Holiday and Second Homes Regulation: Cornwall and Isles of Scilly

Debate between Jim Shannon and Andrew George

Wednesday 23rd October 2024 Westminster Hall

[Andrew George (St Ives) (LD)]

I beg to move,

That this House has considered the regulation of holiday and second homes in Cornwall and the Isles of Scilly.

I am delighted to have secured the opportunity to debate this motion. It is worth emphasising that this is about not the politics of envy, but the politics of social and housing justice. Many people are concerned about the proper provision, allocation and use of property, particularly residential properties, in those areas with a significant preponderance of holiday and second homes. The tourism industry in such areas is vital, but it is important to get the balance right in the usage of properties and how, and which, properties are used in the industry. In such areas there is often a big mismatch between earnings levels and house prices, given the large amount of wealth that wishes to invest in those properties, so we need to ensure a proper balance.

It is also important to understand the distinction between second and holiday homes. Often, in discussions and media commentary, the two are confused. They are two sides of a coin, but in regulatory terms they are significantly different. Some properties flip from one form of regulation to the other, from being second homes operating under the council tax regime to the holiday lettings sector, which operates in the business rates system.

[Jim Shannon (Strangford) (DUP)]

I commend the hon. Gentleman for securing this debate. In previous Parliaments, he has proven himself to be an advocate for those who have such issues. Does he not agree that we need to make the most of tourist potential—as we seek to do in the incomparable Ards peninsula, which I represent—but a fundamental need is to have housing stock available for people to live and raise their children in, without being outpriced by the demand for second homes?

[Andrew George]

Indeed I do agree, and I am grateful for that intervention emphasising the points that I and many of those present wish to make. Although we are talking about Cornwall and the Isles of Scilly specifically, the subject clearly has wider impact across the country as a whole.

The context is important in Cornwall and the Isles of Scilly. Over the past decade, more than half a billion— £500 million—of taxpayers’ money has been handed out to holiday home owners in Cornwall alone under a variety of different and variable tax incentives available to the holiday lettings sector, such as the small business rate relief system for furnished holiday lets. Perhaps most scandalously, because those properties were entitled to such relief, they were entitled to covid aid as well—£20,000 to each one of them, for no very good reason.

The latest figures in Cornwall show nearly 14,000 second homes and more than 11,000 properties registered as short-term lets, as far as businesses are concerned. The most recent trawl through the larger of the holiday letting websites showed nearly 22,000 active listings. That figure was recorded on an initial trawl, but it does not represent the full scale of holiday lets available.

Housing: Cornwall and the Isles of Scilly

Debate between Jim Shannon and Andrew George

Monday 9th September 2024 Commons Chamber

[Andrew George (St Ives) (LD)]

It is a pleasure to have the opportunity to raise the rather grave issue of providing affordable housing in the housing emergency-ridden communities of Cornwall and the Isles of Scilly. I am grateful to those engaged in business earlier this evening who have permitted us a little extra time to explore the issue. Perhaps that was done for good reason, so that the grave and important issues of Cornwall and the Isles of Scilly could be properly and fully debated. I welcome the Minister to his place. Indeed, Liberal Democrat Members warmly welcome him and fully take on board the sincerity, intensity and determination of the Government to address the serious housing problems that exist across the country, and the housing emergencies that exist in many communities as well as Cornwall and the Isles of Scilly.

I should also declare an interest. During my nine-year sabbatical from this House I went back to my profession as the chief executive of a registered provider—a housing charity—working at the front line on predevelopment work and delivering affordable homes for local people. It is a challenging environment, and because of the man-made—or man and woman-made—nature of the regulatory environment in which professionals operate, and the topographical challenges that we face in places such as Cornwall, it is a little like trying to push boulders up a steep slope. I hope the Minister will take into account that if measures can be taken to improve the availability of opportunities for those who are ticking all the right boxes to deliver genuinely in-perpetuity affordable homes, which are desperately needed in our communities, the Government will do that.

This is not my maiden speech, and after having taken a sabbatical—perhaps it was an enforced sabbatical, but it was one I enjoyed—away from the Chamber for so long, I would in normal circumstances praise my predecessor. We did not share much in the way of political agreement, but he worked hard for the constituency and achieved a great deal. Indeed, Mr Derek Thomas strived on a large number of projects, and I hope that I will reflect the efforts he made to ensure that those projects are delivered during my time in this House.

