Local housing markets – Killing the Goose that lays the golden egg?

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Brighton and Hove Council are the latest and largest English urban destination outside London to start considering if and how they could or should tackle a range of issues associated with the private rented sector and second and holiday home ownership.  These include: the booming short-term let market, the lucrative shift from longer-term residential letting towards short-term holiday lets, the potentially inappropriate usage of residential accommodation for leisure purposes, the impacts on availability and affordability in the local housing markets and the knock-on impact that this might have on availability of local employees, especially in the service sector and, in particular within that, tourism and the visitor economy. It is latter concern I wish to focus on here.

Recently Whitby (North Yorkshire CC, Scarborough BC, Whitby TC) residents voted in favour of proposals to consider imposing primary residency restrictions on new build housing in the town.  Similar restrictions are being discussed or have been applied in a number of usually smaller, rural town mainly in coastal destinations and National Parks, for example, St Ives in Cornwall and Keswick in Cumbria.

Primary resident restrictions are not without there own issues. For example, in my own place of birth and former home town of Keswick, I know of new houses bought by local families who have taken the opportunity retain their original homes and now let them in the lucrative holiday market. Not necessarily I would suggest within the spirit of the primary residency clause scheme?  Equally there are studies that suggest that primary residency restrictions in places like St Ives act to limit local housing development and therefore only serve to reduce supply, increasing pressure on the existing property stock, albeit that this is arguably already be beyond the means of many local buyers? A failed challenge of the St Ives scheme has set some useful legal precedence (link below to article on both below).  

Nationally there a number of associated changes underway. In England owners of short-term letting properties claiming and often then benefiting financially from business rate status will, from April 2023, have to actually prove they have met the existing minimum 70 days let, 140-day available criteria in the previous year (as they already have to do in London). The principle is a bit of a “no brainer” although the how, and how effectively that is to be enforced remains a bit fuzzy.  Councils will also be able to adopt higher Council Tax rates (200% and rising annual) for properties including second and holiday homes left empty after one year (previously two).  Although arguably genuinely empty houses aren’t necessarily the real problem?  In Wales, having consulted on restrictions on second home ownership, significantly higher threshold for classification as a holiday letting business (182 let, 252 days available) and locally adoptive powers to charge higher Council Tax rates on occupied second and holiday homes (up to 300%), the Welsh Government have now adopted most of their original proposals, unchanged with effect from April 2023. Differing approaches also applied in Northern Ireland and Scotland (see link to Westminster briefing below).

 Arguments continue to rage around whether second and holiday homes and the exponential growth in short-term holiday lets are generally a good or bad thing for tourism.  At one extreme of the debate the arguments are all about the benefits that more accommodation for visitor and therefore, in theory at least, more tourists and tourism that this brings to local destinations. On the other extreme the arguments are about the reduction in local owner occupation and the numbers of properties available for long term let and therefore, in theory at least, less availability of affordable, owner occupier and or private rental sector housing for the local workforce essential to service those visitors and maintain a healthy visitor economy. 

Depending on your viewpoint the goose and golden eggs being killed off by housing issues and/or by the growing action to alleviate them is either: an unfettered supply of accommodation for visitors or an adequately sized local workforce to service the needs of the visitor economy.  The two opposing ends of the argument are reaching the point at which they may have become mutually exclusive in an ever-growing number of destinations. Whichever side of the argument you lean towards it is perhaps time that questions like those being asked in places like Brighton and Hove are also asked and answered more widely at both a locally and, more particularly in England, at a national level.

For a decade plus, British Destinations have been raising unfashionable concerns about how individuals were expected to both “live and work” in popular destinations and, in particular, in popular rural areas and urban honey pots where the housing market has become overheated. Not everyone in the industry has appreciated us raising such a potentially unpalatable truth and until recently Government has appeared relatively unconcerned.  So, what’s changed? 

Bluntly the arbitrary and sudden removal of a large, steady stream of often younger, relatively well-educated, usually single employees, willing to work, often as much for the experience as for the wages and to live in often cramped, sometimes substandard accommodation, either provided by the employers or found locally. Accommodation that is typically fine for a few months or a few years but not adequate for a sustainable long-term, normal life style. If we genuinely wish people to live and work in destinations, long-term then we need to address the genuine quality of the life offered and central to that is the place people physically live when not working.

