Suzy Davies, Chair WTA, asks the Senedd Local Government and Housing Committee to take the differences between STHL Businesses and Casual lets into consideration in their inquiry - 09/02/2022
Local Government and Housing CommitteeInquiry into Second Homes: Evidence Session 4 - Economy
Asked whether the report to Welsh Government by Dr Simon Brooks fully recognises the economic impact of holiday homes, including second homes. Suzy Davies noted the author recognises at the beginning of the paper he was not able to do as much as he would have liked, but she said the report is still useful. She added the report distinguishes between second homes, businesses and second homes where casual lettings occurs.
Shomik Panda added the UK Short Term Accommodation Association believes the economic impact of short term lets should not be underestimated. He added a study conducted by Oxford Economics on behalf of Airbnb estimated guests on the platform contributed a total £107 million to the Welsh economy in 2019, with each 1,000 Airbnb guests in Wales estimated to support four jobs across restaurants, retail and entertainment.
David Chapman said it is important to look issues such as second homes within the wider economic situation and seek to find holistic solutions that improve the economic value of industries which support local people, whilst ensuring people can afford to buy homes in their community. He added any solution should be environmental and sustainable, also.
Welsh Government’s Objectives
Sam Rees said the Welsh Government’s objectives on the issue are not as clear as RICS would like, saying it is unclear whether a tax is seen as a revenue maker, a deterrent, or a means to support local people to enter the housing market. Shomik Panda concurred, saying Welsh Government needs to be clearer what it wants to achieve in relation to second homes and holiday lets as the two issues are separate. David Chapman noted there is a broader challenge about supporting local employment, the impact of the pandemic and Brexit.
Suzy Davies said it is clear Welsh Government is seeking to understand what a “balanced” community looks like, but noted there is some anger that self-catering accommodation is being pulled into the conversation. She questioned whether there has been conflation between letting businesses and the casual lets of second homes, and the referred to the public narrative surrounding this debate which is impacting bona fide businesses.
Interventions and Policies
Suzy Davies noted it takes a long time to see whether existing policies, such as the council tax premium, are having a tangible impact. She added the pilot scheme in Dwyfor Meirionnydd will also require a long time to determine its impact. Shomik Panda questioned whether all the regulatory options need to be deployed at once, concurring with Suzy Davies that some time is needed for assessment.
Sam Rees said there has been a “seismic” shift in the housing sector, due to the pandemic and growth in “staycations”, and it is unclear what the long-term housing view is in Wales.
Defining Second Homes
Daryl Mcintosh said “home” is a key word and suggested the rise in hybrid working increases the opportunity to use a residence as a second “home”. However, he added someone who inherits a second property may not use it as a home. Sam Rees noted there also needs to be distinction between types of properties, such as bricks and mortar properties and static caravans. He said it is important to implement a consistent definition of second homes and holiday lets, at a national level.
Shomik Panda said the distinction between first and second homes could be “relatively straightforward”. He said a primary home would be a property where a person is resident for at least half the year, while a home where someone is resident for less than half a year should be classed a secondary home. He added second homes should be able to be short term let on a multi-use basis, saying these properties could not alternatively be rented long-term. Shomik Panda asked that interventions be made where there is evidence of pressure on local housing.
Suzy Davies said the Wales Tourism Alliance does not consider commercial business short-term lets to be the primary issue in discussions about housing problems, but the casual letting of existing domestic properties instead is putting pressure on communities. She added a clear distinction needs to be made between commercial business short-term lets and casual lets, and believed this grey area should be the main focus for resolution.
Shomik Panda disputed the claim casual letting is unregulated and said it can provide a good, supplementary income to people. Mabon ap Gwynfor MS further challenged this, saying there are streets of homes being purchased for casual letting, suggesting they are not regulated as businesses.
David Chapman discussed the situation facing hospitality businesses from April, including food and energy price inflation, VAT rising, business rates returning to 50%, National Insurance rising, and repayment of loans. He said a sustainable tourism programme needs to understand where value is held and the full benefit of attractions and businesses to communities.
Shomik Panda noted the importance of registration to capture data on the situation, to make informed decisions, and said authorities would be able to see who is paying their fair share of taxes. He added a national scheme would be cheaper than lots of smaller systems, and that it should be available online.
Suzy Davies said a national, statutory registration scheme would help data gathering, distinguish between commercial lets and the “grey economy” of casual letting, and help local authorities understand their local economy and income. She added it would also prevent the practice of flipping between commercial and residential status to benefit from their respective taxes.
Suzy Davies noted any money raised on the back of registration should be invested in quality and enforcement. She did not agree with local licencing. Daryl Mcintosh said there needs to be a purpose to any licencing scheme, beyond data gathering, and noted a national register would likely be best.
Local and National Powers
Suzy Davies said draft guidance would need to accompany any legislation on localism powers, to ensure some consistency as local authorities’ needs will differ. Daryl Mcintosh and Sam Rees each raised the need for additional resources to support local authorities’ enforcement capacity.
Shomik Panda said policy should generally be made and implemented at a national level as it makes it easier for operators to comply with regulations. He referred to the licencing system in Scotland which makes it difficult for users and hosts to comply. However, Shomik Panda said the UK Short Term Accommodation Association recognises local solutions are needed to tackle local issues, but within a national framework and with a national government holding local authorities to account.
Asked what should be taken into consideration, David Chapman said it is important to have appropriate data to hand to make decisions about powers, to avoid acting on assumptions. Sam Rees said it is hard to understand what the “tipping point” might be, without data.
Suzy Davies said the point at which the provision of services become unviable should be taken into consideration, which will differ from ward to ward within a local authority area. She said once this is known, a decision can be made about what is needed.
Sam Rees said it is difficult to know whether taxation will have an impact on property values, and although council tax bands or Land Transaction Tax may deter some buyers there may be an impact from wealthier buyers bidding against each other.
Planning Permission and Classification
Asked about planning permission and classification to regulate the use of properties, Suzy Davies said a registration system would be preferred and outlined some of the unintended consequences that may result from a planning permission approach. For example, she suggested it may deter someone from purchasing a property for private use if it is currently classed as a holiday let business – if they need to apply for planning permission to return to private use.
Sam Rees and Daryl Mcintosh each questioned whether a property would need to be marketed only at its existing use when it goes to market, and what impact this may have on mortgages and property value.
Private Rented Sector
Discussing any transfer from the private rented sector into short term lets, Daryl Mcintosh noted the potential impact of the new, incoming system for private renting if short term letting remains “buoyant” and said landlords are being attracted to sell properties due to the property market.