1st September 2026
There is something faintly Alice in Wonderland about the way Scotland is tackling its housing shortage.
We don't have enough houses.
So we are taxing some of the houses we already have.
Then, because that apparently isn't enough, we are taxing them more heavily.
And in some parts of Scotland, the tax can now be several times the normal Council Tax bill.
Perhaps somewhere down the rabbit hole there is an explanation for how this is eventually going to produce thousands of new homes.
But back in the real world, it is worth asking a fairly simple question.
If we don't have enough houses, shouldn't the main answer still be to build more houses?
This isn't an argument against doing anything about second homes or long-term empty properties. In communities where people genuinely cannot find somewhere to live, it is perfectly reasonable to ask whether homes that are rarely occupied could be brought back into the housing market.
But there is a danger that something which can make a useful contribution at the margins starts being treated as though it can solve the whole problem.
It can't.
Highland Council estimates that the region needs around 24,000 additional homes over the next decade. Yet only 880 homes of all tenures were completed during 2025/26.
That gap should make us stop and think.
Even if every empty property could somehow be brought back into use, we would still need to build thousands more.
And this is where the Council Tax experiment becomes interesting.
From April 2026 Highland introduced a 300% premium on second homes. That doesn't mean the owner pays 300% of the normal bill. It means a 300% premium is added to the normal charge, producing a total bill of 400% of the standard Council Tax.
The council intends to go further, with a 350% premium planned for 2027/28 and 400% for 2028/29.
That could eventually mean a second-home owner paying five times the ordinary Council Tax.
It is a substantial financial incentive to reconsider what to do with a property.
The Western Isles has gone down a similar route, moving from a 100% premium to a 225% premium, meaning affected properties pay 325% of the standard Council Tax.
Midlothian has gone further still, with a graduated system which can eventually produce a total bill six times the normal rate for some long-term empty properties.
Scotland has effectively become a laboratory for housing taxation.
The theory is straightforward.
Make it increasingly expensive to leave a property empty or use it as a second home and some owners will sell, rent it out or put it back into permanent occupation.
And that could certainly happen.
But there is a rather important catch.
Taxing a house doesn't create another house.
If somebody sells a second home, there is still exactly the same number of houses.
If another wealthy person buys it as a second home, the housing shortage hasn't changed.
If it becomes a holiday let, the property may be occupied more frequently and could generate valuable tourism spending, but it is still not a permanent home for a local family.
Even if the property becomes a long-term rental, that is useful because it changes its use. But again, it hasn't increased the physical housing stock.
The only way of increasing the number of homes is to create more homes.
That rather obvious point seems to get lost surprisingly easily in political debate.
The rabbit hole gets deeper
There is another complication.
Councils are being encouraged to use the additional money raised from higher premiums to help tackle housing problems.
Highland has established a £1 million Empty Homes Fund, with grants of up to £30,000 available to help bring empty properties back into use in return for affordable or mid-market renting arrangements.
That is a sensible idea.
It is much more attractive to take money raised from an underused property and help turn another empty property into a home than simply to collect the tax and put the money into the general council pot.
But it still doesn't solve the fundamental problem.
If Highland needs 24,000 additional homes, a £1 million fund is a very small part of the answer.
And there is a reason why building new houses is difficult.
Land has to be available.
Planning permission has to be obtained.
Roads, water, sewage, electricity and other infrastructure have to be provided.
Developers have to be able to make the economics work.
Construction workers have to be found.
And increasingly, people have to be able to afford the finished houses.
None of those problems disappears because the Council Tax on a second home has been increased.
There is a bigger danger
The danger isn't really that the tax doesn't work.
It probably will change the behaviour of some owners.
The danger is that governments and councils become so pleased with a policy that produces a visible financial penalty that they start treating it as a substitute for the much harder job of increasing housing supply.
It is always easier to change a tax rule than to build 24,000 houses.
It is easier to announce a new premium than to find land, secure planning permission, finance infrastructure and actually put bricks on top of bricks.
Taxation produces an immediate announcement.
Housebuilding produces years of planning meetings, objections, infrastructure problems and construction.
One produces a headline.
The other produces houses.
Perhaps that explains some of the attraction.
But there is an important distinction between making better use of the housing we already have and increasing the supply of housing.
We need both.
A long-term empty property which can be renovated and rented to a local household should not be left sitting unused indefinitely.
A second home in a community experiencing a severe housing shortage is a legitimate subject for public policy.
But neither issue should distract from the central problem.
Scotland needs more homes.
And the Highlands needs more homes.
Indeed, if the Highlands succeeds in attracting the investment it is currently pursuing, it may need even more.
The region is hoping to benefit from enormous investment in renewable energy, electricity transmission, nuclear decommissioning, engineering, construction and associated industries.
All those projects require people.
People require somewhere to live.
It would be rather unfortunate if we succeeded in attracting the jobs but discovered that the people needed to fill them could not find a house.
What should we actually measure?
Perhaps the councils should be judged less on how much additional Council Tax they collect and more on what happens to the properties afterwards.
How many second homes become permanent homes?
How many become long-term rentals?
How many empty properties are renovated?
How many are actually bought by local people?
And, most importantly, how many additional homes are built?
Those figures would tell us whether the policy is doing what it is supposed to do.
There is also a danger of measuring success by the amount of money raised.
A council could theoretically collect millions of pounds from higher premiums and still have exactly the same housing shortage.
That would make the tax successful as a revenue measure but unsuccessful as a housing policy.
That distinction matters.
Perhaps we have fallen down the rabbit hole
Alice eventually discovered that Wonderland operated according to rules which did not always make much sense in the ordinary world.
There is a slight danger that housing policy could become like that.
We have too few houses, so we tax some of the houses we have.
If that doesn't work sufficiently, we tax them more.
Then we discuss changing the classification of other houses.
Meanwhile, the demand for homes continues to grow.
Perhaps the answer isn't quite as complicated as we are making it.
Build more houses.
Build them where people need them.
Build affordable homes for people who cannot buy at market prices.
Build homes for older people who want to downsize.
Build homes for young families.
Build homes close to the jobs that governments and councils are trying to attract.
And yes, bring suitable empty properties back into use and discourage the inappropriate retention of homes that could otherwise provide permanent accommodation.
There is room for all of those policies.
But we shouldn't confuse one with another.
Taxation can change behaviour.
It can encourage an owner to sell, rent or renovate.
It can raise money which can be put towards housing.
What it cannot do is perform the most basic trick required by a housing shortage.
It cannot manufacture a house where there wasn't one before.
Perhaps that is the part of the story which has become lost somewhere down the rabbit hole.
And perhaps the most useful question for Scotland is not how high the housing tax can go.
It is simply this:
When are we going to start building enough houses?