Second homes tax loophole to close as Airbnbs surge in staycation hotspots

Second-home owners will be forced to prove they are renting out homes for at least 70 days a year as the Westminster government bids to close a tax loophole that has seen a surge in short-term lets and turned popular staycations into ghost towns.

Michael Gove announced second-home owners in England would not be able to access small business rates relief without proof they are using them as short-term lets or Airbnbs from April 2023.

The housing secretary’s move is a bid to prevent second home owners from leaving homes in popular holiday spots such as Cornwall, Devon, the Lake District, Suffolk, West Sussex and the Isles of Scilly empty for most of the year, leaving local services struggling to survive.

Countryside campaigners CPRE revealed there has been a 1,000 per cent increase in short-lets across England’s rural staycation hotspots in the last six years with 148,000 homes which could house locals turned into short-term and holiday lets instead.

“The government backs small businesses, including responsible short-term letting, which attracts tourists and brings significant investment to local communities,” said Gove.

“However, we will not stand by and allow people in privileged positions to abuse the system by unfairly claiming tax relief and leaving local people counting the cost.

“The action we are taking will create a fairer system, ensuring that second homeowners are contributing their share to the local services they benefit from.”

Under current rules, owners of second homes in England can avoid paying council tax and claim business rates relief if they declare an intention to let the property out to holidaymakers.

This leaves the system open to abuse, the government said, with the potential for home owners to benefit from the tax break without ever actually renting out their homes.

As a result, local people locked out of homes and the supply of available homes plummets, pushing up local prices. Leaving properties vacant also has a knock-on effect on local amenities with people unable to live and work in the towns and villages all-year round.

Residents and activists have taken action in recent years to prevent second-home owners from buying properties in their towns. People living in picturesque places like Beadnell in Northumberland and St Ives in Cornwall have held referendums in recent years to ban newbuild properties from being used as second homes.

Now central government is cracking down on second home owners to tackle the problem by forcing them to pay council tax if they cannot prove their properties are being used as genuine holiday lets.

Holiday let owners will have to show brochures or websites advertising the property as well as letting details and receipts to get the tax break.

However, Jayne Kirkham, a Labour councillor for Falmouth Penwerris in Cornwall, said the new rules do not go far enough.

She said: “Renting your second home out for 10 weeks per year isn’t enough to make it a genuine, primary business. Why can’t they just pay double council tax? 

“It also means that people who rent their second homes out for 10 weeks per year would still be entitled to Covid business grants. This isn’t shutting a loophole. It’s just enabling it. We need real powers to enable us to tax and regulate second homes, holiday lets and Airbnbs in Cornwall.”

CPRE’s analysis of Airbnb and other short-term letting sites found 148,000 homes could have been used to house families in rural staycation hotspots like the Lake District and Cornwall while 176,000 households sit on social housing waiting lists.

Speaking ahead of the government’s announcement, Crispin Truman, CPRE chief executive, said: “Across our most traditional rural communities, from the beaches of Cornwall to the lakes of Cumbria, homes that used to be rented to local families sit empty for much of the year.

“Hard-working people are suffering and they will not easily forgive a government that promised to level them up if it leaves them falling through the cracks of a broken system.”

Action on Empty Homes director Will McMahon welcomed the Westminster government’s move to crack down on second homes but warned “this is only one aspect of a much bigger problem of emptiness and under-utilisation of half a million properties across the country”. 

McMahon added: “This is why Action on Empty Homes is calling for a statutory national register of landlords and beneficial owners so government can introduce evidenced measures to bring these properties back into the housing supply for the 100,000-plus families presently in temporary accommodation.”