This is the main message from a new report produced in conjunction with Paragon Development Finance which found 45% of local authorities charge developers full council tax on newly built homes.

As such, this means council tax is immediately levied on some homes that are completely uninhabitable and still lack utilities, fixtures or fittings.

Properties may be deemed “substantially complete” but delays in utility connections, labour availability and material shortages can mean council tax is due before the homes are ready for sale or occupation.

This can then impact a developer’s cashflow and consequently the ability to deliver future sites.

SME home builders are particularly affected with 88% reporting council tax charges are affecting their cash flow and, as a result, threatening their ability to deliver future sites.

With these findings, the HFB is urging the government to introduce a clear and consistent framework about the application of council tax to newly built homes.

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According to the report, this should also include the reinstatement of the time-limited Class C council tax exemption on newly built dwellings that are unoccupied and not yet furnished.

“These properties are not long-term empty homes, second homes or homes deliberately withheld from occupation,” said Neil Jefferson, CEO at the HBF.

“They are new homes being brought to market in challenging circumstances, often by the smaller businesses the government has repeatedly said it wants to support.

“We are urging the government to introduce a clearer, fairer and more consistent national approach and to remove this damaging additional tax on development that is acting as yet another barrier to SME builders staying in the sector.”

Neal Moy, managing director at Paragon Development Finance, added: “When significant liabilities arise before homes are sold, occupied or even properly habitable, it can quickly undermine a scheme’s viability and delay delivery.

“Clearer, more consistent rules would give developers greater predictability, cost certainty and allow funders to support housing delivery with greater confidence — which is why we’re backing this report and its recommendations.”