My Lords, this group of amendments concerns second homes, holiday lets and empty properties. I declare my interest as set out in the register as the owner of a second home in Wales.
In relation to Amendment 166, tabled by the noble Baroness, Lady Hayman of Ullock, I share her commitment to ensuring that we have the best-quality data to inform our policies. Indeed, I also share some of her concerns. I can assure her that we already have good systems in place; for example, local authorities report annually on the number of properties that have been classed as empty for more than six months. This
data is published as part of the council tax base statistics. It is also used as the department’s measure of long-term empty dwellings that are published in the live tables on dwelling stock. This latter data includes the number of properties vacant on a particular day, as well as the number of properties that have been empty for more than six months.
As part of our council tax base statistics, we also detail the number of properties that are subject to the existing long-term empty property council tax premium. This shows the number of properties subject to the premium in each local authority area, broken down into the different levels of premium that apply, depending on the length of time that the property has been empty. We will continue to further refine the data we seek from local authorities to ensure that we have data on how many properties are subject to the extended premium, having been empty for more than 12 months. I hope that the noble Baroness is satisfied with that assurance on data that we already collect and propose to collect.
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I turn to Amendment 167, tabled by the noble Baroness, Lady Taylor of Stevenage. The Government understand the concerns that a high concentration of second homes can have a negative impact on local communities. We have already introduced a higher level of stamp duty for purchases of second homes. We are also investing £11.5 billion into the affordable homes programme that will deliver tens of thousands of affordable homes. Clause 76 provides a further power for councils to use, enabling them to apply a premium on top of the existing council tax on second homes. This will generate additional resources for councils to reinvest, as they see fit, into local services and to improve the sustainability of local communities.
We need to ensure, however, that in introducing a premium, we strike the right balance. We must not lose sight of the fact that second homes can benefit some local economies and the tourism sector, particularly when they are regularly used as holiday homes. They can also allow people to work in and contribute to the local economy of the area, while being able to return to a family home in another part of the country.
I know that the Welsh Government have decided to allow councils there to increase the level of the existing premium on second homes to 300% from this April. That is, quite rightly, a decision for them. However, it is telling that while the Welsh Government are increasing the maximum premium that could be charged, only three of the 22 councils in Wales make use of the current maximum of 100%. The Bill includes provision for the Secretary of State to introduce different levels of premium in future, but it makes sense to see the impact and to assess the evidence of this new measure before we consider taking any further action.
I turn to Amendment 168, tabled by the noble Baroness, Lady Taylor, and Amendment 168A in the name of the noble Lord, Lord Berkeley. It may be helpful if I set out the rationale for the approach in this particular part of the clause, and to make clear what it does not do. The clause does not require everyone who purchases a second home in the future
to be given at least 12 months’ notice of the application of a council tax premium on their home. If a council has introduced a second homes premium in its area, it is quite reasonable to take the view that the purchaser would have taken account of that policy as part of their decision to purchase. Nevertheless, the Government believe that it would not be fair and proper to those individuals who currently own second homes—and who may have done so for decades—to be faced suddenly with a significant change in their tax liabilities without a reasonable period of warning prior to its introduction. Therefore, the clause requires that, prior to the initial introduction of a new premium, councils should give existing owners of second homes an appropriate period to consider how they might want to respond to the measure. They may choose to sell, they may decide to retain it as a second home, or they may wish to explore alternative uses.
As the amendment in the name of the noble Lord, Lord Berkeley, demonstrates, what might constitute an appropriate period of time before a new tax is applied is a matter of judgment. Given the impact that the measure may have, the Government believe that a period of one year prior to a premium’s introduction provides an appropriate window within which individuals can consider their response. Once the premium is in place, it will apply to all liable properties covered by the council’s determination. Although I understand the desire of the noble Baroness and the noble Lord to ensure that councils have access to these powers as soon as possible, the consequence of Amendment 168 would be that those owning second homes could suddenly become liable for additional tax, with very limited time to respond.
In relation to Amendment 170, I am grateful to the noble Baroness, Lady Hayman of Ullock, for setting out her concern to support those individuals who may become responsible for a home following a bereavement, and to protect them from the risk that they may become liable for a premium. It is worth noting that the council tax system already provides significant support in cases where a property becomes empty following the death of the owner. If there is no other liable person, no council tax will be due until the grant of probate. If the property remains empty, there is then a further period of up to six months following the grant of probate before council tax becomes due again.
Where a property is exempt from council tax, a premium cannot be applied to it. In such situations, therefore, neither a second homes premium—as set out in this clause—nor an empty homes premium, as provided for by Section 11B of the Local Government Finance Act 1992, can apply. The noble Baroness makes a strong case for a further period of exemption from the second homes premium in those cases where a property has effectively become a “second home” as a consequence of bereavement. I do understand those concerns; it is certainly not the intention of the clause to capture all those who have unwittingly become a second home owner in such situations.
The noble Baroness has set out the arguments in favour of a two-year exemption where a property is inherited, and I can certainly see that there may be a case for some further protections. I trust that the noble
Baroness will be reassured by the fact that Clause 76 includes the power for the Secretary of State to make regulations to prescribe the types of properties that should be exempt from the premium. Those exemptions could be based on the nature of the property or the circumstances of the owner.
