Levelling-up and Regeneration Bill

Lord Shipley Excerpts

Report stage
Wednesday 13th September 2023 Lords Chamber

Moved by

[Lord Shipley]

247YYE: After Clause 218, insert the following new Clause—
“Second homes for council tax purposesThe Secretary of State may by regulations permit, through a licensing scheme, local authorities to set a limit on the proportion of dwellings which, at the point of sale, become second homes for council tax purposes.”

[Lord Shipley (LD)]

In moving Amendment 247YYE, I will speak also to Amendment 288B; both are in my name and that of my noble friend Lord Foster of Bath and relate to second homes. They would give a power to the Secretary of State by regulation to permit local authorities, through a licensing scheme, to set a limit on the proportion of dwellings which, at the point of sale, become second homes for council tax purposes.

We have heard about deal on Report on the Bill about the housing crisis, not least a crisis in the availability of truly affordable homes. Government data shows that 7,644 social homes were built in England in 2021-22, while 24,932 were sold under right to buy and 2,757 were demolished. The crisis is particularly bad in rural and coastal areas.

In 2019, the Rural Economy Select Committee, chaired by my noble friend Lord Foster of Bath, noted that, in rural areas, house prices—and so, in turn, rents—are higher than in urban areas, while incomes are lower. That disparity is widening. In Cumbria, for example, average house prices are 12 times average household incomes. As a result, it is ever harder for people of working age to live and work in rural and coastal areas, with an inevitable impact on their local economies.

There are three principal causes: too few genuinely affordable homes being built; second homes taking over full-time residential homes; and, the most rapidly increasing problem, short-term lets taking over the long-term private rented sector. In Cumbria, for example, there are currently 232 long-term rental properties available, compared with 8,384 short-term lets.

My noble friend Lord Foster of Bath, who is unable to be here today, lives in Suffolk, close to the popular seaside town of Southwold. With the recent growth in second home ownership and the rapid rise in short-term lets, of the 1,400 properties in Southwold, only 500 have full-time residents, while 500 are second homes and 400 are short-term lets. Two-thirds, therefore, are not permanently lived in.

House prices and long-term rents have risen steeply. Local families are being forced out and those working in the local tourism industry cannot find or afford local accommodation. As a result, many of the bars, restaurants and hotels now have staff vacancies. As a local councillor said recently, soon people will not

“want to visit the soulless toy town where no one lives any more”.

In Committee, my noble friend Lord Foster of Bath and I proposed amendments to address the issues of short-term lets and second homes. In particular, we proposed separate use categories for both. Other noble Lords also addressed these issues, with a range of similar proposals. In response, the Government promised to take action. Indeed, as a result, consultation has been taking place on proposals to introduce a short-term let registration scheme, which would allow councils to apply health and safety regulations across the guest sector.

Consultation has also been taking place on establishing a separate use class, C5, for short-term lets. I welcome these proposals and the intention of using permitted development rights so that areas of the country where short-term lets are not an issue are not impacted. Where they are, a planning application will be required for change of use to a short-term let and councils can decide whether, given local circumstances, it should be approved.

Clause 218 of this Bill provides for the implementation of the registration element of these proposals. These Benches welcome the proposals and hope they will be implemented quickly. However, this completely ignores those second homes not being used as short-term lets. They should be known as “second homes for council tax purposes”. On the latest figures, there are some 257,000 such properties in England; although not as rapidly as short-term lets, the numbers are growing year on year.

I expect that the Minister will point to the way in which neighbourhood plans can be used to address this issue and the new power for councils to further increase council tax on second homes. While undoubtedly welcome, these measures do not give affected local councils sufficient powers to address the problem. Can the Minister explain why the Government, having belatedly agreed to address the short-term lets problem, are failing to do the same for the second home problem?

The two amendments in this group in my name and that of my noble friend Lord Foster of Bath propose a solution. We could have adopted a similar approach to the one the Government have proposed for short-term lets and if, in response, the Minister suggests the Government plan to explore that route, we will be happy to support it. However, following a substantial discussion with local councils and councillors, we propose a new approach: a licensing approach available for those councils which choose to adopt it.

It is a simple approach. By restricting its application to the point of sale, it does not impact existing homes. We recognise that it would require a person seeking to buy a property to be used as a second home—not intended to be a short-term let—to conduct inquiries into the likelihood of a council agreeing to a licence. That is no more onerous than many other pre-purchase searches and no different to that required for a use class order change to short-term let. But it would give much-needed powers to councils which face problems caused by second homes. I hope the Minister is in listening mode on this matter.

Finally, on second homes and council tax, can the Minister explain what steps the Government will take to resolve their failed attempt to close the tax loophole? For some years many of us have been drawing attention to the situation whereby second home owners avoided paying either council tax or business rates. They did this by claiming their property was available for rent—and so eligible for business rates—but then ensured that little rental took place and so the business income fell below the threshold, so no tax was paid.

Last January, so-called tough new measures were introduced for eligibility requirements: making the property available for rent for 140 days a year and proving it had been for at least 70 days. However, as the Daily Telegraph reported earlier this month:

“Holiday let council tax crackdown backfires—costing local authorities millions”.


The tough measures have not prevented more and more second home owners registering as a business and then claiming 100% business rate relief. Two years ago, 73,000 such properties were on the business rates list in England; the figure now stands at over 85,000. Can the Minister tell the House what further steps will be taken to address this problem? I beg to move.

[Baroness Taylor of Stevenage (Lab)]

My Lords, the percentage of second homes in so many parts of the country has had such a devastating impact on communities. We heard about that in great detail in Committee and had many examples from all sides of the House. We noted that it particularly impacts on rural and coastal communities. I am also concerned about the tax loophole and that so many second home owners avoid paying either council tax or business rates. This is clearly an anomaly and needs to be resolved.

The amendments in the names of the noble Lords, Lord Foster and Lord Shipley, would be an important next step in tackling this. We too welcome the licensing steps already taken but, if we are going to tackle this, we need to go one step further. We look forward to hearing the Minister’s response to the amendments proposed.

--- Later in debate ---

In my judgment, it is imperative that we allow time to assess the impact of the actions I have described that the Government have already taken. It is for that reason that we are resisting the amendment. However, I hope I have provided sufficient reassurance that we are already taking action to address the issues raised, and I hope the noble Lord, Lord Shipley, will feel able to withdraw the amendment.

[Lord Shipley (LD)]

My Lords, I thank the Minister for his reply, which was as I anticipated. It is clear that we are going to be returning to this issue again and again while the Government fail to build enough affordable housing for people to live in, particularly in coastal and rural areas under great stress. For the moment, though, I beg leave to withdraw the amendment.

Amendment 247YYE withdrawn.