Because it is not my maiden speech, I therefore do not need to remind the House, as I did on 22 May 1997, that my constituency is the most beautiful and most remarkable place in the country, occupied by the most beautiful, remarkable people.

[Jim Shannon (Strangford) (DUP)]

On that point, will the hon. Member give way?

[Andrew George]

Am I giving way on “beautiful” or “remarkable”?

[Jim Shannon]

On both.

[Andrew George]

Okay, on both points.

[Jim Shannon]

First, I commend the hon. Member on securing the debate. It is good to see him back in his place. He brought much to the Chamber when he was here before, and I was fortunate to share some time with him in the Chamber. We have many things in common. The first is that we have beautiful constituencies, and the second is our concern about affordable housing and its accessibility. Does he welcome the Government’s manifesto pledge to increase housing? In my area, the housing lists are massive. Does he agree that when it comes to the Government’s policy, it must first be better streamlined planning? Secondly, they should allocate funding to getting families into homes. Thirdly, does he agree that we need a strategy and a programme motivated and driven by Westminster for all the regions of this great United Kingdom of Great Britain and Northern Ireland, because, as I always say, we can do it better together?

[Andrew George]

The hon. Member anticipates many of the subjects that I will be coming on to, which are about the delivery and streamlining of planning and so on.

Part of my background is not only in the delivery of housing through a community land trust and the charitable housing sector, but also in my volunteering. For many years, I was involved in Penzance street food project and was working at the frontline addressing and speaking to people who were suffering from the most severe housing problems in the country. Indeed, in Cornwall we often have to repeat that although people come and have enjoyable holidays, as I know the Minister did, beneath that veneer are extremely severe housing problems and severe and exceptional levels of homelessness, which perhaps are beyond the vision of those who come and enjoy our beautiful beaches, our beautiful environment and our wall-to-wall sunshine.

I have given the Minister advance notice of some of the subjects I intend to cover, but one is to probe a little harder on the Government’s intention to raise house building targets and to challenge how we can properly ensure that if we are to build more homes, that will address need, rather than developers’ greed. I will come back to that in a moment. Under the surface—I think a lot of people are not fully aware of this—the public purse is making a major contribution to the injustices going on in the housing sector, in that multi millions of pounds in public money are going into the pockets of holiday home owners, especially through various tax loopholes and covid aid grants and so on. That clearly is driving the sector in the opposite direction to the one in which it should be going.

By way of background, Cornwall has high levels of housing need. The latest Homechoice register is 20,332, but that is after the annual administrative process of removing people who have not been active on the register for the previous year. The month before that, the register was 27,000, so the numbers oscillate. From my experience of undertaking housing need surveys across many communities in Cornwall, the numbers often underplay the significant level of unexpressed housing need. We often find that the level of need in most communities is at least double what is recorded on the Homechoice register, because many people think it is a waste of time putting their names on it, because they have little chance of ever getting a home.

Of course, every location has housing problems of one type or another—other places experience similar problems—but in Cornwall we face a rather unique combination. For example, just 12.8% of our housing stock is social housing against a national average of 17.1%, and although 20% or thereabouts of the housing stock is privately rented—that is about the national average—it is an extremely vulnerable sector for people to find themselves in. Particularly in recent years, a large proportion of families in that sector have found themselves on the verge of being evicted to make way for yet more holiday lets.

Housing completions have been good. We have an effective register and a housing association sector that is delivering well, and indeed Cornwall is one of the best local authority areas in delivering numbers, but it achieves that as one of the larger local authorities, so it is bound to be up at that end of the league.

My first substantive point for the Minister is about the Government’s stated intentions on house building targets. I fully endorse and support the Government’s intention to deliver in order to meet housing need, but, as I said to the Deputy Prime Minister when the announcement was made in July, Cornwall shows how simply having house building targets does not work.

