Second Homes Debate

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					                            Second Homes (Cornwall)
1.29 pm

Matthew Taylor (Truro and St. Austell) (LD): I welcome the opportunity to have
this debate, and welcome the Minister for Housing and Planning. This issue has been
on-running for some time in our part of the world and in national parks and other
areas that are popular for holiday-making. In Cornwall, it has reached crisis point with
homelessness figures and the unaffordability of local housing to local people on local
wages. Many people who do not come up in the homelessness figures, but who are
looking for homes and cannot afford them are also affected, such as young people
who live with their families and others who have left the county because of work and
the housing situation, but who would like to live where they were born and brought

The number of second homes in Cornwall has been growing substantially, although
the figures are not easy to determine in detail. The rawest figures suggest that the
number of second homes—homes for which people are essentially getting council tax
discounts, which are unoccupied for most of the year and which are used by families
only for holidays, and are not used commercially—has risen from 9,233 in 2000 to
13,221 in 2005. That is a growth of more than 40 per cent. Almost 4,000 of what were
mainly family homes are no longer available to local people. The total number of
households in Cornwall is 215,000, so more than 6 per cent. are now second homes of
that sort. That does not include holiday homes to let that have come through the
business rating system.

Andrew George (St. Ives) (LD): My hon. Friend makes a good point. He will be
aware that on the Isles of Scilly, which are part of my constituency, nearly 25 per
cent. of the housing stock is second homes. In a survey of estate agents that I
undertook in my constituency last year, I found that twice as many properties sold in
the previous year had gone to second home usage than to first-time buyers. That
amplifies the seriousness of the situation.

Matthew Taylor : My hon. Friend makes a good point about the Scillies, but the
problem is not only there, it also affects popular holiday communities around
Cornwall. Official figures for St. Just in Roseland parish show that there are 234
second and holiday homes and 596 homes in which people are in full-time residence.
Second home ownership in some Cornish parishes is as high as 80 per cent., taking
holiday lets into account. A survey conducted in Portscatho suggested that 85 per
cent. of properties are unoccupied most of the year. That is not a small village; it is
quite a substantial one. Manaccan on the Lizard peninsular, with which my hon.
Friend will be familiar, also has a figure of more than 80 per cent.

To put those figures in context, in the same period there was an increase in social
housing. While there were 4,000 extra second homes, the net increase in social
housing was 51—just over 1,000 properties were built, but nearly 1,000 were sold
through the right to buy. Indeed, since the right to buy was introduced, more than
10,000 council houses in the county have been sold. That is a third of the stock.
28 Feb 2006 : Column 69WH

In north Cornwall, there are 3,797 second homes—I reiterate that I refer to homes
used only by their owners' families and friends and which are not rented out
commercially—compared with 4,595 local authority and registered social landlord
homes. The number of second homes alone in north Cornwall is approaching that of
homes available for affordable housing, and far exceeds that number when
commercially let properties are taken into account. There is a similar problem with
building developments. In 2004–05, 2,000 homes were built, of which all but 231
were private commercial developments.

All of that takes place in a county in which homelessness is a serious issue. In 2004–
05, 1,213 households were found newly homeless, of which 875 were considered to
be in priority need.At the end of September 2005, more than 1,000 homeless
households were placed in temporary accommodation through local authorities, and
15,600 were on the housing register in the county in 2004–05. It is interesting to put
those figures in the context of vacancies among local authority and RSL housing. In
north Cornwall, there were only 272 vacancies, but more than 2,000 individuals were
accepted on the homeless register, which includes only those individuals who are
deemed to be in need of social housing. It will not include young adults of working
age because they are not considered to be in that sort of need. People have to be
disabled, have children or be elderly to qualify, or there must be some other relevant

The most recent figures that I have been given include only second homes under the
council tax discount—there is still a 10 per cent. discount—but according to people to
whom I have spoken, those data are dubious. Others researching this issue may be
aware of that. I make that point because the Minister may refer to that council tax
data, according to which second home numbers appear to have remained fairly
constant since 2002, and even to have declined in some parishes. However the people
to whom I have spoken say that that is not representative of the true issue. Housing
officers and county council statisticians all say that those official figures do not reflect
the real situation. What evidence of that is there? The deputy chair of the Cornwall
branch of the National Association of Estate Agents confirms that estate agents report
no decline in the number of people buying second homes in the county. Local
communities reporting to district and county housing officers and statisticians say that
that the number of second homes in their villages and towns is greater than official
figures suggest. That has been confirmed to me by district council housing officers.

