Wales Considers New Vacant Land Tax to Boost Housebuilding

The Welsh Government could be given new powers to introduce a tax on disused land in an effort to encourage more housebuilding across Wales. Ministers believe such a move could help tackle the issue of stalled development sites and discourage land being held without being used.

The proposal would involve the UK and Welsh governments launching a joint consultation on devolving the necessary powers, allowing Wales to create a vacant land tax. However, it is understood that the consultation is unlikely to take place before the Senedd election in May.

Proposed Vacant Land Tax Aims to Reduce Land Banking

Welsh ministers want the new tax to discourage “land banking”, where land is purchased and held in the hope that its value will rise, rather than being developed. The concern is that this practice slows down housing delivery and leaves potentially valuable sites unused for years.

Welsh Government research published in 2020 identified 456 stalled sites across Wales, with 376 of them being residential. Ministers believe a vacant land tax could push developers to build within expected timescales instead of holding land indefinitely.

Ministers Say Tax Is About Behaviour Change, Not Revenue

Finance Secretary Mark Drakeford has said the aim of the tax would not be to raise money, but to change behaviour and encourage development. He argued that land designated for development but left unused for long periods could be brought back into productive use through financial pressure.

UK Government Welsh Secretary Jo Stevens also supported the idea, stating that the policy could have a positive impact for Wales. However, she did not provide a clear timeline for when the consultation would begin, only saying it would be published in the near future.

Devolution Still Required Before Any Tax Can Be Introduced

The Welsh Government cannot implement a vacant land tax without the UK Government agreeing to devolve the relevant powers. Any transfer of authority would need approval from both Houses of Parliament and also from the Senedd before Wales could move forward.

Welsh ministers have pushed for similar powers in the past, but earlier requests were refused under previous Conservative-led UK governments. Welsh officials have indicated that the process stalled after disagreements with the Treasury over the details required for approval.

Political Context Adds Pressure Ahead of Senedd Election

The announcement comes at a politically sensitive time, with Welsh Labour facing growing competition from Plaid Cymru and Reform UK ahead of the May election. First Minister Eluned Morgan has previously suggested that Prime Minister Keir Starmer would be welcome to campaign in Wales if he delivered additional funding or devolved powers.

Opposition parties have responded with mixed views. Plaid Cymru welcomed the consultation but also renewed calls for wider devolution in areas such as rail infrastructure, youth justice, probation and the Crown Estate. Meanwhile, Conservative representatives questioned whether the Welsh Government has provided enough detail on how the tax would work and what its real impact would be.

Calls Grow for Wider Reform of Wales’ Tax System

Other parties have argued that the discussion should go beyond a vacant land tax. The Green Party has suggested Wales needs a full overhaul of its property taxation system, including replacing Council Tax and business rates with a broader land value tax.

While the consultation has not yet been formally launched, Welsh ministers continue to argue that devolving this power could help reduce dereliction, encourage regeneration and ultimately support faster delivery of housing across Wales.

Conclusion

The proposed vacant land tax is being presented as a tool to speed up housebuilding by discouraging land from sitting unused once it has been earmarked for development. Ministers say the priority is not revenue, but ensuring land is brought into use to meet housing needs.

For the policy to progress, the UK Government must first agree to devolve the relevant powers. Until then, the idea remains dependent on the upcoming consultation process and political negotiations between Westminster and Wales.