by Dr Peter Wynarczyk, former senior university manager, academic economist, and higher education and business consultant.
A large majority of English councils have taken the opportunity given to them by government to apply a second home premium of up to 100 per cent, following the lead of Wales and Scotland. The justification for the doubling of the council tax bill, and punishing second home owners, is largely underpinned by an unsubstantiated narrative that serves both to demonise them for significantly adding to the housing crisis while also usefully deflecting responsibility away from government failures.
Second home owners are increasingly presented as asset hoarders and, together with other additional property owners, face a barrage of penalties and restrictions designed with the intent to nudge their behaviours and free up properties to the wider market. This stick rather than carrot approach to intervention may fit a certain anti-aspirational ideation but has little else to recommend it and is likely to worsen the very problems it is alleged to be addressing.
It is undeniable that we have a housing crisis following decades of insufficient supply and have fallen well behind Europe. A recent estimate suggests Britain has a supply shortfall of as much as 3.4 million housing units. Even if we were to succeed in building 300,000 houses a year during this parliament, this will not ameliorate the shortfall since net migration figures will add more pressure. The ONS estimates that there will be almost 4 million extra added to the population by then. The Home Builders Federation rightly concluded that the UK had fallen well behind European and OECD countries regarding the condition, age and affordability of its housing stock.
While one cannot underscore enough the housing challenge we face, it is strange that most countries in Europe are doing far better matching their housing stock to domestic needs than we are while at the same time having a far larger proportion of their populations owning more than one property. Around 9 per cent of English households own additional properties, one of the lowest rates in Europe. Germany has 15 per cent. France 18 per cent. Spain 27 per cent. Clearly our European neighbours do not share our open hostility against citizens having additional properties. Additionally, evidence relating to empty properties tells a different story to the conventional wisdom usually advanced in this country. Only 2.7 per cent of the English housing stock is classified as vacant and remains one of the lowest rates in the OECD. France and Germany have rates of 8 per cent.
The incessant focus on the UK's alleged housing maldistribution is a deliberate smokescreen, deflecting attention from the long-term damage inflicted by misguided short-term interventions and the undeniable failure of both local and central government to build enough homes. This narrative is nothing more than a convenient myth.
Northumberland (and most of the others) have adopted the maximum premium and are applying it across the entire region thereby allowing the alleged problems appertaining to a limited number of hotspot outliers complete overreach across the whole county. The government’s guidance on the implementation of the council tax premiums on long-term empty homes and second homes, expected that any council implementing the second homes premium would fully engage, consult and communicate directly with affected second home owners.
In addition, they should provide an accessible, detailed rationale and impact assessment of the actual second home premium policy being implemented. With regard to Northumberland County Council I have found them to be remiss on both counts and when challenged on this openly concede that they did not have to follow the government’s guidance and are simply doing what they are doing because they now can. Their failure to engage with second home owners is particularly galling given that many have a limited voice in any decision-making and suffer from an unjust form of taxation without representation lacking recourse to the ballot box.
This widespread national contagion, magnifying the problems posed by local hotspot outliers across the whole country, appears most easily explained by the eagerness of councils to take advantage of the opportunity granted to glean additional income at almost zero cost rather than based on local circumstances. In Northumberland’s case, I estimate that the second home premium will rake in between £7-10 million.
The council appears to be far more interested in this new unearned income stream than providing any policy rationale or impact assessment justifying what they are doing. Without any provided rationale, the only possible explanation one can presently come up with is that they were attracted by the additional revenue take, its administrative convenience, and limited political fallout, while also feeling obliged to follow the lead of other local authorities. Northumberland, and doubtless many other councils, have yet to prove otherwise.
While Northumberland does not have the significant increasing population and infrastructure pressures of elsewhere, we do, however, likewise have homes where nobody wants them and others where everybody would like them. There appears to be a pronounced tendency to exaggerate the extent that second homes and holiday lets have in making the whole of Northumberland more unaffordable while underplaying the role of a lack of new homes.
The council’s action is clearly directed at trying to bring more of the existing second homes stock to market, and thereby add to principal residency supply. This draconian attempt to make second homes increasingly unaffordable in the hope that they will make the Northumberland housing market more affordable makes little sense. By intentionally depressing this market they will depress others, as witnessed in areas of Wales.
Indeed the council’s own 2024 report concedes that ‘It remains to be seen whether, and to what extent, the council’s announced doubling of council tax for second home owners from April 2025 will have any impact on these numbers’. It will be the sledgehammer that not only fails to crack the nut but also damages everything around it.
One has to be sceptical of Northumberland council’s claim that ‘it does not have any objection to people owning second homes’ given it is intently pursuing an action designed to reduce their number. They employ the euphemism of wanting to ‘encourage’ second home owners to return their properties to resale and rental markets. This sounds pretty close to Orwellian newspeak and is a rather perverse understanding of the meaning ‘to encourage’ by means of a stick rather than a carrot.
I am sure that most second home owners neither need nor asked for council encouragement on how to use or dispose of their own property. I remain at a total loss of whether they want any second home owners at all or of what the ideal number is that they are striving for? Do they wish to eliminate or merely decimate their number? Councils across the UK appear silent on this and much else.
Rather unsurprisingly, the increased council tax revenue from the second home premium cannot even be ring-fenced to directly benefit the communities affected. Northumberland County Council have acknowledged that the council tax is ‘not linked directly to any services you may or may not receive’ which is of course an extremely convenient way of avoiding increased accountability.
The justification that council tax is 'not service specific' explicitly breaks the established principle of payment being tied to delivered services, raising serious concerns about its justification and fairness. There was a time when councils were not only more appreciative of second home owners but also recognised that they made less use of council services and merited a discount in their council tax.
To conclude, given that we have significantly less second home ownership than most of Europe alongside lower vacancy rates, the main cause of the housing crisis does not reside there. It resides in our failure to both increase and improve the housing stock in line with our growing population demands. There is a need to incentivise animal spirits within the sector. For Northumberland, as elsewhere, if you have hot-spots just build more where they are clearly most wanted and follow the money. This home, un-sweet second-home policy and wishing you weren’t here is not only short-sighted, with unintended and unforeseen negative consequences, but a cover-up for decades of local and central government failure.