Cornwall is one of the fastest growing places in the United Kingdom, having almost trebled its housing stock in the last 60 years—I have been living there through most of those years—and yet at the end of all that the housing problems have got worse. I am not saying that it would be better if we had not built any houses, but simply setting very high housing targets in itself does not address housing needs. The two-dimensional view of housing being somehow a simple relationship between supply and demand in which equilibrium will be found and prices will therefore reflect what local wages can afford has never been the case in Cornwall. That reflects, in effect, a sub-London housing market, with house prices having been significantly inflated by people and property investors buying second and holiday homes.

In the present local plan for Cornwall, covering 2010 to 2030, the house building target is 52,500. The Government propose to increase those projections under their new formula from 2,707 properties per annum to 4,454. I urge the Minister to allow places such as Cornwall to be granted devolved powers to vary the way in which we achieve what needs to be done in our local environment: not simply to give us house building figures but to set targets to reduce housing need. After all, house building targets are a means to an end—the end is to meet the housing need—and if we have built the homes but that has not achieved the purpose, we must ask ourselves: are we going about it in the right way?

The Government’s new standard method has a different starting point from the old method. It is based on a two-step process of a 0.8% annual uplift on existing housing stock, plus a further uplift for the affordability gap. The problem with that approach is that, in places such as Cornwall, it bakes in demand for second and holiday homes, because that has to be included in those overall figures. That was a problem in the previous plan, when we had our local plan projections rejected and the inspector wrote in much higher figures, saying that we had to increase the numbers to 52,500—more than another 5,000 homes—in order to address, as they put it, “the growing demand for second homes in Cornwall.” We have high and growing demand for affordable homes—that should be baked into the figures.

We should have a mechanism by which we can deliver those homes, because the way in which the system works is that we get all the second and investment properties—the developers are very pleased to do those, but they are not so keen to deliver the genuinely affordable homes, which are the ones that we need. There is a simplistic view that there is equilibrium between supply and demand, and there is a presupposition that developers will release properties in the market when the Government’s policy achieves its stated intention of reducing house prices in that locality. We found that they only release them at times of housing inflation, so that is simply not the case.

In my experience at the development end, trying to deliver the affordable homes that local people need, the policy is counterproductive because if the number of homes announced in the local plan increases, the hope value of land adjoining every single community in Cornwall goes through the roof. If a local housing charity goes there and says, “I would like to look at your land and build some affordable homes on it,” the developer will not talk to them. They will wait for the lottery win when they get the full open market development value on that land, which is significantly greater than what a local charity can offer. I urge the Minister to have a conversation with those who are trying to deliver the products on the ground, to set targets to reduce need rather than feed developers’ greed, because that is what housing targets do in places such as Cornwall—elsewhere they might have a different impact. Again, I ask the Minister to come to Cornwall and the Isles of Scilly and see what it is like. I am sure that all the local MPs, who are all champions for their own localities, will be fighting hard to address these issues.

A further point I wish to make is on the rural exceptions policy, as I used that tool when working in the sector on a regular basis, and I have raised it with the Minister already. It works well; since the 1990s when it was introduced, it has been very effective in delivering affordable homes on land that otherwise would not get planning permission. All I would say to the Minister is that we should look at ways in which we can expand and grow development on rural exception sites. In Cornwall we are doing very well; we deliver 50% of what is delivered on rural exception sites across the whole of England. About 20% or 30% of delivery in Cornwall is through rural exception sites. What the local authority has done, and what we as a charity sector campaigned for it to do, is extend the entitlement to deliver rural exception developments from the smaller villages to the edge of towns. It may sound counterintuitive, but one of the best ways of delivering affordable homes is to draw the development boundary very tight around a local community and to use rural exception as a way of ensuring that we keep the development land values low and deliver genuinely affordable homes.

The other thing I urge the Minister to do, perhaps to correct the mistake made by Cornwall some 15 years ago, is not to allow cross-subsidy on rural exception sites. That has created a slippery slope where more and more landowners and private developers find ways around normal planning procedure and use rural exception sites as a Trojan horse to crowbar in far many more unaffordable homes on those sites than would otherwise be the case if we stuck to the principle of the policy itself.