A survey conducted by Crantock parish council in 2004 concluded that actual second
home numbers are far higher than the census figures. For Manaccan, census figues put
second home ownership at 25.2 per cent., but the parish council figure is more like 80
per cent. Similarly, official figures for Veryan parish show 116 second and holiday
homes compared to 427 resident households, but in Portscatho, which is one of the
major communities in that area, and which is similar to others, an actual household
survey suggested that more than 80 per cent. of properties were owned by people who
were not in full-time residence. In such places, one has only to look at the blank
windows on winter evenings to know that that is obviously true.
28 Feb 2006 : Column 70WH

In Portloe, I was approached by a constituent who is looking for housing. He works as
an odd-job man in the area and is obviously on a low income. He had just been given
notice to leave the last full-time rented property in the parish. All other rented
properties are rented as holiday accommodation, so the best that he could get was a
winter let. That vacancy had come about because—surprise, surprise—the property
was being sold as a second home.

Why does the problem with data exist? There are a number of reasons for it, and it is
important that the Minister is aware of them, because they are significant issues for
Government as well as for us in the county. Restrictions on time and resources are
impacting negatively on the quality of data gathered through the census, but I draw
the Minister's attention to the fact that council tax data seem to be increasingly more
misleading. That might be an unforeseen—or partly foreseen because there was
comment about the possibility of tax avoidance—consequence of people seeking to
minimise their tax knowing that they can get a 50 per cent. discount on second homes,
rather than only a 10 per cent. council tax discount. The senior research officer at the
county council told me:

       "With council tax my understanding is that it is financially more advantageous
       for some owners of what really are second homes to pay business rates. Also I
       don't think this is quantifiable unless research has been done which I don't
       know about, but it is said that some couples with two properties register one of
       them in each of the two properties and each pays council tax with a single
       person discount . . . Those are just two reasons why the figures may be

The loss of the second homes council tax incentive means that there is a potential
financial advantage for couples or family members to register as single occupants of
properties. They then qualify for a 25 per cent. discount, and often look forward to
inheritance tax advantages in the future. Young adults living with their parents might
be registered as living at second homes in order to minimise council tax payments
there and future tax liabilities. Alternatively it may be financially advantageous to a
register a second home as a small business and apply for small business rate relief.
The anecdotal evidence confirms that.

A member of the treasury team at Kerrier district council reported an increase in the
number of domestic property addresses submitted on the last batch of forms for small
business rate relief. He noted a drop in the number of second homes registered
compared with the previous year. People are swapping across. Restormel and Carrick
both confirmed that and I was provided with a specific example in Kerrier, which
gives a measure of the financial advantage of doing that. A property in Kerrier district
council that is currently in council tax band B—a small property with a council tax
that is not particularly high—would, with the 10 per cent. second home discount, be
subject to £836.46 in council tax. However, if it were registered as part of a small
business, it would be subject to £809.25, which would be the full business rate, but if
an application were made for the 50 per cent. small business discount, the bill would
be reduced to £404.63. That is a clear incentive to make the change, let alone issues
such as capital gains tax avoidance and inheritance tax further down the line.

