FMB criticised for calling for tax breaks on unfinished houses – despite longer than ever build rates

The Federation of Master Builders (FMB) has been criticised for calling for partially unfinished properties to be exempt from Council Tax despite longer than ever completion rates.

Brian Berry, Chief Exec of the FMB, said the tax was hindering Small and medium sized developers and contributing to the ongoing housing crisis.

However the Local Government Association hit back, stating that 475,000 homes had been given planning permission but hadn’t been started, with the average completion date now 12 months longer than in 2007/8, at 32 months.

FMB Chief Executive Brian Berry called for action from central government, saying: “If the Government is serious about solving the housing crisis, it must address the issue of unfair Council Tax charges on house builders. Today we are calling on the Government to halt the poor practice of local authorities charging Council Tax on incomplete new homes. Reports from FMB members suggest it has become relatively commonplace for new homes to be deemed complete for the purposes of Council Tax long before they are actually inhabitable. This is sometimes the case before even basic work has been completed, such as the walls have been plastered or the floors have been concreted.

“Council Tax is designed to fund services provided to tenants, so there is little justification for levying it on new homes months before anyone could move in. There is a growing concern that Council Tax is being unfairly levied as just another development tax. We accept that there is a case for Council Tax being levied on existing empty properties in order to incentivise these being brought back into use. However, for new homes, it creates perverse incentives for developers to hold back completing these properties until they’ve agreed sales and slows down the delivery of completed new homes onto the market.”

“What is urgently needed is an agreed definition of when a new home is complete for the purposes of charging Council Tax, and one which ties this point much more closely to the point of inhabitability. This will help ensure against current poor practice in some areas and will also serve to speed up the delivery of new homes. For this reason, we’re also urging Government to review whether the removal of the automatic six month exemption for ‘unoccupied and substantially unfurnished’ dwellings should have been applied to new dwellings, as we fear this is having the unintended effect of further slowing down house building.”

Responding to the Federation of Master Builders’ (FMB) call for developers to be freed from council tax burdens, Cllr Claire Kober, LGA Resources Portfolio Holder, said: “Where a home is structurally complete or where the work remaining can be expected to be completed within three months, councils can legally serve a completion notice to specify the date it is eligible for council tax. To ensure accuracy, council officers will often visit sites and review houses being built before making a decision. A clear and transparent appeals process is in place for developers to challenge any decision.

“The FMB offers no evidence to support its claim that dissatisfaction with this process is high among developers.

“Our recent analysis shows there are up to 475,000 homes with planning permission which are still waiting to be built and developers are taking longer to complete work. It now takes 32 months, on average, from sites receiving planning permission to building work being completed – up 12 months since 2007/08.

“Councils are desperate to tackle this growing housing backlog and need more powers, not less, to force developers to build homes more quickly. We are calling on government to use the Budget to hand councils the ability to charge developers full council tax for every unbuilt development from the point the original planning permission expires.”

Today's Conveyancer