Council Tax and Second Homes

Bob Stewart Excerpts

Tuesday 26th June 2018 Commons Chamber

[Steve Double (St Austell and Newquay) (Con)]

rose—

[Bob Stewart (Beckenham) (Con)]

rose—

[Derek Thomas]

I will give way first to my colleague from St Austell and Newquay.

[Derek Thomas]

That is a completely fair point, and I will be addressing it later. I have had meetings with people in St Ives town, where this has been a particular issue and where bins have been removed because the council has deemed them to have been abused by holiday let owners. This has resulted in residents who are paying council tax having nowhere to put their rubbish.

[Bob Stewart]

I was going to make exactly the same point, so I shall shut up and sit down.

[Derek Thomas]

I am quite impressed by that intervention. It was quite a thing to hear, and I am sure that it will go on public record and that people will refer to it in future.

I have raised this issue with the Chancellor of the Exchequer since I was elected in 2015. I have raised it with three separate Secretaries to the Treasury, and I raised it once again just a couple of weeks ago in a debate in Parliament. I have a simple ask: every property that has been built as a home should pay council tax. I argue that the Government should close this loophole, allowing the authority to collect the council tax charge to provide public service and enabling the Government to divert cash towards the provision of homes for local families.

I remember—I was a counsellor and a parliamentary candidate in St Ives at the time—when business rate relief was introduced. It was clearly done to support our high streets and, for many, it has had a significant benefit. However, I do not believe for a minute that that relief was ever intended to create a route to enable a homeowner to avoid paying council tax, or business rates when a property is used as a business. Do not get me wrong: I am well aware of the contribution that tourism makes to the economy of Cornwall and Scilly—to the local economy, through the jobs it provides and through all the contributions that allow our high streets to have a fighting chance of survival—and I recognise the role that holiday lets play in supporting the sector. I am not seeking to oppress the tourism sector but to install some fairness in the housing system and identify some much-needed cash that can be used to provide the homes that my constituents and constituents across Cornwall need.

[Derek Thomas]

That is why I believe that this is an opportunity for the Government to simplify council tax. If they know that every property built as a residential property is due for a council tax charge, surely that simplifies it. What the Government then decide to do about whether the properties are registered for business rates or not should be left to someone far brighter than I am. I am glad that I have two Cornish colleagues in the Chamber and that other Cornish colleagues support this campaign—

[Bob Stewart]

Not just Cornwall—

[Steve Double]

But an honorary Cornishman.

--- Later in debate ---

[Derek Thomas]

No, not just Cornwall, but we work closely together as a team, fighting for Cornwall in all sorts of ways. I am proud to be in a county where the six MPs work so closely together on such important issues, helping us to maintain good local communities and a fair society.

I am also asking the Government to see what powers local authorities can be given to collect an additional council tax premium of up to an additional 100% from second homes that would be ring-fenced for investment in local housing stock. These powers are already available to authorities for empty homes and it may be sensible to extend them to second home owners given the pressures on authorities to provide housing for local families. If the money is collected from second home owners and used to build homes for local families, that would do a great deal to create harmony and unity in our communities.

I know from the second home owners who live near me—down the lane on which I live, three of the nine properties are owned by them—that they buy properties in Cornwall because they love the communities, want to contribute to those communities and want to be part of the life there while they are on a break. I know that they want good public services, so I do not believe for a minute that they would object to contributing more if the Government were to allow local authorities to do that in a sensible and proactive way.

Earlier this year, I met the then Secretary of State for Communities and Local Government with the Council of the Isles of Scilly, where there is a real problem with second homes—195 properties in a community of just 2,200 people are locked up and often visited for only a few weeks a year. That has a depressing effect on the housing market, so when the council looks to create skilled jobs and attract nurses and people to work in schools and public services, housing is not available for them. The council has asked to be able to increase council tax on second homes by much more than 100% to free up the property market and start making houses available for the people who are needed to work on the islands.

