Second Homes and Holiday Lets: Rural Communities

Matthew Pennycook Excerpts

Thursday 6th January 2022 Westminster Hall

[Matthew Pennycook (Greenwich and Woolwich) (Lab)]

As always, it is a pleasure to serve with you in the Chair, Mr Sharma. I congratulate the hon. Member for Westmorland and Lonsdale (Tim Farron) on securing this debate. He has a huge amount of knowledge about the subject. As he has done on numerous occasions in the past, he spoke with authority about the negative impact of second homes and holiday lets on his constituents, as well as outlining a number of suggestions that certainly warrant further consideration.

All speakers in today’s debate have acknowledged that, in order to thrive, rural communities need investment, employment opportunities and, in many cases, thriving tourism industries, but they also need affordable homes for local people. While second homes and short-term lets can undoubtedly bring benefits to local economies, those benefits must be continually weighed against their impact on local people.

It is clear from the strength of feeling expressed in this debate, and from other recent debates that have touched on these issues for coastal, urban and rural constituencies, that there is a clear view among a sizeable number of hon. Members on both sides of the House that, as things stand, the Government have not got the balance right. It is that balance, as so many have mentioned, that is important.

Informed by their respective constituency experiences, the hon. Member for Westmorland and Lonsdale and other hon. Members who have contributed this afternoon have detailed the negative impact that excessive numbers of second homes and holiday lets are having on the communities they represent. As we have heard, excessive rates of second home ownership in rural areas have a direct impact on the affordability and therefore the availability of local homes, particularly for local first-time buyers. As the hon. Gentleman mentioned, high rates of second home ownership entail the loss of a significant proportion of the permanent population, and have a detrimental impact on local services and amenities, whether that be local schools, transport links or local small businesses, and therefore the sustainability and cohesion of those communities.

The staggering growth in short-term and holiday lets in many rural constituencies—as well as, as hon. Members have said, in urban areas, including in my own city—is having a direct impact on the affordability and availability of homes for local people to buy. In many parts of the country the growth in this market is also having an impact on those who cannot buy or to secure social housing, in terms of access to private rentals. That point was highlighted powerfully by the hon. Member for North Devon (Selaine Saxby). That growth is also having an impact in terms of security for those renters, including key workers, who find that their landlord wishes to begin using their property exclusively as a short-term or holiday let, a situation unlikely to be ameliorated any time soon, given the fact we are still waiting for the Government’s promised renters’ reform Bill.

The emerging evidence suggests that the pandemic and the resulting attraction of staycations for domestic holidaymakers has accelerated markedly the growth in both second home ownership and holiday lets. Fuelled in part by the stamp duty holiday, the number of transactions liable for the second home stamp duty surcharge stood at just under 85,000 in the second quarter of this year—the single largest quarterly figure since the higher rate for the additional dwellings surcharge was introduced back in 2016.

As the Financial Times reported back in July, figures produced by estate agent Hamptons International using Companies House data show that the rate at which holiday let companies are being set up has more than doubled over the coronavirus crisis, with the vast majority of those incorporating being individuals owning only one mortgaged property, rather than large corporations holding multiple holiday homes.

It is worth reflecting briefly at this point on the issue of data—the point was well made by the hon. Member for North East Fife (Wendy Chamberlain) in her contribution—because the fact is that we do not know the numbers of second homes and holiday lets in any detail, other than that they continue to rise. We do not have an accurate grasp of the figures across the country. Council tax records are likely to significantly undercount second homes, both because there is no financial incentive to register a property in areas where a council tax discount is no longer offered and because second home owners can still avoid council tax altogether by claiming that their properties have moved from domestic to non-domestic use. When it comes to second home ownership, the estimates produced by the English housing survey are more reliable, but even they are based on a relatively small survey sample and rely on respondents understanding what is meant by a “second home” and accurately reporting their situation. Similar limitations apply to short-term lettings. There is no single definite source of data on rates for what is after all an incredibly diverse sector, with providers offering accommodation across multiple platforms.

It therefore seems logical that as well as considering what more might be done to mitigate the negative impact of excessive rates of second home ownership and short-term and holiday lets, the Government should give some thought to how we might obtain better data on overall rates, not least to provide a more accurate baseline as we emerge from the pandemic and also a better sense of precisely which parts of the country face the most acute challenges. I would be interested to hear from the Minister whether the Department has given data collection in this regard any thought and, if not, whether he will commit to taking the point away for further consideration.

In relation to how we might meet the housing needs of local people in rural areas and other parts of the country where there is high demand, the wider context is obviously crucial. The point was touched on in the debate, but if we had had more time, we could have had a much wider debate about affordability criteria and what needs to be done, not least in the light of the evident failings—here I have to disagree with the hon. Member for Thirsk and Malton (Kevin Hollinrake)—of the First Homes scheme, to give local first-time buyers better access to new homes.

On the specific issue of what more might be done to mitigate the negative impact of excessive numbers of second homes and holiday lets, it is useful to break things down, as the hon. Member for Westmorland and Lonsdale did, into potential planning and non-planning—primarily taxation—measures. On the non-planning side, the Government have taken action over recent years by reforming stamp duty, allowing local authorities to increase council tax to 100% for second homes and proposing that properties be required to have been let for 70 days in a given financial year in order to be liable for business rates rather than council tax, although I believe that we are still waiting for a formal decision to confirm that change in policy.

However, there is a strong case for exploring whether the Government should provide local authorities with powers to, for example, introduce licensing regimes for second homes and short-term lets, and for considering giving them even greater discretion over their council tax regimes—perhaps allowing local authorities, as Labour has done in Wales, to levy a premium or surcharge on second homes and long-term empty properties if they believe that that is required in their locality. There is also a strong case—this point was well made by my hon. Friend the Member for York Central (Rachael Maskell)—for reviewing whether the current 3% rate of stamp duty surcharge on second homes as well as the 5% rate levied on non-UK buyers remain at the appropriate level in the light of the boom that we have witnessed over the course of the pandemic. Is the Department even exploring those or any similar options?

When it comes to planning, the system now enables local residents to put in place neighbourhood plans that can go some way to managing second home ownership rates, but it is clear that further measures are required. May I therefore press the Minister to clarify whether the Government accept in principle that in order to bear down on excessive numbers of second homes and holiday lets in particular parts of the country, there may be a need for further changes in relation specifically to planning restrictions and enforcement—designed, obviously, so as not to exacerbate the problems of affordability and availability that have been touched on in the debate today?

This has undoubtedly been a worthwhile debate on an issue that is only going to grow in significance. I look forward to hearing from the Minister about what further steps the Government propose in order to ensure that when it comes to the benefits and liabilities of second home ownership and short-term and holiday lets, we begin to redress the current imbalance affecting rural and other communities across the country.