What Is the Impact of Second Homes on Rural Communities?

In recent years the demand for holiday lets in tourist hotspots has exceeded supply. This, in turn, prompted a surge in second home sales as buyers sought to cash in on the trend for staycations.

Whilst holiday lets support the local tourism economy, others argue that second home investors are destroying communities as locals can’t afford soaring house prices and villages are like ghost towns out of season.

In this article, we look at the pros and cons of second homes and their impact on rural communities.

In defence of second home owners

• There is a fundamental difference between a second home (which is only occupied for a few weeks of the year by their owners) and a holiday let (which is let to paying guests). Local economies and businesses benefit enormously from the revenue injected by holiday let guests who spend money eating out on groceries, shopping, booking activities, entertainment etc.
• Owners also employ local people such as gardeners, handymen and cleaners – bringing much-needed leisure income to areas that rely heavily on tourism.
• In many locations where holiday lets are concentrated, tourism is the main industry. The income that holidaymakers generate over the summer gets businesses through the winter. Local trade alone would not keep businesses going.
• It could be argued that if there were no tourists the houses would be cheaper, but locals wouldn’t have the jobs and income the tourists generate to buy a house with.
• Many second home owners also buy with a view to moving to the area permanently when they retire. It is in their interest to play an active part in supporting the community.
• Locals also claim that they are being driven out due to unaffordable house prices pushed up by second home owners. However, in many communities, there’s hardly any other industry other than tourism and young people move to where job opportunities are.
• There is a housing shortage and property prices across the whole of Britain are unaffordable for most people. Second-home owners are only partly to blame. High house prices are not a phenomenon unique to the countryside. The bigger, more expensive houses are beyond the reach of the majority in any case.
• However, how many locals would accept a lower offer from a local buyer rather than sell to an outsider? It’s argued that if local residents did not sell to second home investors at a price that locals could not afford, then the issue would not arise.

Do second home buyers destroy local communities and price out locals?

• The 2021 census revealed that around 70,000 addresses were used as holiday homes across England and Wales. In some areas, more than 1 in 10 addresses were being used as holiday homes. The demand for second homes in coastal areas, or near national parks has caused house prices to soar. Locals have complained that they’re priced out of their towns, blaming holiday lets for raising house prices.
• In many tourist hotspots, house prices don’t reflect the income of locals who can’t afford to buy. In Coniston, in the Lake District, average house prices are £608,222 but average annual earnings across South Lakeland were £26,193 in the year to September 2021, ONS figures show.
• If locals can’t find anywhere affordable to live in second home hotspots, this leads to a shortage of workers to staff the pubs, cafes and shops.
• Second home hotspots are often like ‘ghost towns’ in the off-season because owners don’t visit and the rental market dries up. This has seen communities where local services are cut back or closed.
• Locals also struggle to rent, as there are not enough properties for long-term rental. This is because landlords have switched from buy-to-lets to holiday lets because landlords can earn more money, pay less tax and there’s less legislation.

What’s being done to tackle second homes?

• To address the issue of second homes and lack of affordable housing in coastal areas and holiday hotspots across the UK, the general consensus is that greater taxation is needed. The Government is actively taking steps to clamp down on second homes and holiday lets.
• Both the UK and Welsh parliaments passed new laws to increase council tax on second homes that are not genuine holiday lets. In the UK, second home owners must prove holiday lets are rented out for a minimum of 70 days a year and are available to rent for at least 140 days. In Wales, they must be rented out for at least 182 days a year and available for at least 252 days.
• Also, in some areas, the maximum council tax premium for second homes is up to four times the standard rate – a 300 per cent hike.
• Second-home buyers incur a surcharge of 3 per cent on top of the normal rate of stamp duty. In Scotland, buyers pay an extra 4 per cent on second homes.
• St Ives became the first place to introduce a ban on new-build properties being sold as second homes. Similar rules have also been introduced in other areas.
• In second home hotspots, some properties have a local occupancy clause on them which prevents second home investors from buying them.
• Some councils are also considering proposals that require a second home or holiday let to obtain planning permission before it could change from full-time occupation.
• There are also plans for a mandatory national registration scheme.
• As part of his Spring Budget 2024, the Chancellor announced that he would abolish the furnished holiday lettings (FHL) regime from April 2025. This is to bring taxation in line with buy-to-lets and encourage second-home owners to offload their properties or switch to buy-to lets.

Holiday let owners argue that increasing the tax burden on holiday let owners will mean the economics of providing holiday accommodation will simply no longer add up. If owners have to sell, there will be a shortage of affordable self-catering accommodation and local economies and workers who rely on the sector will suffer.

There will also be fewer buyers as holiday lets will be less desirable with the tax benefits disappearing. Any change of use to convert a second home to a residential home would have to be approved by the local authority wich is costly and can take months. Also, some holiday lets cannot be used as anything other than a holiday let.

How to be a responsible second home owner

In many areas with a large number of holiday homes, there’s a growing resentment of outsiders buying up second homes. In some areas locals have targeted properties, like this holiday home in Cornwall which was daubed with graffiti.

Not all second home owners are wealthy and can afford higher taxes. They work hard to buy a second home, often remortgaging their own homes or buying one with their pension. Holiday letting is hard work often with nominal profits.

If holiday let owners want to be accepted into the community, they need to build a responsible business that puts back into the community. One that promotes local businesses, hires local staff and supports the economy. Use your holiday home on a regular basis, not just for a few weeks a year.

There are arguments for and against second homes. Without the income holiday lets and tourists generate, the local economy would suffer. But there’s also is the issue of the lack of affordable housing for residents.

Local councils must commit to creating affordable housing for locals, whilst supporting tourism. Many councils are increasing taxes for second homes, but they need to understand that there is a significant difference between second homes that are left empty and holiday lets that support the local economy.