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.

Housing: Cornwall and the Isles of Scilly

Jayne Kirkham Excerpts

Monday 9th September 2024 Commons Chamber

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

Thank you, Madam Deputy Speaker, for granting extra time for a debate that is so important for Cornwall and for giving others a chance for speak about its very particular housing issues. I also thank the hon. Member for St Ives (Andrew George) for initiating the debate. As he said, about 27,000 people are on Cornwall’s housing waiting list, and about 800 are in temporary and emergency accommodation. Many of them are families with young children, who are placed in caravan parks and holiday homes that are up to an hour and a half or two hours away from their support networks, their schools, their jobs and where they live. This is really affecting community cohesion, upsetting families and causing real hardship.

The council is struggling with the need, and the cost is vast. It is providing bunk cabins in council car parks for people to live in as emergency and temporary accommodation, which is very difficult. So many people in Cornwall are now living in their vans, because they simply have nowhere else to go. I am finding that families are moving into emergency accommodation, and that the single people who were becoming homeless when I was first a councillor in Cornwall are now living in their cars. The situation has become really dire.

Businesses are now finding that key workers have nowhere to live, so we have people coming down to work in the hospitality sector or in agriculture. The same is true for professionals, such as teachers, nurses and doctors—a headteacher in Cornwall struggled to find somewhere to live, and she had to give up her job and move away again. There is now a movement called Homes for Cornwall, whereby businesses are coming together to try to find alternatives solutions to deal with the housing crisis, which has become so bad that they cannot find staff. As the hon. Member for St Ives said, we have a very low number of social houses in Cornwall—only 10,300 council homes.

I want to talk about the affordable housing programme grant, which a previous Secretary of State, Michael Gove, suspended for Cornwall because of the poor performance of the housing provider Cornwall Housing, which is an arm’s length company owned by the council. That performance has now improved, and the grant is desperately needed for a new social housing scheme in Redruth, but it has not been returned. I ask the Minister to look into that, and to see whether other local authorities in this situation have been treated in the same way and lost their grants. Has that grant moved to other registered providers in Cornwall, or has it left Cornwall completely? Is there any way we could get that back and backdate it?

The other issue, which the hon. Member for St Ives spoke about, is second homes and holiday lets, which have absolutely exploded in Cornwall, particularly since covid. The private rented sector has been decimated and is now virtually non-existent. We have struggled so much with section 21 notices, which explains to a great extent why so many of our families are now in emergency and temporary accommodation.

[Ben Maguire (North Cornwall) (LD)]

I thank the hon. Member for giving way, and I commend my hon. Friend the Member for St Ives (Andrew George) for securing this excellent debate. It is great to welcome him back to his place; he brings a wealth of expertise in this area. I also welcome the hon. Member for Plymouth Sutton and Devonport (Luke Pollard) to his place. I hope that he understands some of the issues that have been raised in this debate, given that he is a close neighbour of ours.

I welcome the cross-party co-operation that we are seeing from hon. Members across the House this evening—although not so much from the Conservative Benches, unfortunately. Cornwall faces a real housing emergency, and it is critical that we work together to fix it. As my hon. Friend mentioned, we must finally move away from building more and more executive housing that has little to no infrastructure, and focus on local need.

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[Jayne Kirkham]

I thank the hon. Member for his intervention. I will shortly move on to some of the ways in which we can deal with the proliferation of second homes and holiday lets, and address the imbalance.

I want to reinforce the point that the hon. Member for St Ives made about the tax loophole. I think £18 million is now lost in council tax because so many housing providers have taken advantage of the loophole whereby they can claim business grants and the zero rate of exemption, rather than pay council tax, if their houses are let out for 10 weeks of the year. As the hon. Member said, so much money was lost in business grants during covid. I think £170 million in business grants went to properties that were registered as holiday lets.

I want to mention my hon. Friend the Member for Plymouth Sutton and Devonport (Luke Pollard), who cannot speak in this debate. He has worked hard with us in Cornwall on the issue of protecting first homes, rather than second homes, and he has supported us, as I know that the same issue applies up in Devon. We have spoken with the Minister about potentially having a toolkit of measures that could be used to deal with issues relating to second homes and holiday lets. I know that our Government will introduce one of those measures: the licensing of holiday lets, hopefully with fees and safety checks on those lets, which is not done at the moment—some properties are not checked for fire safety, or for safety in any way. That is a massive loophole that needs to be dealt with.

The hon. Member for St Ives talked about planning requirements. The previous Government had a review on introducing a use class for holiday lets—but then did not do very much about it—so that is one possible measure. The default could be second home owners having to apply for a change of use if they flip their homes to holiday lets.

[Andrew George]

On the C5 category, and further to the excellent point that my hon. Friend the Member for North Cornwall (Ben Maguire) made, the last Government tinkered with this, announcing and reannouncing on many occasions a proposal to introduce a use class for holiday lets, but does the hon. Lady not agree that that would be far better if it applied to all non-permanent occupancy, whether second homes or holiday lets? Otherwise, there will continually be flipping from one to the other to avoid regulation.

[Jayne Kirkham]

I thank the hon. Member for that point. I wanted to talk about council tax in particular, because, strangely, one of the few things that the entire council agreed on—we have a Conservative council in Cornwall at the moment—was doubling the council tax on empty second homes. In fact, we wrote to the Secretary of State at the time to ask whether we could triple the council tax on second homes, as they do in Labour Wales—that was a very unusual thing to do. Of course, as has been discussed, this is about looking at closing the loophole so that the owners of the property cannot flip between business rates and council tax. That would mean an £18 million a year gain in council taxes.

I agree with the hon. Member that we should encourage co-operative and community housing in Cornwall. That is very popular, and if it was supported more, there would be a great deal more of it. In fact, our cabinet housing member in Cornwall has said that if every village built 10 homes, that would deal with the housing crisis completely. Discouraging hope value, particularly in certain parts of Cornwall, would be very helpful. I know that forcing developers to deliver their affordables rather than relying on the viability defence is part of the Government’s plans, because so often developers get to a point and say that they cannot afford to build the affordable houses that they promised. Another real problem is that the cost of building has shot up because the contractors in Cornwall have dropped in number and have become a great deal more expensive.