Council tax to DOUBLE on second homes in 200 areas from April

Three quarters of local authorities in England and Wales are set to introduce a 100 per cent council tax premium on second homes from 1 April.

The double council tax charge is being introduced by more than 200 councils and could generate an extra £445m in total revenue, according to a Sky News report. 

It means a second home owner in England paying the typical Band D council tax of £2,171 could soon see that rise to £4,342.

Holiday hotspots such as Cornwall, Norfolk and Somerset are among those introducing the tax, in a bid to make homes more affordable for local people. 

Second homes are defined as furnished properties where nobody lives, or where the owner has their main residence elsewhere. 

The surcharge does not apply to buy-to-let landlords.

Councils that are yet to bring in the changes must first vote on whether to introduce the charge, and then provide a year’s notice before doing so.

What will the changes mean? 

Jonathan Hopper, chief executive of Garrington Property Finders says that while this isn’t a blanket change across the country yet, it could be soon. 

‘The government has opened the door for local authorities in England to charge double council tax on second homes if they want to,’ said Hopper. 

‘Given that many English councils are strapped for cash, due to a combination of inflation and reductions in the amount they receive from central government, it’s highly likely that most will opt to use this new power.

‘The first councils to do so are those with a high concentration of holiday homes – for example Devon, Cornwall, Cumbria and Norfolk – but it’s worth remembering that many properties in central London are second homes too.

‘From the councils’ perspective it’s a no-brainer – they can raise tax revenue but blame it on central government – so I expect take-up to be near universal. 

‘The one crumb of comfort for second home-owners is that the increase won’t come in immediately – councils need to give at least a year’s notice.’

Supporters of the council tax surcharge argue that it will help bring homes back into productive use at a time where there is a housing shortage.

It could encourage some second homeowners to sell up, freeing up homes for would-be homeowners or bring more homes into the rental sector.

Jeremy Leaf, north London estate agent and a former Rics residential chairman, said: ‘In our opinion, any measure which helps to return second homes and under-used properties to single family use should be welcome.

‘More supply will contribute to greater balance with demand, as well as keep prices under control.

‘We see so many homes, especially in seaside resorts or central London, only used for a few weeks each year or, in some cases, left empty for years as capital assets. 

‘Such uneconomic, inefficient use of valuable resources cannot be good news at a time when there is such a damaging housing crisis.’

However, not all are convinced it is such a good idea.

‘Not all second home-owners are the super wealthy urbanites of popular imagination,’ said Hopper. 

‘Some families have had a little place in the country for generations, or use them in ways that support the local economy. 

‘You might see people transferring homes into holiday lets to avoid the surcharge, which could have other knock-on effects.

‘Remember that this change would also impact professionals who live in the country but rent a one-bedroom place in London to use as a base during the working week.’

Could double council tax become triple soon?

All councils now have the choice to introduce the new rules. 

 In 2023, the maximum level at which local authorities could set council tax premiums on second homes was increased to 300 per cent.

While double council tax on second homes is likely to become universal across the country, Hopper suggests that the war on second homes could see that rise further in the future. 

‘Once you open the door to these kinds of premiums, you do have to wonder what’s next,’ added Hopper.

‘There’s definitely a trend of councils and policymakers looking to shape housing behaviour through taxation. 

‘So, while triple council tax isn’t on the table officially, I wouldn’t be surprised to see more creative or higher-tiered taxes on second homes down the line.#

What will its impact be? What are the upsides and what are the downsides?

‘There are certainly two sides to it. On the upside, councils can raise more funds to pay for local services, and in areas where housing stock is tight, it might deter speculative ownership.

What could it mean for house prices?

The impact on house prices will likely be very localised.

In some second home hotspots, it is possible there could be a cooling of demand and a bit more supply coming onto the market, which might ease local prices.

However, broader forces like interest rates, mortgage availability, and planning policy are going to have a much bigger impact on property prices nationally.

Jonathan Hopper also suggests Wales offers a useful test case for what might happen.

‘Several Welsh councils with high numbers of second homes have already introduced big council tax surcharges on second home-owners and while this has throttled back demand for homes in popular coastal areas, it hasn’t always helped get local first-time buyers on the ladder,’ he said.

‘The reason is that the sort of homes we’re often talking about – remote little cottages with sea views that are great for a few months a year – aren’t necessarily what a growing family needs.

‘This is a long-term change – it’s a tax on the occupation of a property rather than its purchase – so the full impact might not be felt for a number of years, but the Welsh example suggests it is no silver bullet for local housing shortages.’