If that were happening to a great extent, one would expect the process to filter through
to the holiday-homes-to-let market. The figures are incomplete

28 Feb 2006 : Column 71WH

because if people say that they are registering as a letting business but do not bother to
let the property they do not necessarily come into contact with the tourist associations.
Even setting that aside, in 2001 there were 2,895 self-catering accommodation
businesses in Cornwall and in 2005 there were 4,111, the great majority of which
were hired holiday homes. That is significant growth, to say the least, and there are
likely to be thousands more. Those figure show that, contrary to the indication from
council tax figures on second homes that there has been a slight decline in numbers,
there has been an increase of more than 1,000. Taking the two together, it is not
unreasonable to assume that about 10 per cent. of all properties in Cornwall are likely
to be holiday homes or second homes. Those homes used to be for full-time family

I hope that I do not need to spell out the resulting issues in too much detail, but I will
run through them. First, this is money coming in from other parts of the country from
people who are wealthy enough either to invest in a small business—letting the
property—or to have it simply as a second home. Many people can afford to do that.
It undoubtedly contributes to rising house prices because it adds a huge extra demand
to the market. The average house price in Cornwall confirms that prices bear no
relation to local incomes. The average house price in Cornwall is now just over
£208,000, compared with £191,000 in England and Wales, yet our wages are 25 per
cent. below the national average. According to Shelter and others, that is the worst
affordability gap in the country and worse than London where house prices are higher,
but incomes are much higher.

Since 1999, national house prices have risen by 97.9 per cent. and that created
headlines about inflationary house price rises. However, in Cornwall the rise has been
153.1 per cent. Yet wages have fallen further behind the national average in the same
period, so it has clearly not been driven by people in the local housing market. That
has also lead to the erosion of community fabric as family members are priced out of
the market and forced either to move away or to live in the family home. Tight-knit
communities have been weakened as a result.

Mr. Dan Rogerson (North Cornwall) (LD): I congratulate my hon. Friend on
securing this important debate. Does he agree that the effects that he is describing
could have an impact on the excellent education system that is provided in Cornwall
because of the decline in numbers in small village schools, which will create problems
in future?

Matthew Taylor : My hon. Friend is right, and I was about to come to the reduced
use of local services. Those services include not only schools, but pubs, post offices
and buses, and reduced use sometimes results in the closure of services. I shall give a
couple of examples.
The first is from my constituency. St. Mawes is a large community but the
combination of retirees and the holiday market means that it can scarcely maintain a
two-classroom school. Numbers have been declining and the school may be lost
altogether. Crantock is another example, which is familiar to my hon. Friend. Two
stores have closed, the playgroup has folded, the

28 Feb 2006 : Column 72WH

youth club is struggling, pubs have few out-of-season customers, and the village hall,
churches and charity organisations are all reporting difficulties in maintaining
themselves. In that area, 80 per cent. of homes are reported to be holiday homes or
some sort of second homes.

Julia Goldsworthy (Falmouth and Camborne) (LD): I am sure that my hon. Friend
is also aware that the regional spatial strategy that the regional assembly is proposing
includes a huge increase in house build in the most urbanised areas of the county.
That will exacerbate the problem even more. Villages need homes to help to maintain
sustainability, but they are not being built in those places.

Matthew Taylor : I thank my hon. Friend. These shocking figures come from new
research, although the Minister may have seen similar material from his civil servants.
It has taken a great deal of work to put the material together because it is not readily
available through the local authority due to the difficulties in determining what is
actually going on.

I want the Minister to consider some serious solutions. First, it is evident from what I
have said that we need a serious study of what is going on. Perhaps it could be piloted
in Cornwall where there is evidence of the effect of the second-home discount. I
welcome the change because the discount seems to have thrown people into various
tax avoidance schemes with no proper measure of what is going on. We need some
serious work on the impact, not only in Cornwall, but in national parks and similar
areas, which seem to be suffering similar problems. Otherwise, funding and planning
decisions, not least on house build, will be taken on the wrong basis and the
Government will lose cash for local communities, which they should not do. Local
councils which need that money to build affordable homes will also lose.