[Bob Stewart]

For the vast majority of the year, perhaps six months, holiday lets are empty. Surely, as things stand, council tax can be put on the properties when they are empty.

[Derek Thomas]

As the rules stand, if a property is advertised for let for a certain number of weeks a year, it can be registered as a business and exempted from council tax and business rates. It is not necessarily required for people to be in the building during that time, as long as it is advertised as available for let. My hon. Friend is right, but I do not want to complicate the issue further. Simply saying that council tax is applicable to every house built for residential purposes would reduce many of the headaches that people might have at the moment.

The other additional benefit of applying council tax to every property is that communities like Steve and Mousehole. [Laughter.] I say “Steve” because of your point earlier. Sorry, not your point, Mr Speaker—although it was a good point you made—but the point made by my hon. Friend the Member for St Austell and Newquay (Steve Double).

The other additional benefit of applying council tax to every property is that communities like St Ives and Mousehole, which have a large number of holiday lets, could benefit from simplified and inclusive waste collection. Currently, because of the concern that the users of second homes in places like St Ives are abusing the system and using the bins provided for genuine local residents who pay council tax, Cornwall Council has removed some of the bins and is refusing to collect some of the rubbish.

Recycling, refuse and how we look after waste is a big issue in St Ives, and I have a big meeting on Friday to identify the issues. The local community will put forward a plan and I will work with Cornwall Council to deliver it. I have been working on the situation for three years, and bins that were available for residents who pay council tax have been taken away because it was deemed that they were being abused by people who own holiday lets and local restaurateurs, which has caused real hardship for elderly people. In parts of St Ives, and in other parts of my constituency where holiday lets are numerous, the people who are left are often older people who are less mobile, and they are having real difficulties in getting rid of their rubbish.

--- Later in debate ---

[The Parliamentary Under-Secretary of State for Housing, Communities and Local Government (Rishi Sunak)]

I commend my hon. Friend the Member for St Ives (Derek Thomas) for securing this debate. The issue of second homes is a subject that I know he cares about passionately and has raised repeatedly in the House. It is right that he voices his constituents’ views on this topic, for they deal with the issue of second homes more than most. When we look at the percentage of a local authority’s housing stock accounted for by second homes, we find that the Isles of Scilly ranks second among authorities in England and Cornwall ranks 13th. I have some personal familiarity with this issue, due to the reasonably high prevalence of second homes in my rural constituency of Richmond (Yorks), especially in the Yorkshire Dales national park. As we heard, in areas where the number of second homes comprises a significant proportion of the housing market, there is a risk that local people, particularly those who might be looking for their first home, might be priced out of the local market. There are legitimate concerns about the effect on local services, as well as on community cohesion.

However, it is also important that we do not lose sight of the benefits of second homes: the boost they can give to local economies and the tourism trade. Many local livelihoods will depend on tourism. This Government are not in the business of removing people’s right to choose where they want to purchase property. There can, of course, be many reasons for owning more than one property. Although second homes are frequently referred to as “holiday homes”, they can just as easily be properties that enable someone to work in and contribute to the local economy of an area, while being able to return to a family home in another part of the country on a regular basis.

However, we do recognise the concerns, which have been set out so clearly by my hon. Friend in this debate. As such, I would like to highlight for the House the range of actions the Government have put in place to mitigate the impact of second homes in affected areas and pass on more benefits to local residents. Let me start with the second home discount. The Government inherited a situation where second homes were automatically entitled to council tax discounts. There was a presumption that those who do not use local services for much of the year should pay less, but we shifted away from that approach. From 2013, the law was changed so that local authorities were no longer required to offer council tax discounts in this way, allowing them to target any discounts as necessary, according to their particular circumstances. I am pleased to report that that change has made a difference. Last year, no local authorities still offered blanket exemptions for second homes; nearly a third of billing authorities offered no discount at all on second homes; and, perhaps most clearly, fully 92% of second homes were charged the full rate of council tax.

