Second homes Council tax rates

16 June 2022

 

Dear

ATISN 16353 – Impact Assessments and Financial Data relating to The Non‑Domestic Rating (Amendment of Definition of Domestic Property) (Wales) Order 2022

Information requested

Thank you for your request which I received on 25 May. You asked for the following.

1. Evidence of Impact Assessments and/or similar economic modelling the Welsh Government carried out in preparation for the Regulations (The Non-Domestic Rating (Amendment of Definition of Domestic Property) (Wales) Order 2022) which, in relation to second homes, intends to increase council tax applied by local authorities by up to 300%, and in relation to properties used as self-catering holiday property (SCHP) liable for business [non-domestic] rates, to amend the minimum letting period to 182 days in any 12-month period and availability for letting from 140 to 252 days.

2. All evidence and scenario planning calculations of the net impact on council tax income generated. This should include:

1. the net additional income to each local authority is expected to achieve by applying either 100%,200% or 300% multipliers (ie the range of net additional council tax income estimates);
2. the calculation of how many second homes in each LA area will be affected;
3. the calculations for how many second homes are expected to be sold or expected to cease to be classed as second homes as a direct result of the increases in council tax;
4. the estimated number of second homes so released back into the housing market;
5. the number of homes so released that are expected to be bought by local Welsh residents, and the basis for that calculation/estimate;
6. the estimated change in the market prices (or average market price) of homes in Wales as a result of this Order.

3.   With respect to self-catering holiday properties (SCHP), all the evidence and scenario planning calculations for the net impact on:

1. the number and % of SCHP that will fail to achieve the new minimum thresholds based on current letting information;
2. the number and % of SCHP the Welsh Government estimates will cease to qualify for business [non-domestic] rates as a result of this legislation;
3. the number and % of SCHP the Welsh Government expects to be withdrawn from the letting market as a result and the net reduction (if any) in SCHP accommodation in each local authority area;
4. the number of SCHP that the Welsh Government estimates will put back into the domestic housing market over the relevant periods;
5. the financial impact – positive or negative – on the local economies and the tourism industry in terms of reduced (or increased) numbers of non-Welsh visitors to Wales per annum and, as a consequence, any assessment of the impact (positive or negative) on numbers of local people employed in the tourism sector in Wales.

4. In both cases, any evidence, reports, sensitivity analysis, forecasts and other evidence commissioned or undertaken by the Welsh Government in preparation for this legislation, how this evidence was commissioned and who from.

5. In respect of both second homes and SCHP, any evidence of forecasts produced of how many more homes will become available to local buyers by whatever means as a direct result of this legislation and the impact on house prices generally. The information should also include any evidence relied upon to arrive at the figures proposed in the legislation (ie up to 300% council tax and 252/182 days for business [non-domestic] rated property).

6. If no such information, calculations or forecasts were prepared, commissioned or evidenced by the Welsh Government for some or any of the above information in preparation for the legislation, please state unequivocally which and what evidence was prepared and relied upon.

Our response

The information you requested is set out below.

Query 1

The Welsh Government carried out a Regulatory Impact Assessment in preparing the Non-Domestic Rating (Amendment of Domestic Property) (Wales) Order 2022, which can be found at: Explanatory Memorandum to the Non-Domestic Rating

This legislation applies only to the criteria for self-catering holiday property to be classified as non-domestic. The relevant legislation for the level at which a council tax premium for second homes may be set by a local authority is the Council Tax (Long-term Empty Dwellings and Dwellings Occupied Periodically) (Wales) Regulations 2022. The accompanying Regulatory Impact Assessment for these regulations can be found at: Explanatory Memorandum on the Council Tax

Query 2

The Welsh Government does not hold any data on the net additional income to each local authority is expected to achieve by applying a council tax premium. It is a matter for each local authority to decide whether to apply a premium and the level at which to apply it.

Published figures for the number of chargeable second homes can be found in table 6 at: Council Tax dwellings: April 2022 to March 2023. 

The Welsh Government does not hold any data on the number of second homes that are expected to be sold or cease to be classed as second homes as a direct result of the increase in the maximum council tax premium.

The Welsh Government does not hold any data on the estimated number of second homes to be released back into the housing market.

The Welsh Government does not hold any data on the number of homes expected to be bought by Welsh residents.

The Welsh Government does not hold any data on the impact on average house prices.

Query 3

The Welsh Government holds limited data to quantify the extent to which the new thresholds will be met. The Wales tourism accommodation occupancy surveys demonstrate that, over the three years prior to the coronavirus pandemic (2017 to 2019), self-catering properties in Wales consistently exceeded 50% occupancy, on average.

Data is also available from a sample of VOA assessments and responses to the Wales tourism accommodation occupancy surveys. The two data sources present opposing trends over the three years prior to the coronavirus pandemic. In the VOA sample, around 40% of properties were let for at least 182 days in 2017, declining thereafter. In contrast, the occupancy survey shows an increase over the three years, to reach around 40% of properties in 2019.

A survey of operators conducted by the Professional Association of Self-Caterers UK, Wales Tourism Alliance and UK Hospitality Wales, found that 34% currently let their properties for at least 182 days per year. Almost a quarter currently exceed 200 days.

Even if previous occupancy related to the new thresholds were known with confidence, it would not reveal how many of those would be able to increase their letting activity, so that they do meet the new criteria by the time they take effect.