The second issue is the need to tighten up the application process for small business
rate relief. Under Government rules, it seems that all that people with second homes
need to do to cut their tax is to say that those homes are available to rent for 140 days
a year. They just have to tick a box on a form and do not have to provide any evidence
that they have marketed the property, let alone that they have actually rented it out. In
many cases, the community does not even benefit from more visitors because the
property is occupied for only two or three weeks a year when the family take
advantage of it. Yet they benefit from a cut in tax and the local council loses money
that is currently being invested in building new affordable homes, which is what the
extra money from second-home council tax is being used for.

The third issue is that it is important to ensure that the extra funds obtained from
increased council tax charges continue to be ring-fenced and are not included in
general council income. Councils have a discretionary power to raise the council tax
from 90 per cent. and 50 per cent. and to get rid of the discount. In Cornwall that
money is predominantly being transferred to the districts to build new homes. For
example, in 2004–05 such money delivered real results on the ground with 20 houses
in Penwith, 10 in Kerrier, 28 in Carrick, 35 in Restormel, 34 in North Cornwall and
six in Caradon.

28 Feb 2006 : Column 73WH

Many more are in the process of being built. Such results depend on the money being
ring-fenced, and I hope that the Minister can offer some reassurance on that. They
also depend on people paying, and if they continue to move their holiday homes to
business rates that money will dry up.

When we have sorted out the tax avoidance issues, I believe that owners of second
homes might pay more rather than less council tax than someone with a normal, full-
time home. I shall not give a figure and I am not into penalising those people, but it is
normal in the tax system—for example, VAT—to pay little or nothing for essentials
but to pay the full rate for things that are less essential. For example, we do not pay
VAT on food or children's clothes, but in the housing market people still pay less
council tax for a second home than for the home they live in. That seems to be an
oddity in the system.

My most important call is for the Government to examine the planning system. The
national parks have done so with new build—not with total Government support—by
introducing restrictions on new build and insisting that it is used for full-time
occupation. However, there are still two planning rules that the Minister must review.

First, barn conversions in rural areas are not allowed for a full-time home, yet they are
allowed for a holiday business. That does not make any sense at all and very much
angers local communities. In many cases, farmers say that they want to make the
conversion for a local person, and that they will charge an affordable rent, but they are
not allowed to do so, perhaps because of misplaced sustainability concerns.

Secondly, it is most important that the Government reconsider giving local authorities
planning control powers to stop full-time homes being converted to second homes in
ever-increasing numbers. I know that it would be hard to police, but there are good
tax reasons for policing such conversions. If they are not policed, there may be
substantial capital gains tax avoidance. There is also the business rates issue and
potential inheritance tax avoidance.

Policing the development of second homes is necessary anyway, but in communities
where 60, 70 or 80 per cent. of homes are being turned into holiday homes and where
the demand appears to be insatiable, it is vital that councils can say, "Enough is
enough." Frankly, if they do not, there will be no point in building new homes in
Cornwall. From figures that I obtained today about houses built over the past five
years, it appears that at least one of every two has, in effect, gone into the holiday and
second home market. Therefore, we are not tackling the housing problem in Cornwall.

1.51 pm
The Minister for Housing and Planning (Yvette Cooper) : I thank the hon.
Member for Truro and St. Austell (Matthew Taylor) for securing this debate and for
using it to raise the important issue of housing availability and affordability in
Cornwall. The Government take the matter of housing affordability seriously, and we
recognise that problems of affordability must be addressed in all parts of the country.
Sometimes, affordability is talked about as if it affects only London and the south-
east, but, clearly, it does not. It affects different regions in different ways, according
to the different circumstances that arise.

28 Feb 2006 : Column 74WH

Average house prices in the south-west are over £200,000 and are the fourth highest
in the country. The average price figure that I have for Cornwall of £202,396 is
slightly different from the hon. Gentleman's figure, but similar.

Housing is also a problem for first-time buyers. It can be difficult for many hard-
working families and households to pay for starter homes, which can be expensive.
There are more than 1 million more home owners than in 1997, largely as a result of
lower mortgage rates, but the pressures on the housing market in general mean that
first-time buyers in particular face pressures.

