Mary Dejevsky: Second home owners don't need tax breaks

In France there is no tax relief for second homes, and houses are less for investment than for living in
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Not so very long ago, two-centre living was the preserve of a certain class. Now, it seems, everyone is doing it. It is not just the jet-setting Zeta-Joneses, the Murdochs and Madonnas, who flit between multiple residences, but an ever-growing number of middle-brow, middle-income Britons. More and more of us are buying a second (third or fourth) home somewhere else. We are spreading our income, our credit and our lives between town and country, between here and abroad, between our home and a little something to rent out.

Let me enter here a pre-emptive plea of guilty. We have a second home in a glorious part of southern France, which we use all too rarely. I would be the first to grant that it should, in a rational world, be accommodating a local family, a dozen French homeless people or Moroccan asylum-seekers. It is not a sensible use of the space or the location, and it stretches our finances. But it is a refuge in a familiar, but different, culture that affords variety and delight. End of confession.

A change of culture, or climate, of course, as well as peace and pleasure, are reasons a great many second-home owners would cite in defence of their dual existences. The other reason second-home ownership has multiplied is that many more people can afford it. Mine is a "sandwich" generation of a particular kind: we are beneficiaries of the huge rise in house prices in much of the country over the past 25 years. Our experience of other investment has been discouraging: stocks and shares proved a disaster; the private pension system will fail us and interest rates on deposits are miserly. For us, second-home ownership seems to make sense.

This week, it has been argued twice, from different perspectives, that this trend will only grow. A report from the Centre for Future Studies, commissioned by Direct Line insurance, argues that a combination of global warming and more disposable income will increase competition, and prices, for second homes. Then Elinor Goodman, as head of the Affordable Rural Housing Commission, warned that new tax incentives for second-home owners would exacerbate the shortage of affordable housing in rural areas. And not just in rural areas, I submit, but anywhere - town or country - where people want to live.

It is not difficult to see both sides of the argument. In a free country, with a free market, there is no reason why an individual should not own two - or more - homes. On the other hand, second-home ownership has an effect not just on prices in desirable areas, but on the quality of life. Incomers may bring money that revives local services, but they also deplete the local housing stock and leave villages empty during the week. Given the acute housing shortages in many of these areas, the tensions between locals and incomers are entirely comprehensible.

Less easy to understand is why this government - of all governments - should have done so much to make second-home ownership additionally attractive. Start with council tax. It has been left to individual councils to decide whether to levy full council tax on second homes or to continue the previous 50 per cent discount.

Why should this be so? If people can afford a second home, they can afford to pay council tax in full in two places. I cannot quite understand why there should not be a supplement for second-home owners. They may not use local services as much as permanent residents, but a house that is empty for much of the time is a liability that could reasonable attract a penalty.

Continue with the "buy to let" scheme. One of this government's early moves was to abolish tax relief on mortgages. Thus vanished one of the - by then small - benefits that made home ownership more affordable. The wisdom of removing mortgage tax relief can be argued. But then to offer large tax incentives - relief on mortgage interest payments and most maintenance costs - for buying a second property seems perverse in the extreme.

Strictly speaking, "buy to let" properties are not second homes. The scheme was primarily intended to improve the provision of rented housing. With property prices rising as sharply as they then were, however, few needed such generous tax inducements to buy: the projected increase in the property's value was reward enough. The result is a glut of small flats in high-price areas where reasonably priced family accommodation is in desperately short supply. Is this really what the Government intended?

And now the advantages for those with multiple properties are to be compounded. Ms Goodman's point about rural housing was that the market was about to be skewed once again by some more friendly intervention from the Treasury. From April next year, new rules will allow property - second homes, "buy to lets" etc - to be included in private pension funds. It will thus become even more cost-effective, especially for some higher-rate tax payers, to acquire - or extend - a property portfolio. The effect will be tantamount to a 40 per cent discount on the purchase price.

Even if the Chancellor can afford this lost revenue, it is difficult to conceive of a more certain way of raising house prices across the board, while also widening the gap between high-price and lower-price areas. Second-home owners do well enough as it is; there is absolutely no need to make their financial lives any more comfortable or encourage others to join them for investment, rather than quality of life reasons.

It is worth clarifying here that second-home owners in France enjoy none of these incentives. We pay our local taxes in full. There is no tax relief specifically for second homes - lived in or let - and houses in France are less for investment than for living in. Prices are more stable because supply and demand are better balanced than in the UK.

Conditions are quite different. But there is one way in which Britain could learn from France. French second-home seekers, like many in continental Europe, constitute a specific market; they are not nearly as often in competition with mainstream house-buyers than their counterparts in Britain. What they are looking for is a purpose-built, serviced, holiday home, in a self-contained complex or resort area.

A similar market hardly exists in this country, where incomers and local vie for the same chocolate-box cottage or converted barn. If the Government wants to intervene in the second-home market, it could do worse than earmark land for holiday complexes in desirable areas, set strict landscaping criteria and offer tax breaks to the developers. Add in Britain's warming climate, and the seething tensions about second-home ownership might start to subside.

m.dejevsky@independent.co.uk

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