Second Home Bombshell Dropped by Welsh Leaders

The Welsh Government has stepped up the crackdown on second home and holiday let owners with a package of planning and tax laws aimed at cooling house prices in popular tourist hotspots. 

In an ongoing campaign, First Minister Mark Drakeford and Plaid Cymru leader Adam Price held a joint press conference to explain their plan to tackle a perceived second homes crisis in Wales. 

They are calling for changes in planning and tax for second homes and holiday lets and a new licensing scheme for self-catering accommodation. But opposition to the measures is growing from holiday let businesses and the Wales Tourism Alliance (WTA) - a trade body speaking for more than 7,000 businesses. 

Chair Suzy Davies argues politicians have not thought through the unintended consequences of the proposed laws and underestimate the value of tourism to the Welsh economy.

Planning and tax changes

The package includes three main policies: 

• Planning shake-up - By the autumn, Wales will have three new planning classes for first homes, second homes and holiday lets. Owners must apply for planning permission if they change the use of the property. In addition, councils will have powers to cap the number of second homes or holiday lets in any neighbourhood.
• Holiday let licensing - All tourist accommodation will need a licence before the property is advertised to potential guests. 
• Stamp duty rise - Councils will gain the power to vary local land transaction tax for neighbourhoods with high concentrations of second homes and holiday lets. The new measures also allow councils to charge council tax up to 300 per cent higher than the base level on second homes and holiday lets that fail to meet qualifying tests from April 2023.

What is a holiday let?

Holiday lets can claim business rates instead of council tax if they are available to let for 252 days and let to paying guests for 182 days in any rolling 12 months. Homes should be available for 140 days and let for 70 days to qualify to pay business rates. 

Drakeford states that swathes of second homes and holiday lets are turning many Welsh communities into ghost towns as they are only occupied for a few weeks every year. He also hit out at second homeowners who choose to pay business rates rather than council tax. 

Business rate relief wipes out any money due if the rateable value of a property is less than £15,000. But no one checks claims to ensure holiday homes meet the availability and letting thresholds.

Drakeford explains policy

“We are today setting out the next steps in a radical programme to ensure everyone has the opportunity to afford to live in their local community – whether that’s buying or renting a home,” said Drakeford. 

“We have a shared ambition for Wales to be a nation of thriving communities – a country where people do not have to leave to find good and rewarding work and a country which people want to come to visit and to live. 

“Tourism is vital to our economy but having too many holiday properties and second homes, which are empty for much of the year, does not make for healthy local communities and prices people out of the local housing market. 

“There is no single, simple solution to these issues. Any action we take must be fair. We do not want to create any unintended consequences, which could destabilise the wider housing market or make it harder for people to rent or buy.”

The WTA argues that the qualifying thresholds for holiday lets are unreasonable and unlikely to be met by other than a fraction of self-catering accommodation businesses.

Unintended consequences

“The Welsh Government needs to mean what it says about unintended consequences and recognise that genuine tourism businesses contribute to the viability of communities,” said Davies. 

“Whatever their aims, their unwillingness to address the unintended consequences of the policies they have already introduced hasn't convinced the industry of their sincerity on this. 

“Holiday let businesses are professionally run, often locally owned, employ local people, provide custom for local businesses and pay a business premium for things like rubbish collection. 

“However, across the whole of Wales, they have already been caught up as part of the Welsh Government’s policy to control the separate, different issue of second home proliferation in some specific communities. 

“Tourism providers recognise the worry about second homes but have grave reservations about how the Welsh Government intends to resolve it. We are already nervous about the reference to a licensing scheme rather than a registration scheme; this has brought nothing but bureaucratic grief in Scotland.

What is land transaction tax?

Land Transaction Tax is the Welsh version of stamp duty paid on buying a property in England.

What is the Welsh co-operation agreement?

The Labour-led Welsh Government and Plaid Cymru have had an agreement to support each other in the Welsh Assembly since last year’s elections. Labour won 30 of the 60 seats, so did not have an absolute majority. 

To outvote rival parties, First Minister Mark Drakeford signed a deal with Plaid Cymru to give the parties an overall majority. In return, Plaid demanded Labour take on some of their policies - including resentment of second homes and holiday lets.

Do the second home rules only apply in Wales?

Yes, the measures only apply in Wales, but Scotland and England have similar rules and law changes in the pipeline.

Who is Mark Drakeford?

Mark Drakeford is the Welsh First Minister - equivalent to the prime minister. Born in Wales, he is a career politician who has worked as a probation officer and youth justice worker, and Drakeford is also the leader of the Welsh Labour Party.

Are homes affordable in Wales?

The latest data from the Office for National Statistics says the cost of an average UK home is £281,000 after rising 12.4 per cent in the year to April. The average home in Wales costs £281,000 after rising 16.2 per cent.