People who own second homes cause homelessness and community death. Yet the government rewards them with lavish subsidies and tax breaks.
How big would our housing crisis be if it were not for second homes? It’s a question almost no one in public life wants to ask, let alone answer. But it becomes more urgent every day.
By a second home, I don’t mean one continuously rented to another household. I mean a property used either as a personal holiday home or as a place to stay while working away from your main home: in other words, a luxury that deprives other people of a necessity.
Before the pandemic, government figures show, 772,000 households in England had second homes. Of these, 495,000 were in the UK. The actual number of second homes is higher, as some households have more than one; my rough estimate is a little over 550,000*. Since then Covid, Brexit and the growing realisation that you can monetise your extravagance by putting your second home on Airbnb when you’re not using it have triggered a gold rush.
Far from seeking to restrain this frenzy, the government has lavished subsidies and tax breaks on second-home owners. If you rent yours out as a “furnished holiday let” for part of the year (it should be “available” for 210 days but needs to be let for only 105), you no longer have to pay council tax, but can register instead as a business ratepayer. Then you apply for 100% small business rates relief, cancelling the entire bill. So while every other kind of housing is taxed, second homes, if you play it right, are tax-free.
Under the Restart Grant Scheme, hospitality and leisure businesses registered for business rates are entitled to a gift of up to £18,000. This comes on top of the Closed Business Lockdown Payment, of up to £9,000, the Small Business Grant Fund, of £10,000, and the Retail, Hospitality And Leisure Grant: a further £10,000. The Stamp Duty Holiday also applies to buying a second home, saving up to £15,000. Every sinew of the state is strained to reward and cosset those who deprive other people of a home.
All this has further fuelled a massive spending spree. On the coast, and in scenic areas inland, local people report that buying a home has become impossible. Rural prices over the past year have risen by an astonishing 14%: twice the rate of homes in cities.
The result is community death. A survey in Devon this month found villages in which between two-thirds and 95% of properties are second homes. In one village in Pembrokeshire, there are three remaining residents. In Cornwall last month, there were more than 10,000 properties listed on Airbnb for holidaymakers, but just 62 offered on Rightmove for rent to permanent residents. In the Newquay area alone, more than 500 people are reckoned to be homeless. While tourists surf, residents sofa-surf.
Homelessness and housing demand caused in one place can manifest in another. If people can’t find a home where they want to live, they have no choice but to move, and they might end up on the housing list in a less attractive borough. Displaced demand can ripple through the entire housing sector, as people bump each other along the chain.
The environmental implications are also massive. If you own two homes, another home has to be built to accommodate the household you’ve displaced. In other words, you’ve doubled your housing footprint. Prosperous people in the shires, rightly objecting to Boris Johnson’s proposal to rip down the planning laws, might ask themselves whether they have helped cause the problem he falsely claims to be solving.
So how much of the housing crisis is caused by second homes? Well, it depends which crisis you mean. Let’s start with its most extreme manifestation: homelessness. On one estimate, there are 288,000 households in England that are homeless or in imminent danger of becoming so. So on this measure, we discover something truly obscene: there are roughly twice as many second homes as homeless households.
Of course, this is by no means the whole story. There are 1.6 million households on the social housing waiting list. The level of unmet need could rise even further, now that the Covid eviction ban has been lifted.
But just as homelessness is the extreme and visible symptom of a much bigger problem, so are second homes. Though we need to build far more social homes, the underlying reason for high house prices is not the lack of supply. The number of dwellings in the UK has been growing faster than the number of households, and there are now more bedrooms per person than ever before. The problem is the grossly unequal distribution of space. Houses are unaffordable because of the purchasing power of landlords and speculators, and their use as investments. Government figures show that even if 300,000 new homes are built every year for 20 years, house prices will be only 6% lower in real terms than they would otherwise have been.
What we need, in all cases, is effective politics. We might decide, as a nation, that holiday lets are important enough to make other people homeless, or to trigger demand for new housing elsewhere. We do, after all, need holidays, and coastal and scenic communities want income from tourists. But good policy doesn’t happen by itself. As we proposed in the Land for the Many report, local authorities should be able to decide how many of the homes in a village or town should be permanent residences, and how many should be holiday lets. Any second home, existing or envisaged, would need planning permission for change of use.
In Wales, local authorities are able to charge double the rate of council tax for second homes. But, though this power is contained in Westminster legislation, it doesn’t apply to the rest of the UK. Even so, it’s of limited use, now that second homeowners have discovered that they can register as businesses, pay nothing at all, and be rewarded for it. We need a progressive property tax, based on value and payable by owners, not tenants. And second homes should be taxed at a much higher rate.
So why isn’t this urgent issue on the political agenda? Well, partly because almost everyone prominent in public life – including many MPs, editors and senior journalists – seems to own a second home. This is how we end up with a cruel, divided nation, in which wealth causes poverty and greed displaces need. It’s not enough to revolt against Johnson’s attack on the planning laws. We also need to fight a gross injustice.
*According to the same government figures (though the description and methodology are quite confusing), the total of all second homes owned by people in England is 873,000. If 495,000 of the 772,000 households who own second homes own them in the UK, that gives us 64%. Applying the same percentage to the 873,000 gives us 558,700.
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