The headline last week that Cornwall Council will be given the power to levy a 100% council tax premium on second homes was welcome news after a sustained campaign by councillors and MPs. But how much will it raise and what should it be spent on? Will it have any real effect on the housing crisis and should Westminster have gone further and abolished the business rates exemption for holiday rentals too?
There are 13,255 second homes recorded on Cornwall Council's council tax database- although it is openly acknowledged this is not an accurate up to date figure. Estimates put it at about 16,000 and many predict this number will increase when the 2021 Census is released, giving us more recent information on what percentage of the county’s 280,000 strong housing stock is used for leisure and not for living (for reference Wales is around 23,000).
The average council tax bill on a Cornish property is £2,108 meaning 16,000 second homeowners already pay around £33 million per year to Cornwall Council in council tax- just under 10% of the total income of £347 million. This could double to £66 million if the premium is applied at 100%.
The next question is how any new premium should be spent. Local authorities will be able to decide on how to spend funds raised and many feel that, like the adult social care levy on council tax in 22/23 which is due to raise £3.4 million, the second home premium should be earmarked exclusively for affordable housing- perhaps even in the same location; a hyper localised approach meaning second homeowners making a large contribution to providing homes for local people. If it is used as general revenue funds to reduce council tax bills the levy would do nothing to solve the housing crisis at all. An extra £33 million a year would translate to a lot of affordable housing.
Another concern for residents, councillors and MPs are the 8000+ holiday lets registered for business rates- meaning they pay no council tax at all. The exemption equates to an annual £18 million ‘discount’ to holiday let owners. The visitors using these holiday lets will spend a significant amount of money in the area but few can understand why letting a property out for ten weeks of the year, with much of the rental income (often the biggest expense) leaving the county, justifies not contributing to the upkeep of the infrastructure and services. Council tax and business rates are the main ways, aside from central government funding, that councils must fund the majority of their services. In 2022/23 Cornwall residents have seen their CT bills rise by nearly 3% whilst experiencing the largest ever reduction in services in a single year. An £18 million increase would provide a significant boost to the council’s budget- nearly covering the £22 million of cuts made to adult social care services this year despite the 1% levy.
So is Cornwall at a point where more regulation and/ or taxes must kick in?
It has to be acknowledged that in many ways Cornwall is booming; a property market with the highest increases in the country, planning applications up (unfortunately as job cuts push officers down) along with spaceports and satellites. The G7 made St Ives not look like the child poverty capital of Cornwall, Tom Cruise came by on a superyacht and Taylor Swift even made an appearance somewhere on the north coast. It’s a glossy picture.
We need tourism, it is around a 20% of the economy, but to many Cornwall is at a point where its life blood could also be its poison- because tourism encroaches on the housing sector in a way no other industry does. Cornwall has 1 per cent of England’s population and 17 per cent of its second homes; in some towns, second homes and holiday lets (for there is a difference between the two) are the majority. Holiday lets, self-catering accommodation, will always be in demand (I’d be lying if I said I’d never used an AirBnB), but should this take priority over the county’s residents not having homes?
There are 22,000 households on the housing register. Cornwall Council declared a housing emergency in 2021 and has since implemented a £15 million emergency programme, with money taken from existing affordable housing schemes. However, when compared to the business rates relief, it actually works out the council spends £3 million more subsidising holiday let owners than in housing its own residents in an emergency.
So… does a 100% s council tax premium go far enough?
For those able to afford a second home- will an extra £2000 a year make a difference? In March the Welsh Government gave their councils the right to charge a 300% council tax premium on second homes and long term empty properties plus they've more than doubled the number of days a year the property must be rented out to qualify for business rates.
If Cornwall Council had the powers to do this it could generate an additional £101 million on top of what’s paid in council tax today- £120 million if the £18 million business rate exemptions were binned.
It will be interesting to see how the picture in Wales, Cornwall and Devon plays out over the next few years as the differing new rules come into effect. One thing’s for sure; we haven’t heard the last of tourism related taxes and regulation of the market. Until there is some balance in the housing situation down here it will continue to be the talk of every town.
Photo by Darren Welsh on Unsplash
Graphic by Flea Market Economics
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