Jeremy's Blog 26th November: Housing - Tightening Controls

This article by Jeremy Moody first appeared in the CAAV e-Briefing of 25th November 2021.

It is striking that, while waiting for the mystery of England’s new housing policies to be revealed by Michael Gove, the last eight days have seen Wales and Scotland developing housing packages that interlock local taxation with planning control and licences:

• the close of the Welsh consultation on Council Tax and potential premiums for second homes and the qualification for business rates on holiday lettings
• a new Welsh consultation on separating out second homes and holiday lettings as use classes from primary residences, with councils able to specify areas where planning permission would be needed for such uses of primary residences
• new Scottish legislation for councils to define areas where planning permission would be needed to use dwellings as short-term “AirBnB” or holiday lets
• a new Scottish requirement for short term lets generally to be licensed
• the promise of a Scottish consultation on the taxation of short-term lets.

The Chancellor earlier indicated a review of the threshold for holiday lets to qualify for business rates. Some English neighbourhood plans and councils are requiring primary residence conditions for new dwellings.

The concerns vary from anti-social behaviour by parties in Edinburgh to pressure on the Welsh language in Gwynedd but a common theme in rural areas is blame for high house prices and social change.

Recent years’ tax changes bear on buying-to-let (perhaps to prompt sales) and minimum energy efficiency standards (now being extended to Northern Ireland) challenge many private landlords. The number of let properties has fallen from its peak by 250,000 even if existing homeowners have bought more dwellings than have been built in recent years. Tightening supply may support rents but both Scottish and Welsh Programmes for government mention unspecified rent control.

While the merits of the changes for short lets can be contested (the new Welsh consultation recognises risks), there is a direction of travel. Existing second homes or holiday lets could have more flexibility than others but some of the former may carry more Council Tax and letting activity may have to be serious to qualify for rates (and, where relevant, small business rates relief). If this is more than rhetoric and controls are exercised, there may be less competition and so, potentially, the opportunity for higher rents. What might be the market’s and lenders’ views of primary residences where severe controls are imposed?

Such moves could suggest the prudence of a precautionary review of risk and opportunity ahead of changes potentially happening.