Julie James outlines the steps that Welsh Government is taking to help rural and Welsh-speaking communities impacted by second homes, holiday lets and empty homes.
Wales is a beautiful and welcoming country, proud of its heritage, culture and language.
We have a long tradition of hospitality and are pleased to welcome visitors and all those who choose to come and live here.
There is so much to enjoy – from our award-winning beaches and the breath-taking beauty of our landscapes to our vibrant town and city centres and the unique Welsh language and culture.
However, just like every other part of the UK, we also face challenges.
One of these, at a time of rapidly rising house prices and increasing rents, is making sure people can afford to live in the communities they grew up in – in the places they are proud to call home.
Many communities throughout Wales are seeing disproportionately large numbers of second homes, short-term holiday lets and long-term empty homes.
This poses a real problem for sustainable services and risks creating communities that ‘close’ for the winter.
Tourism is vital to our economy but when we have too many holiday lets and second homes in one community we get properties which are empty for many months of the year and this can impact what would be local, vibrant communities.
We want everyone to be able to afford to live in their local area – if that’s what they want to do – whether that’s buying or renting a home.
We want Wales to be a nation of thriving communities; a country where people feel they can make their future here, and don’t have to leave to find good and rewarding work.
This is a complex and emotive issue with no single solution or quick fixes, but we have made great strides.
In 2021, I talked about our three-pronged approach to help get a grip on future numbers of second homes, giving more control to local authorities to manage them and ensuring that owners made a fair contribution through appropriate and fair taxation.
Since then, we’ve developed the most comprehensive, far-reaching, and enabling set of measures in the UK.
As part of our coherent approach, we have:
Increased the maximum discretionary council tax premium to 300 per cent on second homes and long-term empty properties
Local authorities now have the power to charge a council tax premium of up to 300 per cent on second homes and long-term empty properties.
Wales is currently the only UK nation which gives councils discretionary powers to charge a council tax premium on both long-term empty properties and second homes. This year, nine of our 22 local authorities charge a premium on both types of property and one, Cyngor Gwynedd, has increased its premium to 150 per cent on second homes. We encourage local authorities to direct the money raised to developing affordable housing solutions.
Changed the letting thresholds for non-domestic rates to ensure businesses are making a clear contribution to the local economy
We have changed the criteria for holidays lets to be listed for non-domestic rates.
Holidays lets must now be available for rent for at least 252 days a year and be actually let for at least 182 days in any 12-month period. This is to ensure that businesses are taxed as such and that they make a clear and demonstrable contribution to local economies.
Made changes to planning law through establishing three use class categories
In a ground-breaking move, we have introduced three new planning use classes: primary home; secondary home; and short-term holiday accommodation.
Local planning authorities now have the power to suspend free movement across the use classes, where they have evidence, to make local amendments to the planning system. In effect, they will be able to decide not to allow future changes from a primary home to either of the other classes (although second homes and short-term holiday lets will be free to move to become primary homes). We are working with Cyngor Gwynedd to test the resources and practical implications in rolling out this novel approach.
Consulted on our commitment to bring in statutory licensing for all visitor accommodation
We will introduce a statutory licensing scheme for all visitor accommodation, including short-term holiday lets.
Worked to explore regional or area variations to Land Transaction Tax on second homes and short-term holiday lets
Land Transaction Tax (LTT) is the Welsh equivalent of stamp duty land tax.
We have already increased the higher rate of Land Transaction Tax, which is charged when people buy an additional property, including a second home, to four per cent.
We have consulted about whether local authorities should have the ability to seek for the higher rate of the tax to be varied in respect of second homes and holiday lets in areas where there are large numbers of these properties and have received strong support for this.
Reducing the number of empty homes including launching a £50 million empty homes scheme across Wales
We are taking further measures to bring a higher proportion of existing homes, and especially empty homes, into common ownership at local level.
We invested £24.5 million in 2021-22 in local authorities with high numbers of second homes and holiday lets to buy and renovate empty homes for social housing.
A further £50 million in capital funding over two years (2023-24 to 2024-25) has been provided for a national empty homes grant scheme. The scheme complements the existing £43 million interest-free loans and will bring up to an additional 2,000 empty homes back into use.
Introduced the Welsh Language Communities Housing Plan
Published in October 2022, the plan brings together a number of practical interventions across economic, housing, community development and language planning issues to ensure that Welsh-speaking communities can continue to thrive. The Prosiect Perthyn delivered in partnership with Cwmpas has recently awarded grants to 21 community groups to develop new community-led cooperatives and community-led housing. Five of the projects supported are within the Dwyfor pilot area. Prosiect Perthyn also provides a specialist advice and support service which helped establish 10 new social enterprises.
The plan also established a Commission for Welsh-speaking communities which is tasked with making public policy recommendations aimed at strengthening Welsh-speaking communities, including communities with high densities of second homes. The Commission published its preliminary findings in June 2023.
Established a pilot in Dwyfor, Gwynedd to understand the impact of these novel approaches.
This gives us opportunity to test the individual and cumulative impact of these initiatives and to assess their application and effect on affordability in the pilot area.
The pilot continues to be developed through close working with Cyngor Gwynedd, Parc Cenedlaethol Eryri, registered social landlords and local communities.
A good example is the HomeBuy product and how it is responding to local circumstances in Dwyfor. HomeBuy flexed to take even more account of local conditions; supporting community land trusts, ring-fencing funding to turn empty properties into homes.
In the Dwyfor Pilot area, we have worked with our partners at Cyngor Gwynedd and Grwp Cynefin to adapt the scheme, so it better reflects the higher house prices that local people face.
Those local to communities in Dwyfor with a household income between £16,000 and £60,000 can now apply to HomeBuy for an interest free equity loan up to 50 per cent of the value of the property, and up to a maximum house price of £300,000.
Since the newly flexed HomeBuy scheme was launched in September 2022, Dwyfor has seen 13 successful applications, with many more in the pipeline. Previously, there had been a single Dwyfor completion in five years.
We are working closely with Cyngor Gwynedd on its application of changes to the planning system and, also, with local communities as we support them to identify and take advantage of their own potential solutions.
CONCLUDING REMARKS
While all of our actions together constitute a very broad and bold approach, it will take some time to assess the impact of the interventions. This is a difficult economic climate and a range of factors – many outside our control – will impact affordability. An independent evaluation of our interventions in the pilot will share the lessons across Wales as we progress.
We don’t have the luxury of drawing results from other parts of the UK – Wales is providing the evidence and we have been ground-breaking in our holistic approach.
The evaluation will test if the things we put in place allow local authorities to better balance and manage the number of second homes and short-term lets in their communities. We want to stabilise numbers and prevent other areas from being host to disproportionate numbers of second homes and short-term lets.
Of course, the action we take must be fair. We do not want to inadvertently create any unintended consequences, which could destabilise the wider housing market or make it harder for some people to rent or buy.
We will continue to offer a warm and genuine welcome to visitors while also supporting local people to live in the thriving and vibrant communities which are at the heart of Wales.
Julie James is the Welsh Government’s minister for climate change