If buying a home to live in is the British dream, buying a second one is a sign that you’ve “made it”. Congratulations, you’ve climbed up the class ladder.
The problem is that you’ve also helped house prices rise in that lovely Cornish seaside town/Welsh valley/Devon haven/Lake District village, thereby pricing out the local people who work in the shops, hospitals, pubs, hotels and schools nearby.
Second homeowners have increased significantly across the country since 2010. Their effects on local housing markets has prompted some councils to take drastic action.
Last year, the Welsh government made a decision which has caught the attention of councils across the country. In an attempt to stop local people being priced out of housing, they gave local councils the power to add a council tax premium of up to 300 per cent on second homes from April 2023. This levy could also be applied to homes which had been unoccupied for a long time.
Wales has been hit particularly hard by the second homes boom. The region had some of the lowest numbers of first-time buyers in the country. Schools were closing because young people couldn’t afford to live in towns or villages, and the Senedd argued that communities would become extinct if something didn’t change.
The results are now in. In picturesque Gwynedd, in north-west Wales, there is a 150 per cent council tax premium on second homes, up from 100 per cent in 2023. Gwynedd also introduced a requirement for people to apply for planning permission if they want to turn a residential property market into a second home or holiday let. House prices in the area have fallen by more than 12 per cent year on year, according to new figures. That’s around a £30,000 fall on average.
In two Gwynnedd villages, Abersoch and Aberdyfi, second homes nearly took over: 46.36 per cent and 43.31 per cent of all homes were holiday homes in each place respectively. In Abersoch, the local primary school has closed because there are not enough young families left to fill it with their children.
Pembrokeshire, in south-west Wales, went even further, applying a 200 per cent premium. Since they did that, the number of second homes for sale has trebled.
Across the UK, a backlash against second homes is well underway. From 1 April, Cornwall will follow in Wales’s footsteps and charge an additional council tax premium of 100 per cent on second homes.
Similarly, in south London, Wandsworth has decided to follow suit with a 100 per cent council tax premium, in a bid to stop homes being bought by investors and left empty. They’re able to do this because of powers brought in by former Housing Secretary Michael Gove.
Combined with the end of ultra-low interest rates, it’s likely that these tax hits for second homeowners and would-be second homebuyers will cause housing markets to cool across the country.
The economy of Wales, like Cornwall, the Lake District, Scotland and parts of London, relies on tourism. It’s a huge creator of jobs and generator of income. But, without affordable housing for local people, there is nobody to work in the tourist industry.
When I visited the Lake District recently to report on the second-homes crisis there. I spoke to hotel owners and local tourist attraction workers who told me that some businesses were having to bus workers in from Skegness because there was nowhere they could afford to live nearby.
But the problem, as councillor Olly Monk, Cornwall’s cabinet member of housing and planning, puts it is that councils wanting to curb second homes “have to strike the right balance”.
“We need housing local people can afford, but we also don’t want to kill the goose that lays the golden egg because we need tourism here,” he told me over the phone.
Similarly, councillor Aydin Dikerdem, Wandsworth’s housing lead, says that tax hikes on empty homes aren’t about bringing house prices down but “incentivising for homes to be lived in and not left empty.” He explained: “We’ve got so many families who are desperate to live in Wandsworth and find an affordable place to call home.”
The second homes conundrum mirrors the complexity of the housing crisis Labour has inherited.
Britain needs the Government to put their foot on the accelerator of affordable housebuilding. But, simultaneously, they must slam the brakes on rising house prices to prevent people who won’t qualify for social housing from being priced out.
This is a delicate balancing act. Council tax and stamp duty hikes are one way to cool the housing market down and stop house prices from rising too quickly. However, major falls must be avoided because they can make buyers and sellers nervous, which would take us back to the stalled state of recent years where nobody was moving home.
Chancellor Rachel Reeves knows this. In her Budget, she made it more expensive for people to buy second homes by hiking stamp duty for those purchasing additional properties, but she did not increase the taxes for those selling their extra homes.
The hardest test Reeves faces, however, will be whether she can join up her approach by properly funding local councils to build affordable homes to ensure new housing is entering the market at the same time as second homes are being curtailed.
When it comes to housing policy, you can’t please everyone. What works for local people in a holiday hotspot will upset wealthier second homeowners. Until we reach more of an equilibrium, policymakers will need to be prepared to be unpopular with certain groups.
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