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The government plans to ban second home owners from renting out properties as short-term lets in England

The UK government has announced plans to ban second home owners from renting out properties in England as short-term lets.

The plans are part of the Levelling Up and Regeneration Bill being drawn up by Housing Secretary Michael Gove.  The bill is part of the government’s clampdown on the way they feel landlords are driving up house prices in holiday hotspots and also support the government’s promise to devolve more power to local authorities.

The Levelling Up and Regeneration Bill will give local mayors the power to restrict people renting out second properties for fewer than 90 days.  According to a spokesman for the Department of Levelling Up, Housing and Communities:

“We’re taking action to combat the adverse impact that second homes can have on local communities – particularly in tourist areas such as Cornwall – by closing tax loopholes, introducing higher rates of stamp duty and empowering councils to apply a tax premium of up to 100pc on second homes.”

The news has been welcomed in many of the UK’s holiday hotspots.  When the plans were announced Bob Seely, Conservative MP for the Isle of Wight, said:

“We have got to find a way of protecting communities and we are in the market for sensible ideas that can help.  Places like Devon, Cornwall, the Isle of Wight and the Lake District have lived too long with the problem of hollowed-out communities devoid of life apart from a few months of the year.  What we need is creative ideas to solve some of these problems.” 

Is it a good idea to ban second home owners from renting out properties as short-term lets?

The government’s announcement follows Mr Gove’s plans to overhaul the private rental sector which were announced last week.

While these reforms will improve tenant rights, landlords believe they will be left exposed to additional costs and, potentially, months of rent arrears to chase.  This is because the proposed reforms will obligate landlords to rent to people on benefits and reimburse tenants whose homes do not meet new minimum standards.

The reforms will also give tenants new rights to request to keep pets in their rental properties, a request landlords won’t be able to deny without very good reason.

These changes have come as the rates associated with buy-to-let mortgages continue to increase.  This is already impacting on investors’ revenue and profits, so it is not surprising that many have already been very vocal in their opposition to the Levelling Up and Regeneration Bill.

Jonathan Samuels of Octane Capital thinks the proposal is another attempt to attack rental investors:

“As is the case with all government rental market initiatives, there seems to be little thought as to the unintended consequences that will arise when they further reduce the level of available rental properties on the market.  As always, it will be the tenant who bears the brunt of escalating costs due to inadequate stock.”

Meanwhile Geoff Garrett of mortgage broker Henry Dannell feels that forcing investors to pull out of holiday destinations will actually have a negative effect on local homeowners:

“It’ll be bad for families who are well-established in places such as Cornwall, and have owned their homes for a long time,” he said. “On the other hand, it could be beneficial for some young people in those areas who are trying to buy for the first time and have been priced out by property investors from other parts of the country.” 

We will wait to see how this latest bill will affect buy-to-let landlords but, in the meantime, if you need any help buying or selling a property , please email me at Jeremy.Tulloch@collinshoy.com or call me on 0208 515 6600.