In the south-west, the ratio of lower quartile house prices to lower quartile earnings is
8.46, compared with an average for England of 6.8. We know that there are particular
pressures in Cornwall, that house price pressures can have not just a social but an
economic impact, and that they can affect the sustainability of local communities.

It is important to put the problem in a national context. The south-west cannot be
treated in isolation, although there are some specific issues around the nature of the
local economy and the environment in that area. However, there is also a wider
context: during the past 30 years, the number of households has increased by 30 per
cent. but house building has fallen by more than 50 per cent. Nationally, each year,
190,000 new households are created, but only 150,000 new homes are built.

The level of house building has increased, but it must increase further. Otherwise, in
about 20 years' time, only one third of 30-year-old couples will be able to afford to
buy their own home. That is unacceptable, as it does not meet people's aspirations or
housing need. That is why more market homes, more shared-equity homes and more
social housing must be built. Further proposals to do that have been set out in the
Barker review. They include changing the planning system and consulting on a
planning gain supplement to raise additional resources for infrastructure, as well as
increasing environmental standards.

The Government recognise that the challenges facing each region are different. There
is high demand across London, the south-east and most of the east of England. Rising
incomes are matched by even higher housing demand, which is not matched by
housing supply. In the northern regions, areas of high demand are sometimes
alongside areas of low demand, which creates different challenges.
In the south-west, there is a problem of housing supply not keeping up with housing
demand. It is clear that there is a need to build more homes to meet demand.
However, the position is more complex because incomes are lower than in other parts
of the country, there are higher retirement levels in certain parts of the south-west and,
of course, there are the issues around second homes that the hon. Gentleman raised,
which are acute in particular areas.

The regional spatial strategy must take seriously all those different aspects and the
need for more new homes in the south-west, but it must ensure that building is done in
a sustainable way. That means matching

28 Feb 2006 : Column 75WH

strategies for new house building with strategies for economic regeneration and
development—jobs and housing must be considered together—and the location of
homes must be considered as well. There is an issue around the long-term
sustainability of rural communities, given the additional pressures that they face.

The Government are increasing investment in affordable housing. Of the eight
regions, the south-west has received the largest increase in its regional housing pot, up
from £137 million in 2005–06 to £203 million in 2007–08. That is a significant
increase. The south-west regional housing body proposes providing up to 9,500 more
affordable homes in the next two years, up from the 6,000 homes that were provided
in 2004. We shall announce the final details of the next programme shortly, but it
includes significant increases for the west Cornwall market area. I know that
Cornwall county council and the six district authorities are also considering new
measures to address the problem.

Matthew Taylor rose—

Yvette Cooper : I have only three minutes, and I want to address the issues that the
hon. Gentleman raised about second homes, if that is all right. He raised questions
about the number of second homes. Obviously, it is difficult for me to respond in
detail to some of the questions about the evidence base, but I shall look into the matter
further. I certainly take

28 Feb 2006 : Column 76WH

seriously the points that he raised about council tax avoidance and business rate relief
and shall look into them further.

The Government will continue to support the revenue for affordable housing that is
raised for districts from the changes to the council tax discount. It lasts from 2004 to
2009 and generates some £3 million per year extra subsidy for the provision of
affordable housing in Cornwall.

The hon. Gentleman raised some wider issues around second homes. We must
recognise that the position is complex, as second home ownership can have a positive
impact on the economy if it supports tourism, and the jobs and incomes that depend
on it. The Government asked the Affordable Rural Housing Commission to consider
in more detail the pressures that are created by second homes, and their impact on
rural areas. The commission is also considering where new homes should be built and
sustainability for small communities and villages, particularly if there are high levels
of retirement in the area. We must ensure that communities have a long-term future
and not simply an ageing population.

The Affordable Rural Housing Commission was set up in July 2005 to consider the
evidence and to reach consensus on the relevant issues that impact on affordable
housing needs in rural areas. It is due to report in the spring this year—in fact, in only
a few months' time—and we will look closely at its proposals and any issues that it

Question put and agreed to.

                       Adjourned accordingly at one minute to Two o'clock.

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