18 March 2010

Second homes

This follows on from Part 1 and Part 2.

Second homes are often presented as impacting adversely on the price and availability of homes that people on local pay can afford to buy and rent on the open market and on the viability of villages, thus necessitating the provision by councils or housing associations of controlled affordable homes. There are calls for curbs on second homes.

Forty years ago, before there was so pressing a problem, I think it would have been possible effectively to control the numbers of second homes by restrictions on their creation, by insisting that strictly only x percent of dwellings in a community were for partial residence. The restrictions would have affected very few people and even then would have been sharp and perhaps unacceptable; it might have been politically impossible to secure legislation even in those more statist days.

The justification for restrictions would have been twofold as they are today. Firstly, to try preserve the common facilities especially of rural communities, facilities which require a minimal number of all-year-round residents; and, secondly to try to keep many house prices and rents within the reach of locals on local pay. Neither justification would in the end work of course. The social and economic changes which close down shops, for example, are little or nothing to do with numbers of permanent residents but more to do with the the ideology of choice and cars and the rise of supermarkets; and, importantly, houses came to be seen as a financial asset and investment rather than just a home and that change helped to push up prices relentlessly. In any case the problem was not fully discerned and nothing was attempted with effect.

I think it is now too late for remedy through restriction. The issue is much larger today and thereby more difficult politically and financially. There were 13 603 second homes in Cornwall in October 2008 (House of Commons Library, Deposited papers 2009-1230, April 2009).

Circumstances have vastly changed and restrictions nowadays upon purchased second homes – the usual reference is to homes occasionally used by their owners rather than homes rented out continually or commercial holiday lets but there is often a lack of clarity about what is meant – as a remedy of unaffordability and shortage is, I think, a mistaken approach. Why? In addition to the social, economic, and financial changes noted above, the median average fulltime wage in Cornwall is £21 522 pa (ASHE at April 2009, Table 8.7a): median means that half the wage earners in Cornwall get less. Very few houses on the open market in Cornwall are now within the reach of even a couple both earning that median average, virtually none for those on pay below that; in consequence I think the impact of second homes on affordability is now minimal though there will be some upwards pull of prices on houses below the second homes market.

Effective remedial action today to reduce the large current numbers and stop any increase in second homes would mean in effect giving the local authority the power to undesignate a current second home in some circumstances or the power to prevent the acquisition of the second home status by a present or putative house owne. To insist that a current or putative second home is not sold as a second home is likely to militate against its sale for the best realisable price. These measures would be seriously problematic in a democracy respecting the right to private property, more individualistic and less collectivist than forty years ago, more enamoured with free markets, and keenly aware of the asset nature of a house. It would be likely to have unwanted financial consequences for a large number of people.

Notably, in the present housing market such severe measures would also signally fail to guarantee the ‘restricted’ house became affordable; they would in fact not be so much a solution as a gesture. Only substantial falls in prices will make presently unaffordable houses affordable.

No government is likely to go down the restriction route today if a positive and effective alternative is available as it is.

Although I think second homes are not where the focus should now be for dealing effectively with the shortage of affordable housing, there is a strong case for looking at various tax arrangements for second homes which may unduly privilege them and impact on those looking for affordable homes. For example, we should examine the buy-to-let tax breaks, designed desirably to increase the number of houses for rent, to see what its effect is on first time buyers in Cornwall on modest incomes. Government thinking on houses, tax, and finance does not appear to be in the round yet.

Having looked at the background and some suggested responses, in the next post I shall look at that alternative. I shall look at the question of the provision of “unaffordable” homes and homes for people coming to Cornwall in a later post in this series.

Other posts on affordable housing and Cornwall
Affordable housing and Cornwall Part 1
Affordable housing and Cornwall Part 2
Affordable housing and Cornwall Part 4

Housing the people in Cornwall
Goldilocks and Cornwall