The Big Question: Should the Government be cracking down on people with second homes?
Tuesday 04 March 2008
Why are we asking this now?
An inquiry commissioned by Gordon Brown is going to recommend that local councils should be able to prevent people from buying homes that they do not intend to use as their main residence. The way it would work is that if someone is proposing to sell their home to an outsider who is not intending to live there permanently, the new owner will have to apply for planning permission for a "change of use", in the same way that you have to apply if you want to convert a house into an office or shop.
Coincidentally, this proposal has been put forward just as there is a very nice break on the way for owners of second homes. From next month, if they sell their second home they will pay only 18 per cent of the profit they make in capital gains tax, compared with the present 40 per cent.
What's wrong with people owning second homes?
Matthew Taylor, the Liberal Democrat MP chairing Gordon Brown's commission, is one of many who have warned about the damage done to small rural communities by the phenomenon of wealthy townsfolk buying up houses as rural bolt holes. With their bulging bank balances, they push house prices up beyond the reach of local people. So young couples move out of the village, and the homes that they would have occupied are left empty for much of the year.
Schools close, because there are too few pupils. Local shops struggle, because their trade becomes so seasonal. In Brancaster, in north Norfolk, where a quarter of the homes are second homes, villagers clubbed together to buy the last shop in the village when it was threatened with closure. Even some of the second-home owners chipped in.
Where is the second-home problem worst?
London has more second homes than anywhere else in the country, with more than 23,000 in just four north London boroughs. It is likely that most belong to people who work in London but live somewhere else. The capital is big enough and crowded enough to absorb these homes without a visible impact on city life, except on the house prices in estate agents' windows.
The most serious problems are found in rural areas such as East Anglia, the Lake District, north Wales, and the West Country. About half the homes in Coniston, Cumbria, are second homes. In Abersoch village, in the Llyn peninsula, in North Wales, the figure is around 60 per cent. As Matthew Taylor, whose Truro and St Austell constituency is one of the worst affected, pointed out: "In some communities, 30 per cent, 40 per cent or 50 per cent of the village is dark most of the year. It raises huge issues for the sustainability of the community."
How many second homes are there?
About 276,000 families or individuals have a second home somewhere in Britain. Of these second homes, about 242,000 are in England, with probably most of the rest in Wales. This figure has been fairly stable all the time that Labour has been in government. It does not include Britons with holiday homes on the Continent, particularly France, Spain or Italy, whose number goes up year by year, with the latest estimate being 211,000. But the change in capital gains tax is expected to give the trade in second homes a shot in the arm. A survey featured in Country Life magazine forecast that it will soar to around 342,000 by 2015.
One on-line estate agent firm, owned by the same conglomerate that owns the Daily Mirror, launched a new website last year exclusively for people wanting to buy second homes in Britain, in anticipation of the boom. Its managing director, David Bexon, said: "Demand for second homes is strong, with our warming climate in part responsible for the growing number of people who now aspire to own a second home in the UK by the sea."
Aren't MPs some of the worst offenders?
There is one professional group that is positively encouraged to have a second home, with the costs paid by the government – namely MPs. One case that has had publicity recently is that of the Speaker, Michael Martin, who has a huge grace-and-favour mansion in the Palace of Westminster, overlooking the Thames, and claims £17,000 a year for his detached house in Glasgow. Most MPs have two homes, one of which is subsidised. The rationale is the unusual nature of an MP's job, which requires them to work both at Westminster and in a constituency. Although it may seem hypocritical that they should criticise others for owning second homes, they are not contributing to the depopulation of rural villages, because in most cases both their two homes are in built-up areas.
Why is the Government helping people profit from a second home?
In his pre-Budget speech last October, the new Chancellor Alistair Darling announced that he wanted to simplify Capital Gains Tax, doing away with the complicated business of "taper relief", which meant that some businesses paid as little as 10 per cent, while others paid 40 per cent. He proposed a single rate of 18 per cent.
Small businesses on the bottom rate were understandably furious. Owners of second homes had every reason to be quietly pleased. But now Stuart Burgess, the government's Rural Advocate, has pleaded for the rate to be put back up to 40 per cent for people who sell second homes.
He warned: "This change in tax could lead to property speculation in rural areas where the price of second homes is already high. I think there will be many people ready to jump on the bandwagon." Of course, Mr Burgess is not an MP. There must be a few MPs who are rather looking forward to selling their second homes when the retire and paying only 18 per cent tax.
What has been the reaction to the proposal?
In rural areas, as might be expected, the proposals from Mr Taylor's commission have had an enthusiastic welcome. Alastair Cameron, of Coniston parish council, told the North West Evening Mail: "This is exactly what we have campaigned for." The local councillor for Abersoch, Wyn Williams, said it could be too late to save their village, "but it could stop this type of thing in future". But Grant Shapps, the Tory shadow housing minister, warned: "This measure will require councils to snoop around trying to discover who lives in which house. Since it won't apply nationwide, it will actually push up house prices in some areas, making it harder for local people and first-time buyers to get on the housing ladder."
Are restrictions on second-home ownership necessary?
*Incomers force up house prices, leaving nowhere that local people can afford
*Community life in some villages is being destroyed because so many homes are empty most of the year
*The problem will only get worse when the tax system changes next month
*If one council imposes restrictions, the second-home buyers will simply look somewhere else.
*Do we want council officers snooping around checking who is using a house as a holiday home?
*The best answer is to provide affordable houses for local people, not to try to ban incomers
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