Short-term Lets: Regulation

Jayne Kirkham Excerpts

Thursday 12th September 2024 Westminster Hall

[Jayne Kirkham (Truro and Falmouth) (Lab/Co-op)]

This debate was called by a London Member, my hon. Friend the Member for Cities of London and Westminster (Rachel Blake). I am grateful to her, but I am happy that so many Members from across the country are here too. I wanted to make sure that our voice from Cornwall, where this is a really big issue, was heard very loudly. We have been running a “first homes, not second homes” campaign for a number of years.

Cornwall is the local authority with the largest supply of short-term lets outside London. There are around 24,300 properties in Cornwall, which is up 30% on 2019, while there are about 27,000 houses on the social housing waiting list—hon. Members can see the balance there. Statistics from the council tax base tell us that there are probably about 13,000 second homes registered in Cornwall. That is nearly 5% of the total housing stock, which is nearly five times higher than the average across England. Plus, we have roughly only 10,000 council houses and 22,900 housing association homes in Cornwall. We have 800 families in emergency or temporary accommodation. Lots of families have been evicted under section 21—a situation that will hopefully improve, now that the Bill has been introduced. Businesses struggle to get key workers. The private rented sector has all but collapsed in Cornwall, to be honest.

The taxpayer has lost about £20 million per year, as a result of the loophole allowing second homes to be registered as holiday lets for business purposes: they pay neither council tax nor business rates. During covid, approximately £170 million went to properties that were registered as business lets, with £100 million of that going out of Cornwall, which shows the ownership of the properties.

We have done an awful lot of work on this, and I suggest that the Minister should consider a toolkit of measures to deal with some of the issues. First, lots of people have talked about a licensing scheme obliging owners of short-term lets, including Airbnbs, to register them for a fee for three years, which seems like a sensible amount of time. We would then know how many there were and where, and could push for fire and safety checks to be mandatory. It would be a similar scheme to the licensing of houses in multiple occupation, which currently only applies to homes registered for five or more people; it would seem sensible to increase the scope of HMO licensing as well.

Secondly, we want the business rates/council tax loophole closed. It should not be possible to pay no council tax or business rates on a property; it is just not fair. Thirdly, Cornwall council has already voted to double the council tax on empty second homes, and has actually asked the Government if it can triple it. Given that the council is Conservative-run, and that this decision was agreed cross-party unanimously, it shows how severe the problem has become in Cornwall. If we were to implement that, every time the council tax was doubled it would raise £25 million.

Finally, we should create a planning use class for short-term or holiday lets, so that homeowners need to actively apply for permission for the change from “lived in” to “holidayed in”—flipping the default that the Conservatives suggested. Those are the four measures I would like to see in the toolkit, which could be given to local authorities or could form part of the devolution package.

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[Rushanara Ali]

I thank my hon. Friend for the offer on the Bill that she prepared earlier, and I know that officials listening to this debate will consider the range of suggestions and proposals that colleagues are making today.

We know that many local authorities are eager for the registration scheme to be operational as soon as possible. We share this view and officials are currently working at pace to operationalise the scheme. The Department for Culture, Media and Sport is now in the initial phase of a digital development process for the register, which will allow us to test and refine the possible options for design and delivery of the scheme. We will factor into that process the points made today and will update the House in due course.

As hon. Members have highlighted, London is unique in England in having certain powers regarding short-term lets. Since 2015, primary legislation has provided that homes in London that are liable for council tax may be let for temporary sleeping accommodation for up to 90 nights in a calendar year. Planning permission is required to let for more than that. However, as has already been pointed out today, in practice local authorities in London report that this limit is difficult to apply and enforce, due to a lack of data on addresses, ownership and the number of nights that properties are let for, and because of limited enforcement capacity. Points were well made in this debate about other parts of the country that do not have the London scheme.

We recognise that more needs to be done to ensure that authorities in London have the tools they need to enforce the limit. As we design the short-term lets register and consider future policy, we will keep in mind the uniqueness of each area of our country and in particular the interactions with the existing legislation that applies to London.

I recognise that the current taxation of short-term lets can be seen to incentivise such use. The Government have confirmed that we will abolish the furnished holiday lettings tax regime from April 2025, which will remove the tax advantages that landlords offering short-term holiday lets have over those providing standard residential properties.

At the end of July, the Government took concrete steps to abolish the regime by publishing draft legislation, which includes transitional arrangements to help landlords to adjust to the change. Councils will also be able to charge a council tax premium of up to 100% on second homes from April 2025. It is for councils themselves to decide whether to charge such a premium in their area.

[Jayne Kirkham]

I have just one small point to make about the furnished holiday letting scheme. There are some properties in Cornwall for which there are planning restrictions that say they can only be holiday lets and nothing else can be done with the property, because it may be on the same premises as the first property. I just want the Government to be aware of that when the regulations are developed.

[Rushanara Ali]

I thank my hon. Friend for her contribution.

Where a short-term let does not meet the relevant lettings criteria, it will usually be considered a second home and will be liable for council tax, including the council tax premium where councils have introduced it. However, we recognise that this may not go far enough towards ensuring that all short-term lets are properly contributing to the local tax system, as the premium will not impact those short-term lets that are eligible for business rates. We will continue to keep the tax treatment of short-term lets under review and will consider what more is needed to achieve our aims.

Short-term lets are just a part of the housing challenge in our country, which is why we are determined to address the issue of affordability and to do what is necessary to get Britain building again.