Expat property investors renting out their homes while overseas face a ban on letting through hotel websites, such as Airbnb and Booking.com.
The measure is part of a comprehensive shake-up of landlord and tenant law in England.
Levelling Up and Housing Secretary Michael Gove wants to stop landlords from switching long lets to holiday lets which are pushing up property prices to unaffordable heights in some popular holiday destinations.
Investors are driven by money as holiday lets can earn them much more than a buy to let.
Whereas the average UK rent is £1,103 a month, according to tenant referencing firm Homelet, holiday let rents vary depending on the type of property, location and length of stay.
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No Letting Without Planning Permission
Owners should expect to earn £21,000 a year from short lets, says booking agent Sykes Cottages, compared with £13,200 a year by a buy to let business.
Research by letting agent trade body ARLA Propertymark found that 46,000 buy to let landlords have already switched business models to short term letting, and around one in ten are considering making the change – around another 40,000 property investors.
ARLA also found landlords with five or more letting properties were more likely to take up short-term lets.
Gove proposes to amend the Levelling Up and Regeneration Bill currently navigating Parliament so that only landlords with holiday let planning permission can rent out their properties. In addition, the minister wants to give more powers to mayors to curb the number of let properties in their areas.
This slots in with the government’s levelling up agenda by adding to devolution plans while increasing the powers of local councils.
Town Votes For Second Home Ban
“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,” said a Department of Levelling Up, Housing and Communities spokesman.
Five English holiday hotspots are already gearing up for the ban.
Voters in Whitby, Yorkshire, voted for a ban on second homes in the fishing town earlier this year. With 2,111 of 2,268 voters supporting the ban, although the poll has no official standing.
The Whitby local authority, Scarborough Council, issued a statement saying: “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.”
In Whitby, the average home costs £254,218, which is well beyond affordable for a local earning an average of £18,900 a year.
Strain On Services
Locals argue that wealthy out-of-towners buy homes in the town because locals cannot afford mortgage repayments on their wages, which are £5,700 a year below the national average salary of £24,600, according to the Office for National Statistics.
Watching the Whitby protest play out are councillors in St Ives’s, Cornwall; Salcombe, Devon; Whitstable, Kent and Tideswell, Cumbria. According to the property portal Rightmove, Salcombe is the UK’s top second-home resort. St Ives and Whitstable also feature in the top ten.
The problem for councils is second homes strain services and budgets.
Second homes and holiday lets are only occupied for part of the year, leaving communities like ghost towns over the winter months. They also impact school numbers, healthcare and infrastructure, like shops with smaller numbers to cater for.
Measures are on the way to double council tax on second homes in England and triple the rate in Wales.
Holiday home tax breaks
Holiday let owners can apply to pay business rates instead of council tax. Due to the rateable value of most holiday lets, they pay no rates or council tax due to relief offered by the government.
This reduction in funds adversely impacts council budgets.
As a result, Gove intends to make qualifying as a holiday let tougher for investors. He is demanding holiday lets be available for 140 days a year and let to paying guests for 70 days if owners want to claim business rate relief.
The aim is to stop second home owners pretending their properties are holiday lets to claim tax breaks.
Similar rules are going through for Scotland and Wales.
Cornwall Cornwall Has One In Five UK Holiday Homes
Poor wages, rising home prices and broken communities add up to dissatisfaction for locals living in popular holiday areas.
Cornwall Council has released some data to reinforce their arguments for banning holiday lats.
For example, the county houses one per cent of the UK population but hosts 17 per cent of the nation’s holiday homes.
Of 12,776 properties listed as second homes, 11,000 are registered to pay business rates instead of council tax, but 8,953 qualify for rates relief and pay nothing to the council. Only one in five homes in some popular holiday villages are occupied all year round.
Second Home And Holiday Let FAQ
What’s the difference between a second home and a holiday let?
A second home is an additional property owned and used by someone with a main home elsewhere and let occasionally to paying guests. A holiday let is a business property rented to paying guests. Both are short-term lets, which means guests stay for fewer than 31 days.
Is it legal to own two homes?
Yes, it is legal to own a home and one or more additional properties. However, if the homes are rented out, the rules are slightly different, depending on if the property is in England, Scotland or Wales.
What are Gove’s planning permission rules likely to be?
The Housing Secretary has yet to reveal how he will amend the Levelling Up and Regeneration Bill but expects a law similar to that in London. There, owners can rent a property on short-term lets for up to 90 days a year. Any longer than that, and they must apply to the local council for planning permission to change the use of the property to a letting business.
Is Gove planning a ban on Airbnb or a ban on letting?
Gove is proposing a ban on pretending to let a property as a holiday let in a bid to eliminate the false claiming of tax breaks. His plans for second homes are they are either a holiday letting business or not.
The tax breaks will follow if the property qualifies as a bona fide holiday.
Gove is not banning Airbnb or any other hotel site but stopping owners without planning permission from advertising.
Can I avoid tax on a second home?
No. Any profit made on selling a second home is liable to capital gains tax (CGT) if it’s above the annual exempt amount of £12,300.
Must I stop letting a second home?
No. The new rules do not mean an investor should stop letting or give up a second home. The measure is about making more affordable homes available to locals by making the running costs of a second home more expensive for owners.
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