Seconds out on second homes

As the market becomes more polarised so the debate on second homes becomes more intense. But is government intervention justified?

20 May 2013, Words by Sophie Chick


With households struggling to get onto the housing ladder, the issue of second home ownership, whether that be in the garden squares of central London or along the attractive British coastline, has rarely been more emotive.

Arguments that second home ownership makes housing unaffordable to local residents and deprives communities of social vibrancy have come to the fore.

Not only have council tax discounts for second homes come under scrutiny, but questions have been raised by local authorities and lobbyists such as the Campaign to Protect Rural England (CPRE) as to whether second home ownership should be regulated through the planning system or be the subject of additional taxes.

Policy context

In an age of austerity and at a time when home ownership among the under 35s has fallen by one third in 10 years, it is difficult to argue that second homes, considered by most to be a luxury, should be treated any differently to main homes for council tax purposes. Neither is it easy to argue that non doms, who reside in London for part of the year, should be able to take advantage of stamp duty loopholes.

While measures in these two areas have been taken, proposals for further regulation and taxation of this market need to have regard to the extent and distribution of second home ownership and its wider impacts both positive and negative.

National numbers

Council Tax records indicate there are some 255,000 second homes in the UK, just 1.1% of the UK housing stock. In the context of Britain’s housing need it is a small figure, broadly equivalent to the number of houses which need to be built in Britain each year to meet growing housing demand. However, it is the local concentration of second homes and the consequential impact which this has on house prices that generates so much debate.

Local concentrations

Second home ownership is generally high in Central London and in the most attractive rural locations.

In Kensington and Chelsea around one in every 12 dwellings are second homes. There is a temptation to think that this is purely down to very wealthy overseas buyers who have parked their money in London’s most expensive districts. In reality 11% of band G and H properties in the Royal Borough of Kensington and Chelsea (RBKC) are second homes. One half of second homes are in lower council tax bands. These are often used as a weekday base for those working in London’s tertiary employment sectors. Nowhere is this more evident than in the City of London where 25% of the 6,000 or so dwellings are second homes.

Second home ownership also exceeds 7% of the housing stock in the likes of the South Hams, North Norfolk, Purbeck and South Lakeland. Evidence from Cornwall gives perhaps the most useful insight into the impact of home ownership in these essentially rural areas.

Lessons from Cornwall

It shows that while overall second homes account for 5.7% of all housing in the county, there is wide variation. This means there are 2.7 times the number of homes in the swathes of inland Cornwall where second home ownership is less than 2%, compared to those coastal areas where second home ownership runs at more than 10%.

Furthermore, a significant proportion of second homes, some 39%, are in areas where second homes account for less than one in 10 dwellings.

While there are wide areas where second home ownership is not a major concern and a large number of second homes in areas of Cornwall where they have little impact on the social infrastructure, there are undoubtedly areas of high second home ownership that have a greater impact on both house prices and, the economic sustainability of rural services.

Impact on prices

Certainly as levels of second home ownership rise so too do average house prices. At one end, second home owners are not attracted to low value housing markets. At the other, prices are pushed up by the budgets of affluent second home owners. In the five parishes of Cornwall where second homes account for more than 35% of all housing the average house price is 87% above the county average. This premium falls to 46% where second home ownership is between 20% and 30% and further to 23% where it is between 10% to 20%.

Local buyers will therefore be priced out of some but certainly not all housing markets. Where they are, access to affordable housing is often in larger towns, as reflected in the price differential of neighbouring areas such as Padstow on the one hand and Wadebridge on the other.

Policy perspective

So the case for further taxation and regulation of second homes is far from clear cut. In the capital, second homes provide an important base for those working in London. In the country the impact on prices and local services is localised and far from universal. In both, regular visitors bring spending to the local economy.

Overall second home ownership is an inevitable consequence of a society where wealth, particularly housing wealth, is unevenly distributed. Perhaps the attention which it has recently received simply reflects society’s heightened awareness of the differences between the haves and have-nots.


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