An American solution to the second home problem?

Last month, campaigners near where I live won a by-election where the key issue was that of second home owners and their impact on local communities and services.

This weekend, I’m spending a few days in Rhode Island, home of the chicken, and enjoying the tranquility of the shoreline near the Massachusetts border. Whilst doing so, I’ve been discussing some of the issues surrounding how you maintain healthy rural communities, especially in places popular as holiday destinations. As you do, right?

One of the challenges is how you ensure that local workers, whose salaries are often far lower than those seeking to buy second homes or to retire to the area, can find affordable housing, whilst protecting areas of natural beauty from being damaged by excessive development?

Here in Rhode Island, the community I’ve been staying in, Little Compton, offers a potential solution we can adopt. There is a purchase levy, similar in style to our stamp duty, which levies an additional tax of 4% on all properties purchased costing more than $300,000. That money goes to the local township council, who can spend it on environmental protection, on purchasing land which might be vulnerable to inappropriate development or on other activity which might ensure that development works for the wider community.

It might effectively replace the current additional stamp duty levied on second homes, which goes to central government, without necessarily going to the communities most affected by such problems. In the case of authorities such as Cornwall or Suffolk Coastal, that money might be used for infrastructure, or to support local services whose viability is threatened by high numbers of second home owners.

You might allocate the money to specific parishes in rural areas, or to district or unitary authorities where the skills needed to utilise the funds are lacking, to be used in a similar manner to the new Community Infrastructure Levy.

By setting the limit at which it is levied sensitively, with variations set by local authorities, you can protect those purchasing affordable homes from its impact, whilst ensuring that those who can probably afford the extra amount, many of whom will already be paying it under another guise, can connect their expenditure to some local asset or service.

In towns and cities, you might focus your attention on issues arising from properties purchased through corporate vehicles, as is already government policy. The funds could be used by, say, the Greater London Assembly, to address issues of core services, the provision of extra GP surgeries, or schools, or public transport.

It’s a solution which wouldn’t increase the overall tax burden, would genuinely devolve power to local communities, and would provide a link between expenditure and local outcomes.

What’s there not to like?

* Mark Valladares chairs a small, but perfectly formed, Parish Council in Suffolk’s Gipping Valley. It’s almost as idyllic as it sounds…

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18 Comments

  • Nonconformistradical 13th Aug '18 - 9:10am

    “It might effectively replace the current additional stamp duty levied on second homes, which goes to central government, without necessarily going to the communities most affected by such problems. ”

    That seems to go to the heart of the problem – the extent to which central government controls and micro-manages what goes on in local communities – especially in the current situation which benefits the haves and ignores the have-nots.

  • Interesting concept Mark, since these monies can be readily identified and processed differently ie. not lumped into the general receipts and thus lost. Although it does contain a rather major flaw: revenue is only obtained when a property is sold. So for this to produce a steady income stream, you need a reasonable level of property turnover. Not sure if that is a safe assumption.

  • nigel hunter 13th Aug '18 - 11:17am

    Whilst this does sund good the bit where it depends on a house being sold could be a problem. However that could be looked into. It is definately an idea to look into.

  • William Fowler 13th Aug '18 - 11:27am

    This just seems to be a general levy on houses over a certain amount rather than an additional tax on second homes, or did I read it wrong… seems that Osborne’s system is better – shock, horror – but could be improved by allocating funds from it to the relevant council. Stepping up council tax rates for holiday lets and second homes would also improve things, the money going directly to the council. And perhaps a local form of income tax on rental income.

    I always thought there was also room for the return of leasehold properties built on council or govn land so that the (local) buyer is just paying for the building rather than the land, perhaps with the option of buying the freehold once able to (at an inflation linked rate rather than house price inflation rate).

  • A second home is a luxury, treat it like one and tax it like one.

  • Lorenzo Cherin 13th Aug '18 - 1:29pm

    Mark reveals why America is somewhere before Trump, I admire the progressive and radical politics of their society.

    Realistic and proactive, not the politics of doom and gloom, or the politics of envy.

    I lost my home but see nothing wrong with people who use their money not on hard liquor or drugs or gambling or fripperies, but o a second home for a frequently very well deserved break from city rat race.

