Through our new partnership with the Home Builders Federation (HBF), research has revealed that just under half (45%) of local authorities are charging full council tax on new homes before they are sold or occupied.

The HBF’s report into the issue, License to Bill, also found that these costs are affecting cashflow for 88% of SME housebuilders. What’s more, appeals against charges have also risen by 154% in three years — a concerning sign of how much time and resource is now being spent challenging charges simply to keep sites moving. And that’s before we take into account the impact of Empty and Second Homes Premiums that are now also being imposed on housebuilders.

These figures reveal a system that is totally misaligned with how homes are delivered and sold, exposing an increasingly key barrier to housing delivery.

Issues with supply and demand

The issue is exacerbated further when compared with weakening buyer demand. Following the end of Help-to-Buy, the market has lost a consistent stimulus that supported first-time buyers for more than a decade. This has extended the window in which homes remain unsold, increasing the likelihood that developers incur council tax on properties generating no income.

For SME developers, these hurdles shape decisions on whether sites remain viable and new schemes come forward.

We see that pressure clearly through the developers we work with across the UK, which is why we partnered with the HBF. Developers often experience these issues locally through individual disputes with councils, but what HBF’s work shows is that these cases are not isolated, but part of a national pattern.

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Inconsistent interpretations of when a home is “complete” are creating uneven cost burdens between regions and sites, with council tax frequently applied before homes are sold, occupied or, in some instances, even ready to be lived in. Delays to utilities, labour and materials — variables often entirely outside of a developer’s control — can mean that properties deemed “substantially complete” are still weeks or months away from occupation. During that period, developers are left carrying a cost without receiving any income.

The real cost

This reflects what we see on the ground. One client is facing a five-figure council tax bill on homes that were structurally complete but uninhabitable for several months. Another has had to allocate more than £50,000 to cover council tax liabilities while units moved through the sales process.

Since the campaign launched, other housebuilders have also got in touch to share their frustrations. A South East developer explained they are facing significant financial strain due to council tax on completed but unsold homes, with costs exceeding £215,000 so far and continuing at nearly £6,000 each month. For empty properties not using council services, they believe the policy is being applied unfairly, with attempts to challenge the council having made little progress.

Three asks for the government

The HBF’s report has set out a clear direction for addressing the issue, which is why we’re backing their three asks of government:

• Introduce a clear and consistent national framework for the application of council tax to newly built homes, where properties are only judged substantially complete at the point a building control completion certificate is issued
• Reinstate a time-limited Class C council tax exemption for newly built dwellings that are unoccupied and substantially unfurnished. A 12-month exemption from the date of completion or entry into the valuation list would provide a fair and consistent national approach that recognises the time required to bring new homes into occupation
• Exempt new build homes from the Empty Homes Premium and Second Homes Premium for two years from the date of completion or entry into the council tax valuation list

A more predictable framework would mean fewer unexpected cost burdens for developers, in turn giving lenders like Paragon increased confidence.

Peers across the industry recognise the need for policy to align with the realities of delivery; the government now needs to act.