Against that, there is a very significant challenge of construction industry inflation, which is affecting Cornwall as it is many other places. That has caused a lot of developments in places all around Cornwall to be stalled, as the cost-to-value ratios have resulted in the unviability of many projects. I urge the Minister to look—I am sure he is—at Homes England’s affordable housing programme. While it is looking to the next five to 10 years, the current programme up to 2026 needs a further injection to address the current difficulties that many developments face.

I said that I would address housing injustice. I am conscious of time and I know other hon. Members wish to speak, so I will be brief. When I was first elected, in 1997, the Conservatives had just introduced the 50% council tax discount for second homes. I campaigned against that at the time, and was grateful to Chris Mullin and the late Michael Meacher for being receptive to the arguments to remove the 50% council tax discount. However, in 2012, the Conservatives then introduced another loophole, which allowed second home owners to flip their properties from being registered as second homes for council tax to being registered for business rates as a holiday let, if they could demonstrate that the property was available for 140 nights a year. They did not need to let it, but it had to be available for 140 nights a year as a holiday let. Then they could apply for small business rate relief and pay nothing at all.

We have ended up with a situation where all that has to be covered by the Treasury. Initially, in 2012, when I first blew the whistle on it as an MP, that resulted in £6.5 million going each year to holiday homeowners in places such as Cornwall. Within a couple of years, that had doubled. There has been an industrial-level movement of properties from council tax to business rates. When covid happened, they were all entitled to a covid grant as well, on top of that. As a result of that, the furnished holiday lettings and other loopholes, in Cornwall alone over 10 years we ended up with over £500 million of taxpayers’ money—that is our money—going into the pockets of holiday homeowners, at a time when only half that amount was going into housing associations to deliver affordable homes. I urge the Minister to work with his Treasury colleagues to close those loopholes and to find far better ways of using that money. If, as the Prime Minister rightly says, those with the broadest shoulders should bear the greatest burden, this is an area where that burden should be borne by the people who can afford extra properties and property investment in holiday and second homes. That is not, in my view, an appropriate way for us ever to spend public money.

I said to the Minister earlier that I wanted briefly to mention the Isles of Scilly, and I hope that he will come and visit the area. Many people find it surprising that it is currently experiencing depopulation, which is largely driven by the lack of affordable housing. Here I declare an interest, as one who has been working in the sector. Our charity had been working with the council on a project for which we had planning permission, and everything else, to deliver 12 self-build affordable homes for local families. Those homes were desperately needed—I believe that only eight homes have been built on the Isles in the last 10 years—but the construction costs were extremely high. It costs three times as much to build a home there as it does to build one on the mainland. Moreover, the project did not meet the requirements of Homes England in relation to subsidies.

I urge the Minister to have a look at the very special environment that exists on the Isles of Scilly, and to address its housing needs. It is 28 miles from the mainland coast, and it should not be said that members of its community can commute, because they simply cannot do so. I also urge the Minister to consider the community-led homes sector. If we want to change the whole narrative and the way in which communities operate, we should give people the power to start representing themselves and local housing needs through, for instance, community land trusts and co-housing communities. The last Government had a flirtation with that sector and gave it some support, but then withdrew it. However, this work has started, and I think that more can happen to deliver more. If communities have local land trusts or local housing working parties, that is far better than allowing the nimbys to take over and start driving the development process.

Let me also encourage the Minister to consider the issue of discounted sale homes. Before I worked in a community land trust I was a sceptic, but I have to say that I am a convert to that method as one of the additional mechanisms to provide intermediate housing. I believe that it would be a cost-effective way for Homes England to engage with communities that want to deliver in-perpetuity homes for locals, which is clearly very important.

Of course we do not want Rachmans and of course we want to drive bad practice out of the sector, but I hope that, perhaps taking a cue from what is happening in the holiday lettings, the Minister will consider this suggestion. As well as regulating the private rented sector, why should we not reward good landlords? If they are delivering security—affordable rents, a high-level energy performance certificate and the decent homes standard—surely there must be a way, within the tax system, of rewarding those good landlords, as well as regulating and penalising the bad ones.

I hope that the Minister will consider each of the points that I have made to him. I am grateful for the additional time that I have been given to elaborate on those important points, and, of course, he has plenty of time in which to respond. I do not know whether other Members wish to speak as well.