A new report warns that the application of council tax to unfinished housing developments is threatening housing delivery.
The Licence to Bill report by the Home Builders Federation (HBF) and Paragon Development Finance reveals almost half (45%) of local authorities are charging developers full council tax on newly built homes awaiting sale or occupation.
Council tax can be levied on developers before a home has been sold or occupied. In some instances, it falls due even when homes are uninhabitable. Delays in utility connections, labour availability or materials shortages can mean that properties deemed “substantially complete” for council tax purposes remain some distance from being ready for sale or occupation.
The cost can be particularly difficult for small and medium enterprise (SME) home builders. According to the HBF report, 88% of SME home builders report council tax charges are impacting cash flow and threatening their ability to deliver future sites.
The 2025/26 tax year saw an 154% increase in developers appealing council tax bills compared with 2022–23.
Neil Jefferson, chief executive of the HBF, said: “Government attempts to increase housing supply are being thwarted by huge increases in taxes and policy costs that are making many sites unviable while a lack of affordable mortgage continues to suppress demand.
“Charging council tax on incomplete new build homes before they are sold, occupied or, in some cases, fully ready to live in places further pressure on cash flow and can make the difference between a site being viable or not.
“These properties are not long-term empty homes, second homes or homes deliberately withheld from occupation. They are new homes being brought to market in challenging circumstances, often by the smaller businesses Government has repeatedly said it wants to support.”
The HBF is urging the government to introduce a “clearer, fairer and more consistent” national framework for council tax and newly built homes, where properties are only judged substantially complete at the point a building control completion certificate is issued.
It also wants the reinstatement of a time-limited Class C council tax exemption for newly built dwellings that are unoccupied and substantially unfurnished. This would comprise a 12-month exemption from the date of completion or entry into the valuation list.
In addition, the HBF proposes to 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.
Jefferson added: “We are urging 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 sector.”
