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Levelling Up Secretary Michael Gove wants to heap more woe on second homeowners and landlords with a plan to ban letting out properties on hotel websites like Airbnb.
Gove is reportedly considering ways to stop the exodus from long to short-term, letting drive home prices to unaffordable levels in popular holiday destinations.
The current plan is to allow regional mayors in England to ban short lets unless the homeowner has applied for planning permission to rent the property as a holiday home. Gove will add the clause to the Levelling Up and Regeneration Bill currently passing through Parliament.
The secretary sees the policy as a win-win as the proposal not only eases the concerns of local communities but contributes toward the government’s devolution plans to give more power to councils.
A spokesman for the Department of Levelling Up, Housing and Communities said:
“We’re taking action to combat the adverse impact that second homes can have on local communities – particularly in tourist areas such as Cornwall – by closing tax loopholes, introducing higher rates of stamp duty and empowering councils to apply a tax premium of up to 100 per cent on second homes.”
Five traditional English tourism hotspots are already preparing for the ban. Whitby, Yorkshire, has already held an unofficial referendum on the topic. A resounding 97.5 per cent of voters favoured banning home sales to investors - 2,111 of the 2,268 votes cast. Scarborough Council, which covers Whitby, noted the result but added:
“The outcome of the poll is no more and no less than an expression of the views of the electorate of the parish who have voted in the poll and is not binding on any organisation.”
Average house prices in Whitby are £254,218, which puts them out of reach of the typical local salary of £18,900.
Estate agents confirm three out of four homes on their books are sold to second homeowners, while Tory councillor Phil Trumper claims 19 of 20 new homes built by private developers were recently sold as holiday lets. Lobbyists Whitby Community Network organised the poll.
“The result clearly shows the strength of feeling the community has about second homes in Whitby. We trust our councillors will take note and take action,” said a spokesman.
Other English tourist areas hoping to crack down on holiday lets include St Ives’s, Cornwall; Salcombe, Devon; Whitstable, Kent and Tideswell, Cumbria. Feelings run high over second homes and holiday lets.
Locals complain investors who can afford to pay more snap up affordable homes. Properties are left empty most of the year, turning once-thriving communities into ghost towns out of the holiday season. Schools, shops, jobs and healthcare are affected as they have a smaller permanent population.
For example, the Cornwall Council council tax database listed 12,776-second homes. Just over 11,000 were registered to pay business rates, with 8,953 qualifying for rates relief. The figures are for a county that is home to one per cent of England’s population but hosts 17 per cent of the entire country’s second homes.
The county also has 21,817 people waiting for a home. Neighbourhoods in some Cornish villages are split 80\20 in favour of second homes. Protesters have daubed some with graffiti.
Airbnb revealed in January 2020 that 275,000 short-term lets in England were listed on the site.
The problem looks like worsening before any crackdown as letting agent trade body ARLA Propertymark claims up to 230,000 of England's estimated four million landlords are thinking about switching from buy to let to short-term rentals.
Three counties are ready to impose the hotel booking site ban - Cornwall, Devon and Norfolk - with many others looking to follow suit.
Although Gove has not revealed the wording of his amendment, many believe he intends to extend London’s short-leet rules to the rest of the country. In the capital, property owners can let homes for a maximum of 90 days a year before applying for planning permission.
The ban would likely accompany a rented property database to identify shared houses, buy to lets and short lets, as no records like this are kept in England. Wales has RentSmart, a landlord licensing scheme which holds information about shared houses and buy-to-let owners and managers. Scotland intends to licence short-let properties by July 1, 2024.
Anyone can buy an additional property, but the rules are different for England, Scotland and Wales. In England, buyers pay more stamp duty - an extra three per cent above regular residential rates.
Scotland and Wales set stamp duty rates, charging landlords and second homeowners more than ordinary homeowners. In London, owners can rent homes on short lets for up to 90 days a year. To let for more time, they must apply for planning permission.
Councils also have the power to charge extra council tax - some charge double the residential rate. From April 2023, councils in Wales can charge up to 300 per cent council tax on a second home.
Hundreds of websites advertise flats, cottages and other properties available for short-term or holiday lets. The most popular is Airbnb. Others include Booking.com and HomeAway.com, which boasts more than 2 million listings worldwide.
Currently, investors can switch their business model from buy to let to short-term letting whenever they wish. However, the governments in England, Scotland and Wales intend to introduce a new property class - the short-term let. Once this happens, investors must apply for planning permission to switch business models.
Investors can’t use a buy-to-let mortgage to finance a short-term letting property because the terms and conditions of most loans will not allow the investment. However, holiday let loans are specialist products.
Yes, if you make a profit on the sale over a certain level, you will pay capital gains tax.