Secondly, although that was a positive step, we have gone further. Beyond council tax, the Government raised stamp duty rates for those buying second homes. Since April 2016, anyone who has purchased a second home has paid a stamp duty charge of three percentage points above the current rates. Since then, more than half a million people have bought their first home, and first-time buyers now make up an increased share of the mortgage property market. It is worth noting the other significant support for first-time buyers, in the form of the total removal of the need to pay stamp duty on homes worth up to £300,000, which will benefit many people in the constituency of my hon. Friend the Member for St Ives.

Thirdly, the community housing fund is helping to channel funds back into local communities. It has allocated part of the additional revenue raised from the higher stamp-duty rates to areas with the potential to deliver community-led housing. That specifically includes areas with high rates of second-home ownership. Community-led housing is affordable at local income levels and is almost exclusively additional to any housing developed by other sectors, because it is brought forward on sites that would not normally be granted planning permission to speculative house builders.

The community housing fund has provided revenue and capital funding for numerous schemes since 2016, as I have seen at first hand in my own constituency, where the Hudswell community centre used the funds to develop affordable homes for people with local connections to that village. I was delighted to open up the homes and see how the scheme had enabled tenants with strong family ties to the local area to move in. I am aware of other shining examples throughout the country. Indeed, in the first round of the scheme, Cornwall received £5 million to support community housing projects, including the Cornwall Community Land Trust, which I am sure was welcomed by my hon. Friend and others across Cornwall.

Fourthly, through neighbourhood plans, communities have the direct power to develop a shared vision for the future of their areas. Over 590 such plans have been completed so far. The plans allow communities to make decisions on where new homes, shops and offices should be built, what they should look like, and what facilities and infrastructure should be provided. I am delighted that the Government have committed more than £20 million to support communities in the development of neighbourhood plans over the next few years.

Through the neighbourhood-plan process, residents can develop plans that manage second-home ownership of new builds. We are aware that communities in areas such as Cornwall and Northumberland have put in place neighbourhood plans with such restrictions. Indeed, one of the more well-known plans that does exactly that is in my hon. Friend’s constituency of St Ives, where new open-market housing is permitted only where there is a restriction to ensure its occupancy as a principal residence. It is quite right that local residents should have the opportunity to express their views on the design of their areas and ultimately to approve neighbourhood plans via a referendum.

Lastly, my hon. Friend expressed his concern about the possibility that some second-homeowners may be registering their properties for business rates and consequently not paying their share in council tax. Indeed, I have discussed this issue not just with my hon. Friend, but with my hon. Friends the Members for St Austell and Newquay (Steve Double), for North Cornwall (Scott Mann), for Suffolk Coastal (Dr Coffey) and for Totnes (Dr Wollaston), among others.

Holiday lets are a valuable part of the local business landscape in many communities. It is absolutely right that such genuine businesses should pay business rates and, as such, be able to avail themselves of small business rate relief, where appropriate. In the case of holiday-let accommodation, the properties are assessed for business rates rather than council tax if they are currently available for short-term lets for 140 days or more per financial year. This rule is widely understood and provides a clear method of deciding whether a property should be liable for council tax or business rates. It also ensures that properties do not switch between the two systems year to year merely due to success in letting out the property.

However, I assure all hon. Members that the Government take any suggestion of council tax avoidance or gaming extremely seriously wherever it occurs. My hon. Friend the Member for St Ives is absolutely right to point out the potential impact on his area. A reflection of this is that 17% of all holiday lets registered for business rates in England are to be found in Cornwall, and 97% of those have rateable values of £12,000 or below, so may potentially be eligible for small business rate relief.

[Bob Stewart]

I thank both you, Mr Speaker, and my hon. Friend for also allowing me to intervene. Does a business rate raised on a holiday let go to the local council or to central Government? In other words, if it is roughly the same as council tax, does the local council get the same amount?