Second Homes and Holiday Lets: Rural Communities — [Mr Virendra Sharma in the Chair]

Part of Backbench Business – in Westminster Hall at 2:20 pm on 6th January 2022.

Alert me about debates like this

Photo of Kevin Hollinrake Kevin Hollinrake Conservative, Thirsk and Malton 2:20 pm, 6th January 2022

It is a pleasure to serve under your chairmanship, Mr Sharma, and I thank Tim Farron for having secured this important debate. It was good to hear him speak in favour of free markets: that is not something we always hear from his party, so it was very welcome. However, I agree with him that we are in a broken market. I must draw the House’s attention to my entry in the Register of Members’ Financial Interests: I have been involved in the housing market for many years.

There is a scarcity of land across the country, and in the rural areas we are talking about today—many of which are covered by national parks, including much of my area—those scarcities are even more profound. The reality is that we are already intervening in the market by creating that scarcity through the planning process, so I do not think it is wrong for us to talk about interventions, because free markets cannot be the only solution to the problems we have in the housing market.

Certainly, second homes are having a very big effect, creating even greater pressures and affordability constraints in some of these rural areas, and not just rural areas—as Rachael Maskell said, many urban areas face the same kinds of issues. Ryedale council covers much of my patch, where the average house price is around £300,000, with an average earnings to house price ratio of about 8.7. In Hambleton, the ratio is 7.2, and in other places, such as Filey—attractive coastal resorts—prices are going up, and the increasing number of holiday lets is putting further pressure on local people’s ability to find properties to rent and purchase. We cannot just rely on a supply and demand equation to solve all those problems: we must look at different interventions.

What the Government have done through the first homes scheme is part of the solution to this problem. It is an excellent policy, and I do not quite agree with the hon. Member for Westmorland and Lonsdale that it is not a solution for his constituency. He mentioned that average house prices in his patch were 11 times greater than average incomes—well, first homes could be up to half-price. Transfer values in my area from developers to housing associations are below half-price, and there is no reason why some of those houses cannot be made available to purchase in perpetuity through discounts of half-price or even below half-price.

I urge the Government to rename the whole first homes policy “half-price homes”, because we could deliver many properties around the country to local first-time buyers at half-price. That would make a significant difference to the hon. Gentleman’s constituency and to mine. It would mean that young first-time buyers could buy properties in my constituency that would cost four or five times their average earnings, which would bring those homes in scope for lots of those people. I fully concede that this is not all about affordable homes for purchase—we also need affordable homes to rent, shared ownership and lots of other things—but first homes is a very important policy that we should be driving further forward.

Taxation is bound to come into this conversation. Clearly, the Government believe that already: there is already a 3% stamp duty surcharge for second homes, so the Government believe we need to do something about second homes to try to level the playing field between investors, second home owners, first-time buyers and other buyers in our constituencies. This is not uncharted territory for this Government, so we should have a conversation about whether we should have a council tax surcharge as well. There is a perfectly sensible conversation to be had here, while recognising that the Conservative party believes in freedom of choice, so if somebody wants to use their money to buy a second home in a different part of the country as an investment or a place to live, we should not be totally against that. It is about trying to strike a balance between those two things to make it a fair and level playing field.

Another area that could make a big difference and that could fund lots of different activities would be the way we tax non-resident overseas owners. This could be in rural areas or urban areas. I do not think there is any argument for not taxing those people pretty heavily if they own property in the UK and are non-resident. We already have a 2% surcharge, on top of the 3% surcharge, for overseas owners. These people are having a profound effect on some house prices in urban areas as well as rural areas. I think 28% of properties sold above £2 million are bought by overseas owners. Around 20% of all properties in London—and probably a decent quantity in York and other cities—are owned by overseas residents. I do not see a reason why we would not seek to tax those people even more heavily than with a 100% increase in council tax.

Roughly, if we applied a 1% wealth tax on UK properties —this is only for overseas owners, not UK residents—it would raise £4 billion to £5 billion a year. There would still be an incentive for those people to invest their money in the UK, which I am not against, but the reality is that this would make it a fair and level playing field. They would still benefit from the very high house price growth. As we have heard today, house prices have been rising by around 10%, so it still makes sense for people to invest, but such a tax would mean that we could take a little bit out of the money they are making every year from house price inflation and put it elsewhere.

I would recommend that we put that £4 billion or £5 billion a year into the first homes programme, increasing the number of properties available to local, first-time buyers who are keen to get into the housing market. That would ensure that those local people have a stake in our communities and are available for employers to do the very important work of making our communities sustainable.