While we were in the EU this, manifested itself as an apparent problem of skills shortages attributed to poor retention and high staff turnover. Now we are out of the EU it has been exposed for what it really was, inherent natural turnover, now manifesting itself as a chronic lack of staff trained or otherwise. The steady stream of new workers replacing the steady stream of workers heading home or moving on to more lucrative employment within the UK has largely dried up. It is worth noting that prior to relying heavily on EU workers, the industry relied instead on antipodeans on long, post university breaks (late 70s – 90s?), albeit at the time servicing a smaller, more seasonal UK tourism industry. Prior to that (50s – early 70s?) in an even more highly seasonal, school holiday focused industry, many popular destinations essentially exploited the availability of local students and school children (often very young). So how do we break the pattern if it isn’t to find yet another steady source of preferably good quality, low-cost labour willing to live (exist?) in the accommodation now typically available to them?  The answer has surely to include ease of access to an acceptable quality accommodation and its relative affordability?

It would of course be remise at this point not to mention the other major affordability factor in the “live and work” equation; that of wages.  Undoubtedly higher wage rates would be most welcome and assist the “live and work” balance. Unfortunately, the housing market is now so far out of kilter with the average tourism industry wage in most popular, let alone the real honeypot destinations, that it is almost inconceivable that wage levels alone are now the sole or even the main issue or answer to it.

The second major change is the relatively recent creation and subsequent growth in sharing economy platforms like Airbnb.  They may not be solely responsible for the boom in the number of holiday properties now being let and the shift from long to short-term lets but they have at the very least helped shaped the conditions for it to happen and then proactively facilitated what is arguably an unsustainable level of growth.  This is evidenced by similar issues and in many cases the robust actions taken to counter them by individual destinations, regions, states and countries across the globe.  The UK are not alone in facing a range of housing issues that relate to a boom in short-term holiday lets and there are potentially useful lessons, for and against, to be learnt here. See our library of UK and international sharing economy press reports: here.

Meanwhile in England we continue to await the long-promised consultation on a potential statutory accommodation registration. Perhaps not the easiest call for an essentially deregulating leaning administration?  Work on developing a potentially adoptive approach to registration or licensing scheme in Wales is progressing as part of a generally more robust stance on local housing issues, over tourism and local and nation tax on tourism being taken by the Welsh Government.  Registration, essentially in its simplest form a central register of who is trading where, should at least help overcome one of the major issues of the sharing economy, the total lack of transparency and consequently an inability to identify, let alone trying to start adequately regulating the vastly expanded levels of provision.

Assuming, as I do, that the issues discussed above are going to become much more widely debated in many other destinations over the coming months, I would recommend having to hand the Westminster library, UK wide, briefing document on: Second home and holiday lets in rural communities, published in early January 2022. It is an excellent reference document on the main issues, recent activities and plans, less the most recent developments in England and Wales.  It may not be something to read in full now but useful to know where to find if and when the issues raise their head locally:

https://researchbriefings.files.parliament.uk/documents/CDP-2022-0001/CDP-2022-0001.pdf

Local coverage of the issues for Brighton & Hove can be accessed at:

https://www.theargus.co.uk/news/20222393.second-home-ban-planned-brighton-hove/

and national coverage on the vote in Whitby:

https://www.theguardian.com/uk-news/2022/jun/14/whitby-votes-to-limit-sales-of-second-homes

Information on the scale of the issues faced in Keswick:

Lesson arising from St Ives legal challenge:

https://www.cornwall.gov.uk/media/nt5c5jcl/principal-residence-policies.pdf

and one of a number of academic studies looking at the impact of the St Ives policy:

https://www.sciencedirect.com/science/article/abs/pii/S0743016718308301

One thought on “Local housing markets – Killing the Goose that lays the golden egg?

    […] within hours of me publishing a note on the housing market and the conflicting impacts on tourism (here) there is a suggestion in the Times that Michael Gove and the Levelling up Department may be […]

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