Before creating any potential exemptions, the Government would wish to seek views through consultation to develop a well-informed basis on which to make regulations. That will provide the opportunity for everyone to feed in their suggestions and to enable the Government to reflect on any exemptions from the second homes premium that should be introduced. It will certainly be the Government’s intention to make any such regulations before the premium comes into effect.
Regarding Amendment 172A, in the name of the noble Lord, Lord Blunkett, I thank the noble Lord for setting out his arguments to support his proposal for an independent economic evaluation before the introduction of council tax premiums on second homes. Councils will already be fully alert to the challenges facing their local areas when it comes to the impacts caused by large numbers of second homes. It is clearly right that councils will want to have reflected carefully on the merits of introducing a premium, and at what level, and also how they propose to make use of the additional resources generated by a premium.
I welcomed the endorsement by the noble Lord, Lord Blunkett, of the hope that devolution to local authorities should enable them to undertake a proper review of these housing needs, and of course this will be helped by having the correct data available on which to base these decisions. As always, the noble Lord made a number of thoughtful observations, including on the way that the use of second homes has changed since the pandemic and with the advent of working from home.
I am sure that, in considering whether to introduce a premium, councils will want to reflect on the potential behavioural responses that might follow. This might include some second home owners deciding to use their homes as holiday lets. Such steps would clearly have an impact on the potential revenues, and I am sure that councils will want to note that. The measures we have set out in the Bill provide councils with the discretion to introduce a premium, and at what level, up to the statutory maximum; it does not require them to do so. We believe that it is right to trust councils to make their own decisions on whether to introduce the premium, informed by their own knowledge and experience of the impacts of second homes. Councils will of course also have the freedom to decide how to make use of that funding.
Councils will be accountable in the normal way for the decisions they make, including the introduction of the premiums and any future changes they wish to make. As such, I believe it is right that we trust local judgments and avoid dictating what considerations councils should take into account prior to making any changes to the council tax premium.
I now turn to Amendments 171, 442 and 445C in the name of the noble Baroness, Lady Hayman of Ullock, Amendments 228, 263, 264 and 265, tabled by
the noble Lords, Lord Foster of Bath and Lord Shipley, and Amendment 294 in the name of the noble Lord, Lord Young of Cookham. These are highly important matters for many, not least the communities that feel the effects of second homes and holiday lets most acutely. As such, although the final design of the scheme will depend on the views we hear in our consultations, in relation to Amendment 171, these are locally specific matters with a strong connection with the planning system.
Amendment 228 seeks to allow neighbourhood plans to set policies in relation to the number of properties in an area that are permitted to be used as second homes or holiday lets. Neighbourhood plans are an important part of the planning system that allow communities to shape developments that meet their needs. Existing legislation, and the changes within Clause 91 of the Bill, already allow for policies relating to the sale or use of dwellings to be included in a neighbourhood plan. Some areas, including in Northumberland and Cornwall, already have such policies in place.
The Government recognise the impacts that the proliferation of second homes, holiday lets and temporary sleeping accommodation can have on communities in some areas. We have heard, for example, the concerns of areas such as the Lake District, Devon and York regarding the impact of increasing numbers of short-term holiday lets on the availability of homes for local people and the broader community. I have already mentioned the action the Government are taking, both through this Bill and elsewhere, to address these issues. We know that solutions for local areas will need us to look at practical solutions that will help to address specific local issues without unintended consequences.
Amendments 263, 264 and 265 all share a common feature by introducing a transaction feature into the definition of development. They seek to require that planning permission be obtained for a property to be used as a second home or holiday rental following a change of ownership. This requirement applies whether or not they were used in that way before the change in ownership. Planning permission is required for development, including the material changes of use; a change of ownership does not constitute development. The implications of treating transactions as falling within these definitions would be ongoing uncertainty and cost for home owners, buyers and the housing market as a whole. The Government are therefore not convinced that this approach is quite right; we already have the power in the Town and Country Planning Act 1990 to introduce a use class for holiday lets, secondary or supplementary residences.
In relation to Amendments 265, 294, 442 and 445C in particular, we have announced, in addition to the registration scheme in the Bill—on which we shall be consulting—that we will consult on the introduction of a planning use class for short-term lets. This consultation will in particular seek views on the definition of a short-term let. As such uses are not an issue everywhere, we will also consult on the introduction of national permitted development rights for the change of use from a C3 dwelling-house to a short-term let
and vice versa. These rights may then be removed by making an Article 4 direction where there is a local issue, meaning a planning application would then be required where there is a material change of use.
We are also exploring how, were this approach to be adopted, the register could support local planning authorities in the application and enforcement of any use class changes, and I hope that the noble Lord, Lord Foster, can await the outcome of these consultations. Further detail on the timing of this consultation will be provided—and here I have a minor victory for my noble friend Lord Young: I have been able to change it from “in due course” to “shortly”. Sadly, I was not allowed to go further than that, but I do believe that “shortly” really means “shortly”. Subject to the outcome of the consultation, were the new use class introduced, the changes would help local authorities control the proliferation of such uses where existing homes seek to become used for short-term lets.
In relation to the contribution of the noble Lord, Lord Mann, I will have to take away that very sad story and ponder on it a bit further. But with those comments, I hope I can persuade noble Lords not to press their amendments.