Plans to hike holiday home tax amid warning that lack of action could lead to ‘violent demonstrations’
Gareth Williams, local democracy reporter
Decision makers on Anglesey have announced plans to further hike the holiday home tax premium as more pressure is heaped on the Welsh Government to amend the law and respond to a growing housing crisis.
One member of the executive warned that a lack of action on a national level could lead to “violent demonstrations”.
Meeting on Monday, members of Anglesey council’s executive voted to look at increasing the 35% premium to “at least” 50% by April 2022 after a consultation next spring.
Introduced in 2017, the 25% second home levy – increased to 35% in 2019 – saw Anglesey become of the first authorities to bring in the charge, with the proceeds targeted towards helping local first-time buyers onto the ladder.
But following claims that a loophole is costing Anglesey Council as much as £1m a year, councillors once again urged the Welsh Government to change the law, amid fears that the percentage of housing on Môn designated as second homes – currently 7% – will only rise.
Proposing that the authority look at increasing the premium, the portfolio holder for finance also suggested the introduction of a small tourism tax on overnight stays.
Cllr Robin Williams said: “We have seen several homes being flipped from council tax to business rates so their owners avoid paying any tax at all.
“We have written to the Welsh Government asking them to introduce legislation to stop people doing this, but unfortunately they are continuing to ignore us by claiming there is no problem.
“This may not be an issue in somewhere like Merthyr, Rhondda or Neath, but certainly is here and several other areas.”
He added: “I also urge the Welsh Government to use their powers and amend the land transaction tax to ensure that the level is higher for second homes and to consider a tourist tax, as is in place all over the world by now.
“Anyone who’s travelled abroad over recent years will be familiar with resort fees or tourist taxes and any income generated would help with the pressures on services for authorities which see their populations blow up during the summer in particular.”
Maintained at the current 35% level, the authority expects the second home premium to bring in £993,947 during 2021/22 – increasing to £1.41m if hiked to 50%.
But there has long been evidence to suggest that the owners of many second homes are using a “loophole” to avoid paying the premium, or often any council tax at, all by “flipping” towards paying non-domestic rates.
Such a move can be actioned if it’s proved that the property is available for up to 140 days in a year and actually let for at least 70.
But with most self-catering holiday accommodation being eligible for Small Businesses Rates Relief, it often results in no contribution at all into local authority coffers.
Speaking in the Senedd over the summer, Rhun ap Iorwerth MS claimed that this tax “loophole” is costing the council as much as £1m a year – the equivalent of a 3% annual council tax rise – while “changing the nature of communities”.
Cllr Alun Mummery, the portfolio holder for housing, urged caution of increasing the premium until action was taken on a national level, noting that the answers lay in changes to the planning system.
“In an election year, I wonder if politicians will pay much needed attention to this problem,” he told the executive.
“If they ignore this, I can foresee violent demonstrations which would have a profound effect on tourism businesses. Doing nothing is not an option.”
Cllr Carwyn Jones added: “This is a conundrum, with over 7% of our homes being second or holiday homes. We don’t want to see that percentage increase.
“If we’re not careful, we could be looking at one in ten, but how do we bring this down or maintain? I’m not so sure if the premium is effective (in controlling their numbers) which is why we need national action.
“Flipping them over to holiday lets is also problematic for existing businesses such as B&Bs and hotels. We don’t need any more. They aren’t businesses and don’t have to follow the same safety regulations.
“Every percentage it increases by has a profound effect on the island’s culture and language, and the danger is that Welsh will be dislodged as the main language. We’re already in a precarious spot.
“We need vibrant, year-round communities.”
Gwynedd Council – which already charges 50% – has itself announced plans to explore increasing their premium to as much as 100% but is facing similar housing issues as those described on its neighbouring island.
Since 2017, £1.8m from Anglesey’s housing premium has been allocated to fund an empty homes renovation grant for first time buyers, bringing 54 properties back into use so far.
Also offering equity loans, the report noted that 227 local small or medium sized business have benefited through being awarded renovation work.
On Tuesday, meanwhile, the Senedd’s Petitions Committee will discuss calls on the government to give councils the powers to control the housing market in rural and tourist areas.
Echoing Anglesey Council’s calls on varying the Land Transaction Tax and closing the “loophole”, the petition was signed by 5,380 people in just a month.
Responding to the petition, Housing and Local Government Minister Julie James said “there was no quick fix”.
She added that the government was “very much aware” of the challenges second homes presented to the supply of affordable housing, including the “need to have the right balance” between the economic and social needs and creating the right conditions for the Welsh language to thrive.
Confirming they were on course to meet the 20,000 affordable homes target by the end of this Senedd term, she concluded, “We are anticipating the release of research undertaken on second homes in Wales by Seimon Brooks (on behalf of the Hywel Teifi Academy).
“This will be helpful in understanding the scope and scale of the issues and the effectiveness of interventions that have been taken forward in other countries.”