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Vacant Land Tax: Driving up Development or Uncertainty in Wales?

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The Welsh Government is considering the introduction of a vacant land tax to encourage the development of vacant or stalled sites in Wales.

RICS (Royal Institution of Chartered Surveyors) representatives met with Welsh Government officials to discuss all avenues of this contentious issue.

In 2015, Welsh Government-commissioned research showed that over 400 sites were stalled across Wales at the time. These residential developments equated to at least 7,600 homes being tied up across Wales.

As a means to tackle this trend, and increase the delivery of more affordable homes – a key priority for the Welsh Government – the Cabinet Secretary for Finance, Mark Drakeford AM, and his team are exploring a number of ways to encourage residential and commercial development in Wales. A vacant land tax (VLT) is one of the measures.

The current rationale behind this measure is aimed at behaviour change rather than revenue generation; recognising that development land stalls or remains vacant for numerous reasons – including developers’ pipeline.

Hew Edgar, Interim Head of UK Policy, RICS, says:

“VLT is a complex concept, and there is a lot to consider. However, tackling vacant and derelict land and property is vital to localities as they make minimal contributions to communities, the environment or wider economy. In fact, in many cases they are a blight that become centres of crime and anti-social behaviour.

“Discussions that consider, assess and evaluate the benefits of alternative approaches to the effective and efficient use of land and property assets – especially when it comes to regeneration – are important, and RICS welcome them.”

“It is important to note here that the Welsh devolutionary settlement does not currently provide the powers to introduce such a tax. As a result, the first stage of this process is for the Welsh Government to seek the devolution of powers for this new tax, which will require the agreement of both the UK Parliament and the National Assembly for Wales.

“Chancellor Philip Hammond very briefly referred to Sir Oliver Letwin’s Review into Build Out Rates in the housing sector but this may turn out to be one of the most interesting aspects of his Budget.

“It is important that a thorough examination is provided before a proposal is brought forward, as there are numerous issues around valuation, differing geographies and local economies, and landowner inhibitions (not bringing land forward) to consider.

“Sir Oliver Letwin recently published his build out rate report – assessed by RICS – which looked at issues related to the rationale for this tax, and there will be opportunity to learn from the Republic of Ireland’s vacant sites levy (which will be collected from 2019), or the Scottish Land Commission’s proposal to introduce Compulsory Sale Orders

“Ultimately, there will need to be more research undertaken into what, exactly, the prevalent issues and causes of inadequate development rates are in Wales; and a recognition that stand-out issues differ across Wales,” Mr Edgar adds.

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