Council tax premiums on second homes to increase by up to 300% in Wales

The Welsh Government has announced an increase to the limit on council tax premiums for second homes across Wales.

The maximum level at which councils can set council tax premiums on second homes and long-term empty properties will be increased to 300% from April 2023.

The changes are part of a wider package of measures intended to ensure people can find an affordable home in the place they have grown up, as set out in the Co-operation Agreement between the Welsh Government and Plaid Cymru.

The commitment is to take immediate and radical action using the planning, property and taxation systems, and also includes, new local tax rules for holiday lets.

Rebecca Evans, minister for finance and local government, said: “These changes will give more flexibility to local authorities and provide more support to local communities in addressing the negative impacts that second homes and long-term empty properties can have. 

“They are some of the levers we have available to us as we seek to create a fairer system.

“We will continue to make every effort to increase the supply and availability of houses, as shown by the £1 billion of funding to build 20,000 low carbon social homes, contained in the budget I published at the end of last year.”

Plaid Cymru’s Sian Gwenllian said: "It is clear that we as a country are facing a housing crisis. So many people cannot afford to live in their local areas, and the situation has worsened during the pandemic. 

"These changes will make a difference, enabling councils to respond to their local circumstances, and start to close the loophole in the current law. It's a first, but important, step on a journey towards a new housing system that ensures that people have the right to live in their community.

"Through the Co-operation Agreement, we are committed to introducing a package of measures to tackle the injustices in the housing market. Today's announcement is just one part of that wider package. 

“Second homes are a symptom of a wider problem - a market that treats property, not as a home, but as a way of making a profit. By working across the parties in the Senedd, we will introduce more measures, as soon as we can, to make house prices and rents genuinely affordable for people.”

The changes will enable councils to decide the level that is appropriate for their individual local circumstances. Councils will be able to set the premium at any level up to the maximum, and they will be able to apply different premiums to second homes and long-term empty dwellings.

Premiums are currently set at a maximum level of 100% and were paid on more than 23,000 properties in Wales this year. 

Local authorities opting to apply premiums have access to additional funding, and the Welsh Government has encouraged councils to use these resources to improve the supply of affordable housing.

Julie James, the Welsh Government’s minister for climate change which includes the housing brief, added: “We want people to be able to live and work in their local communities. But we know rising house prices are putting them out of reach of many people, exacerbated by the cost-of-living crisis we are facing.

“There is no easy answer or quick-fix solution. This is a complex problem that requires a wide range of actions. 

“We continue to carefully consider further measures that could be introduced, and these changes are the latest steps we are taking to increase the availability of homes and ensure a fair contribution is made.”

Last summer the Welsh Government outlined a three-pronged approach to address the impact of second home ownership faced by Welsh communities. 

This seeks to address the affordability and availability of housing, amend the regulatory framework and system, and ensure second homeowners make a fair and effective contribution to the communities in which they buy.

The criteria for self-catering accommodation being liable for business rates instead of council tax will also change from next April.

Currently, properties that are available to let for at least 140 days, and that are actually let for at least 70 days, will pay rates rather than council tax. The change will increase these thresholds to being available to let for at least 252 days and actually let for at least 182 days in any 12-month period.

The change is intended to provide a clearer demonstration that the properties concerned are being let regularly as part of genuine holiday accommodation businesses making a substantial contribution to the local economy.

Both changes follow a consultation process that has included businesses, the tourism industry and local communities.

Plaid Cymru and the Welsh Government signed their co-operation agreement on December 1

However, there is not universal support for the proposals within the Senedd, with the Welsh Conservatives in long-standing opposition to a hike on second homes.

Commenting on the news of the council tax rises, the party's shadow minister for housing, Janet Finch-Saunders, said: “It is deeply concerning that Labour ministers are pandering to their nationalist coalition partners and punishing aspiration and investment in Wales.

 “The housing crisis is a direct result of years successive Labour-led governments failing to provide opportunities and build enough houses with housebuilding falling below levels before devolution. What we see is a Labour Government desperately trying to act long after the horse has bolted.

 “This Labour Government is failing to tackle the root issues of the housing crisis failing to address the fact that, until recently there have been more empty homes in Wales than there are second homes.

“Labour ministers in Cardiff Bay need to get a grip, address the housing shortage in Wales and provide an environment where hard work can be rewarded.”