When discussing the challenges facing the housebuilding sector, conversations often focus on planning delays, rising material costs, labour shortages and access to land. However, a recent report has highlighted another issue that many people may be less familiar with – council tax charges on newly built homes that remain unoccupied and unsold.
The issue is attracting growing attention across the industry, with concerns that it is creating additional financial pressure for SME housebuilders at a time when housing delivery is already facing a range of social and economic constraints.Find out more about the issue and what changes are being proposed in our latest blog.
What is the issue?
Once a new home is deemed substantially complete, it can become liable for council tax, even if it has not yet been sold or occupied.
While the approach varies between local authorities, many developers can find themselves paying council tax on completed homes that are still being marketed, awaiting occupation or delayed due to factors outside their control. In some cases, council tax is levied on homes that are uninhabitable, lacking in fixtures and fittings or utility connections.
The recent ‘Licence to Bill’ report from the Home Builders Federation (HBF) and Paragon Development Finance found that 45% of local authorities charge full council tax on newly built homes awaiting sale or occupation. The report also highlighted significant inconsistencies in how different councils apply these charges.
Why are SME housebuilders concerned?
The challenge is that homes do not always sell the moment they become defined as ‘substantially complete’. Market conditions, mortgage affordability, utility connections and legal processes can all influence when a property is occupied. In these circumstances, developers may be required to continue paying council tax on homes that are generating no income.
While larger developers may find it easier to absorb such costs, the impact can be much more significant for SME housebuilders who often operate with tighter margins, lower cash reserves and limited access to finance.
The research found that 88% of SME housebuilders surveyed believe council tax charges on unsold homes are affecting cash flow and potentially restricting their ability to invest in future housing delivery.
What changes are being proposed?
The HBF is calling on the Government to introduce a more consistent national approach to council tax on newly built homes. The proposals include:
- Create a clear framework for when council tax liability begins (judging a property as substantially complete only when a building control completion certificate is issued).
- Reinstate a temporary 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 to recognise 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.
Supporters claim these changes would provide greater certainty for developers and remove unnecessary costs that can affect the viability of future projects. Change, they argue, is needed to create the conditions required for the UK to realise its housing delivery goals.
Of course, any changes would need to balance the interests of developers with the financial pressures faced by local authorities. However, the discussion highlights the complex range of factors that influence housing delivery beyond the construction process itself.
Read the full report HERE.
Final thoughts
Increasing housing supply remains a key priority across the UK, but delivering new homes requires more than planning approvals and construction activity alone.
The financial environment in which developers operate can also have a significant impact on whether projects move forward and how quickly homes reach the market.
The debate around council tax on unsold new homes is one example of how seemingly small policy decisions can have wider implications for housing delivery, particularly for SME housebuilders that play a vital role within the sector.
What are your thoughts on the issue? Should newly built homes awaiting sale be subject to council tax, or could changes help support the delivery of more homes? We would love to hear your views – comment over on our Facebook or LinkedIn pages.
09.06.2026
Feature image: Sheriff Construction
