Farron: Planning changes needed for second homes

Second homes are a growing issue in many rural areas of the country. Although visitors with second homes bring economic benefits, they also reduce local housing stock and drive up house prices by making offers that most locals can’t match. The squeeze on housing availability drives up rents as well as prices.

Yet when second home owners arrive for the weekend, for the week or for a holiday, they rely on local people for their services in shops, pubs and bars. But many people can’t afford to live in a settlement where second homes are popular.

In 2018/19, an estimated 772,000 households reported having second homes.

Speaking during questions on Levelling Up in the Commons yesterday, Tim Farron said:

It is… vital that houses that are given planning permission are then used for the purposes agreed on when the permission was granted. I am talking about second home ownership. Homes that are built for local families become second homes, and that leads to communities being hollowed out. Will the Minister look again at bringing in new change of use rules through the Levelling-up and Regeneration Bill, so that second homes and holiday lets fall under a separate category of planning use, and homes in Cumbria can remain for local families, and do not become part of ghost towns?

The response from housing minister was quite positive:

“I seem to be dealing with the issue of second homes daily; colleagues from around the country are raising it with me and highlighting their concerns for their communities. The Bill allows local councils to increase council tax on second homes, but there is more that we need to explore. That is why I am holding a series of roundtables across the country. Perhaps I could come up to the Lake district and hold one there.”

As part of the draft Levelling Up and Regeneration Bill, the government said that councils will be able to target second-home owners by doubling their council tax bills after one year of being empty.

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  • David Langshaw 17th May '22 - 10:42am

    Just a quick observation – there are a lot of “second homes” in London, although they probably don’t often qualify as “holiday homes”. Any legislation or other initiative should bear this in mind – think how the London property market would ease up if there were fewer pieds-a-terre. This is not just a rural problem.

  • It’s not a problem of planning.
    It is a problem of wealth inequality, where it is easier for some-one owning one home to afford two than it is for some-one renting to afford to own their first home.

  • The London 2nd homes thing is worth considering, but I’d argue is distinct in impact from 2nd homes in more rural places. In London the bigger problem comes from investors who buy up new developments as an investment, with no intention of becoming a landlord, nor as a 2nd home.

    People with big houses in the country have long had a London flat for when they go shopping or to the theatre, or in some cases, to attend Parliament as an MP.

    Those 2nd homes may reduce supply of properties to those who want to live in London all year round, but I don’t think they harm the local economy in the same way as happens when half of a rural village becomes holiday homes. While London is struggling to find school places, village schools are finding it hard to justify staying open.

    One solution is to use planning legislation to protect family homes, whilst encouraging suitable dedicated holiday villages, or serviced apartments, or whatever it is that’s needed to satisfy the tourist economy.

    I’m not suggesting we ignore the housing shortage in London, but if we are to address the damage to rural communities caused by too many 2nd homes, then we should focus on that.

  • David Langshaw 17th May '22 - 2:27pm

    Thanks, @Fiona . I am not suggesting that the problems are identical, just putting the marker down that solutions for the problem in one area might have unintended consequences in others. Although to be fair I’m not sure that there is much of a difference in the motivations of buy-to-let landlords in urban and rural areas.

  • The problem also needs another dimension added, namely non-UK resident homeowners/investors – which probably affects London more than other parts of the country. However, even in my part of the UK, we are seeing speculative planning applications being made on behalf of Malaysian “investors” that totally ignore local planning policy, to them appealing is a small business cost…

    I suggest as a general principle owning a second property is a luxury and thus should be treated as such. For new property the charging of 20% VAT would be a trivial matter, likewise service charges such as council tax should also incur VAT for these properties. However, as significant part of the market is pre-existing properties there would have to be corresponding stamp duty to cover these. Yes, I’m sure some couples will decide one is resident in London and the partner in Cornwall in an attempt to evade tax, but then letting income will be a flag for investigation.

  • David Langshaw 17th May '22 - 5:06pm

    Roland makes a very important point. I don’t object to foreigners owning British land, but they shouldn’t be allowed to use off-shore vehicles to do so – for one thing, it avoids Stamp Duty. (If you want to avoid Stamp Duty, sell the foreign company that owns the asset, not the asset itself – bingo!) We need much more transparency in British land tenure – why not have a ten year window to get all British land registered to private individuals or legal entities (charities, companies etc) that are registered in the UK? If anyone fails to comply after a sufficient period of grace, title to any foreign-owned land reverts to the Crown who is then free to sell it. (“God gave the land to the people”, remember?)

  • I completely agree with the last comment about compulsory land registration as it’s the starting point for land tax, as we don’t have a housing crisis, but a land problem.
    I also came up with an idea for lib dems who own second homes and feel conflicted. How would you feel if you agreed to spend one month a year there during the summer, and a housing association rented it to a local family in need the rest of the time?
    Rough conditions as follows:
    Owner signs property over to a Housing Association (HA) on a minimum of a 5 year lease
    HA assumes full maintenance responsibility during the lease
    Property let – furnished – at sub-market rents, to a local family for 48 weeks a year
    HA collects rent, deducts management, maintenance and a home loss/disturbance allowance, passes remainder on to Owner
    Once a year, HA uses home loss/disturbance fund to remove and store resident’s possessions for a month, leaving the furniture, plus compensates the resident for inconvenience (which should help them have a holiday as well)
    At the end of the lease, if it is not extended the property is vacated and the resident receives the residual of the home loss/disturbance fund

    The numbers work, but it relies on the goodwill of second home owners. If only 1% did it, that’s still over 7,000 local households – or around 25,000 people – with a roof over their head.

    Would any of you consider it?

  • Tristan Ward 18th May '22 - 11:38am

    @ David Langshaw,

    It’s true that selling shares in a company is free of stamp duty land tax, BUT

    1 where a company (onshore or offshore) owns residential property there is an annual tax (called ATED). If the residential property is worth between £500k and £1 million for example the annual charge is £3,800 subject to certain exceptions.

    There is also a tax on the sale of shares of “property rich companies” by owners not resident in the UK. It’s a bit like capital gains tax and is levied on anyone with 25% or greater shareholding.

    So yes, no SDLT on sale of shares in property companies but other taxes do apply.

  • @Tristan Ward – thanks for the additional information – clearly there is plenty of room for tax and duty increases here, given UK residents in the main won’t be paying them…

  • David Langshaw 19th May '22 - 12:20pm

    Thanks, @Tristan Ward – but does that work if the company that owns the UK property is incorporated in the BVI, Panama, the Channel Islands etc? All that appears on the public documentation (if anything) is that the directors have changed, which might indicate a change of ownership. I agree, the British system for assessing and collecting Stamp Duty and CGT is well understood, but it’s not enforceable by the British government if the relevant companies are based overseas.

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