    This party is a strange mix of inconsistent caring and meanness.

    Lets have more immigrants and foreign students. Lets have freedom of movement in or out of the country.

    Lets not have more home owners. Lets not have freedom of movement in this and within this country.

    Much of a university town is quieter in the Summer. Much of a holiday resort is quieter outside of that summer.

    Little difference apart from the price of homes is more effected by one than t’other.

    Build many more homes, charge the same council tax based on value of home regardless of number of homes.

    Trippling and beyond of council tax for holiday homes is not liberalism it is Marxism for upper middle class posers.

  • Lorenzo Cherin 13th Aug '18 - 4:27pm

    David, I cannot comment on his council and that area asI do not know their policy, I can say that Tim never called for the 500 per cent nonsense at conference, this kind of increase may be good to oust Russian oligarchs from London Belgravia, but is what I call it for middle class people being mean and snobbish towards other middle class people who spend their own money wisely and sensibly for their health in homes .

    It means less foreign travel, less plane journeys so less climate change effect and pollution, helps with the local economy in that new people spend well in summer. it also enriches a tired community with cosmopolitan city influences, which liberal lefties love if they are from Barcelona or Milan.

    If you are concerned about local people out priced, then we build more homes, if the concern is for older folk, the increased value of homes helps their future and the inheritance, well it is within the inheritance tax exemption, in most of these areas, so, rather than promote intergenerational poverty, brings a boon to many when their dear aged parents, already enriched by all the above, pass on their well earned or deserved assets!

  • John Marriott 13th Aug '18 - 5:00pm

    At the risk of repeating myself yet again, building more homes is the only answer that will work in the long term. However, this will mean that house prices may not only stabilise (supply and demand) but actually fall. For a nation brought up for several generations now to view the ownership of property as a way of making a fairly easy buck this may be a hard pill to swallow. As someone who has lived in the same house for over 40 years and has resisted the temptation to ‘upgrade’ I have no problem with that. When senility finally overcomes me and my wife, we have the means to ‘downgrade’ in whatever form that takes. A second home? Would owning a touring caravan have counted, when we had one?

    As someone said recently in another thread, the French and Germans tend not to put all their eggs into the property basket, so why can’t we diversify a bit as well. Owning a second and third home just shows you how much disposable income some folks have. Tax ‘em, I say. They can surely afford it. OR….why not put covenants on new homes in desirable areas so that only local people can buy them to live in themselves? Why not outlaw ‘buy to rent’ on certain properties as well? Just see the developers and Estate Agents howl!

  • Lorenzo Cherin 13th Aug '18 - 6:42pm

    David Raw

    Your adding further insult to my meaning inverted snobbery only does injury to your attitude exposing it as based on a persistent nostalgia when it suits you, a diatribe when it does not. You accuse me of not knowing about a particular problem in a kind of community when in fact I offer reasons to be cheerful and include a programme of real house building and investment in local services and culture and tourism all together in a holistic approach.

    You seem rather to preach radicalism and offer a warmed up hot headed nimbyism.

  • Lorenzo Cherin 13th Aug '18 - 10:33pm

    My views, David are moderate in most things but as a keen a believer in the view of the Marcus Aurelius, not in all things, but certainly not in my feeling for moderation or at least against extremes, black or white, night and day, europhilia, europhobic nonsense all!!

    The heat of all of it gets to me, sorry but I yearn for something nothing in politics gives me, time to do an Owen an go with my own stance ?!

  • William Fowler 16th Aug '18 - 8:23am

    The main residence gets capital gains tax break – quite rightly IMO – so it seems fair that in a situation where people are sleeping rough that second homes and BTL should be quite heavily taxed to even things out and generate some dosh for local councils.

    Yes, in many ways house prices are an example of pyramid selling, people willing to pay eye-watering prices in some areas because they are convinced they will be worth more next year, which goes on until it goes POP!

  • Nonconformistradical 16th Aug '18 - 9:27am

    @William Fowler

    “The main residence gets capital gains tax break – quite rightly IMO”

    Why should the main residence get this tax break in your opinion?

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