduce the scope of this exemption, we would suggest a reduction in duration (for example, only being entitled to the exemption for three months rather than six) as opposed to reducing the discount. Repairs and Structural Alterations Exemptions (Class A) 12. We agree with the views expressed by many Councils that empty properties in a state of disrepair need to be brought back into use and therefore we do not want to see the introduction of any barriers to this happening. 13. For the same reasons as outlined in the short-term empty properties section above, removing the Class A exemption will impede a landlord s ability to finance their property. This will act as a disincentive to major works being undertaken and impede attempts to improve the quality and condition of the UK s private rented stock. 14. Therefore, we would strongly caution against the withdrawal of the Class A Council Tax exemption for properties undergoing major repair work or structural changes. Long-Term Empty Homes 15. Long-term empty properties (those that have been vacant for more than two years) are a blight on communities. They increase the risk of squatting, criminal damage, arson, graffiti and vandalism. As most are not properly maintained, they fall into dereliction and decay, detracting from the visual amenity of the neighbourhood. They act as a disincentive to investment, can reduce local house prices and in the case of long-term empty terraced or semi-detached properties, they can cause damage and misery to adjoining, inhabited homes. 16. We would therefore suggest that local authorities should levy additional charges on those owners who have left property empty for more than two years. 3

4 17. Such a course of action should hopefully offset the cost of maintaining exemption Class A (shortterm empty properties) and Class C (major repair work or structural changes). It will also act as a significant disincentive to owners leaving properties empty for long periods of time. This, combined with local authorities operating either Social Lettings Agencies or Private Sector Leasing Schemes could have a significant impact on bringing empty properties back into use. Through such schemes, long-term empty properties can be brought up to the Decent Homes Standard which in turn creates good quality and affordable accommodation in the private rented sector that is needed to reduce local authority Housing Waiting Lists. An excellent example of such a scheme being extremely successful can be found in Denbighshire. In 2009, the Council had a target of bringing 15 empty properties back into use. They achieved Second Homes 18. We agree that existing second homes discounts should be removed and that such households should be liable for full Council Tax on their second homes. Increasing Council Tax to Cover Shortfalls 19. The NLA does not support an increase in standard Council Tax rates as a method of covering any shortfalls in Council Tax Benefit. We believe this will act as a significant disincentive for current Council Tax Benefit recipients to find work as they could see their entitlements withdrawn and a premium added to cover the entitlements of others. 20. Further, increasing standard Council Tax rates whilst simultaneously reducing exemptions is likely to cause resentment from tax-paying property owners and provide an additional disincentive for landlords of Houses in Multiple Occupation (HMOs) to let shared accommodation to Local Housing Allowance / Universal Credit recipients as it is the landlord who is responsible, in most cases, for Council Tax liability. Such a course of action could further reduce the supply of good quality, affordable accommodation in the private rented sector for vulnerable and low-income households and therefore increase local authority Housing Waiting Lists. Current Working Age Council Tax Benefit Recipients 21. It is the view of the NLA that the most equitable solution to resolving the shortfall in working age Council Tax Benefit levels would be for either a standard, percentage based reduction on existing levels for all recipients and/or a capping on the amount of Council Tax Support available to households (for example, at a maximum 90% of Council Tax liability). This is based on the principle that everyone should contribute as has been set out by many local authorities in their consultation documents. 1 For more information, see: 4

5 22. We feel this is the only way to avoid disproportionately reducing the entitlements of one category of working age Council Tax Benefit recipient while leaving a different category of recipient effectively untouched by the change. We do not feel this would be an equitable solution for many low-income and vulnerable households. 23. With the introduction of Universal Credit on the horizon, introducing complex eligibility criteria for any new local Council Tax Support Scheme could have a negative impact on uptake; leaving many eligible households unaware they are eligible and so not claiming their entitlements or conversely accidentally over-claiming (and therefore requiring Councils to recover monies paid). 24. Complex eligibility criteria is also likely to act as a disincentive for landlords to take Local Housing Allowance / Universal Credit recipients for fear that if there were any accidental over-payments, attempts would be made by local authorities to claw back these monies through deductions from other benefits which will in turn impact of a tenants ability to pay their rent. We would therefore caution against introducing any more complex eligibility criteria than that which exists in the current system as it may significantly detract from the success of the scheme. Reduction in Capital Limits 25. Currently, as a means tested entitlement, those households with more than 16,000 in savings (capital) are not eligible for Council Tax Benefit. Several local authorities in the construction of their Local Council Tax Support Scheme have considered the option of reducing this Capital Limit. 26. We would caution against reducing the Capital Limit as we believe this may have unintended consequences. Many people on low-incomes who are currently in receipt of Council Tax Benefit and have saved diligently will be penalised and may see their entitlement removed. Therefore, reducing the Capital Limit will act as a disincentive for households to save for the future. Non-Dependant Deductions 27. We would caution against withdrawing or excessively reducing this deduction for non-dependant adults as it may disproportionately impact low-income and vulnerable households. If local authorities plan to reduce this deduction in the creation of their Local Council Tax Support Scheme, we would recommend the adoption of similar principles to those outlined in the Working Age Council Tax Benefit Recipients sections above. Conclusion 28. It is the view of the NLA that the current Class A and Class C exemptions should be maintained albeit possibly with reduced duration. We believe this can be financed through an increase in Council Tax liability for long-term empty properties and a complete withdrawal of the second homes discount. 5

6 29. We do not support the increase in standard Council Tax rates as a way of covering the shortfall in the transition from Council Tax Benefit to local Council Tax Support Schemes. 30. The NLA would further argue that rather than create complex eligibility criteria for current working age Council Tax Benefit recipients we would suggest either a standard, percentage based reduction on existing levels for all recipients and/or a capping on the amount of Council Tax Support available in order to cover the shortfall. 31. We also caution against the reduction in capital limits any explicit decrease in the deduction for nondependant adults. 6