Government’s empty rates relief ‘designed not to be used’

In its response to the empty property rates consultation the British Property Federation (BPF) has said the hugely complex proposal appears designed to be hardly ever used and give the illusion of a Government doing something to support the sector.

Announced by George Osborne in last year’s Autumn Statement as a means of stimulating construction, the property industry has been left disappointed by the limited scope of the Government’s proposals and concerned they will have little or no impact unless the scope of the relief is widened to include redevelopment and refurbishment.

Government has proposed extending relief from empty property rates. However it applies only to new properties built between 1 October 2013 and 30 September 2016, is only given for up to 18 months, and is limited by EU State Aid rules (roughly £55,000 a year). Also, it can only be granted at the discretion of local authorities.

The BPF has argued since the 2008 rise in empty property rates it has had a damaging impact on businesses, jobs and the wider UK economy as it creates a strong disincentive for property companies to develop new space, and causes empty buildings to be demolished instead of refurbished. The BPF has pushed for a complete reversal of the policy, believing it would result in only a minimal loss to the Exchequer given the additional economic activity that empty rates reform would generate.

Liz Peace, chief executive of the British Property Federation, said:

“The relief is so limited and needlessly complex that it almost appears designed not to be used at all. That the Government has dreamt up a new definition for a building, just to implement this policy, is a case in point.

“It will certainly do next to nothing to stimulate development. If Government is serious about boosting construction activity then the renovation or refurbishment of existing buildings must also qualify for relief. This is economically-productive activity that should be encouraged, not penalised through the tax system.”

Jerry Schurder, head of rating at Gerald Eve, said:

“Now that we can see the full extent of the proposals, it’s clear that they will not actually have a positive impact on development conditions in England, but instead will do little more than give the illusion of a Government doing something to support the sector.

“Rather than come up with proposals that would genuinely encourage the return of speculative schemes, especially in the regions, the planned grace period will instead do next to nothing to stimulate development. Unviable or borderline schemes costing millions are not suddenly going to be given the go-ahead because of the reduction of a potential empty rates risk by around £55,000 per year for up to three years. The proposals are a complete waste of time and deeply flawed. At the same time, making the relief available at the discretion of local authorities adds another level of uncertainty to the process.”

Jim Ruthven, head of rating at BNP Paribas Real Estate, commented:

“The proposal offers little if any advantage to a large development, especially in Central London, as any relief granted will be restricted to the European Union State Aid de-minimis limits and this is likely to be swallowed up by the three month empty rates relief period. If it is an industrial property, it may be six months.”