The Welsh Government does not hold data on the number of properties that may be withdrawn from the short-term holiday letting market.

The Welsh Government does not hold sufficient data to accurately assess the financial impact on local economies and the tourism sector, or the impact on employment. The introduction of legislation is, in part, intended to bring about behaviour change which would increase the proportion of properties that meet the new criteria.

Query 4

The Welsh Government requested analysis from the Valuation Office Agency of historic occupancy levels for a sample of self-catering properties listed for non-domestic rates, to inform the RIA. The response is attached at Annex A.

The Welsh Government also requested data from responses to the Wales tourism accommodation occupancy surveys, from the third-party contractor appointed to administer the survey. The data provided is summarised in the table below.

Numbers of self-catering properties according to days let

Number of days let	2017	2018	2019
Less than 182 days	107	84	58
182 days or more	31	32	36
Total properties	138	116	94

These results of these analyses are reflected in the RIA and in response to Query 3, above.

Query 5

No such forecasts have been produced.

Query 6

The Welsh Government has undertaken a wide-ranging policy consultation on local taxes for second homes and self-catering properties, followed by a technical consultation on the draft regulations to amend the letting criteria. A wide range of suggestions for alternative letting criteria was received in response to the policy consultation. The most common specific suggestion was 105 days actually let, but many respondents suggested higher figures. Some respondents were of the view that all properties providing living accommodation should be classified as domestic and liable for council tax, or suggested letting criteria so high that they would have the same effect. The Welsh Government is not duty bound to accept the most common specific response to a consultation.

Following consultation, the Welsh Government is of the view that for a self-catering property to be treated as non-domestic for local taxation purposes, it should operate as a business for the majority of the year. The thresholds take account of the responses to the policy consultation, and factors such as the operation of the current thresholds and the thresholds applied for other purposes.

Limitations on the availability of evidence related to occupancy levels do not prevent the Welsh Government from introducing changes. The evidence that is available is included in the RIA. Historic occupancy is not necessarily a predictor of future occupancy, particularly in the context of an intervention that is intended to incentivise behaviour change and the increased use of under-utilised properties, for the benefit of local communities. Moreover, the changes to the local taxes will operate as part of the wider package of measures which form our three-pronged approach to tackling the impact of second homes and holiday lets on communities.

Next steps

If you are dissatisfied with the Welsh Government’s handling of your request, you can ask for an internal review within 40 working days of the date of this response.  Requests for an internal review should be addressed to the Welsh Government’s Freedom of Information Officer at:

Information Rights Unit 
Welsh Government
Cathays Park
Cardiff
CF10 3NQ. 
Or email: Freedom.ofinformation@gov.wales

Please remember to quote the ATISN reference number above.   

You also have the right to complain to the Information Commissioner.  The Information Commissioner can be contacted at: 

Information Commissioner’s Office 
Wycliffe House
Water Lane
Wilmslow
Cheshire 
SK9 5AF.

However, please note that the Commissioner will not normally investigate a complaint until it has been through our own internal review process.

Yours sincerely

 

Annex A

Valuation Office Agency self-catering assessments in Wales – sampling exercise

• This analysis document is in response to the Welsh Government’s request for an indication as to how long Self-Catering assessments are in practice being let out. 

• A data snapshot taken in December, 2021 indicated there were c 9,400 self-catering assessments in the 2017 Rating List in Wales. From this, a random sample of 457 assessments from across Wales was taken in to understand the number of days they have been let out for each reporting year since 1 April 2017. Not all assessments sampled have been in the lists since 1 April 2017 so there will not necessarily be data for all years.

• Analysis of the sample showed that 58 of the 457 assessments had no lettings data for the previous four years and therefore have been removed from the sample. The 58 excluded assessments are either where property owners have not returned their forms or have not included the number days their properties have been let out. The VOA are investigating these cases and any assessments found not meeting the current self-catering criteria will be moved into the Council Tax List. The VOA separately agreed with the WG to undertake compliance checks for 50% of self-catering assessments in Wales each year, commencing from April 2022.

• The remaining sample of 399 included self-catering assessments where the number of days let was recorded for at least one reporting year between 2017-18 and 2020-21. Data was not however, available for each year, reducing the sample size further when broken down for each reporting year. The smaller the sample size, the less confident we are with the results (we have used a 95% confidence level to calculate the confidence intervals in tables 1 and 2). The following analysis should therefore be treated as indicative.

Table 1. Percentage of self-catering assessments let out 70 days or more (as per current requirement)

Year (ending 31 March)	Sample size	% of assessments let for 70 days or more	Confidence interval
2017/18	203	95%	+/- 3%
2018/19	300	94%	+/- 3%
2019/20	304	87%	+/- 4%
2020/21	128	79%	+/- 7%

Table 2. Percentage of self-catering assessments let out 182 days or more (as per WG’s proposed requirement)

Year (ending 31 March)	Sample size	% of assessments let for 182 days or more	Confidence interval
2017/18	203	40%	+/- 7%
2018/19	300	35%	+/- 5%
2019/20	304	11%	+/- 4%
2020/21	128	9%	+/- 5%

Table 3. Percentage of self-catering assessments let out by number of days

Number of days let	Year (ending 31 March)
	2017/18 [note 1]	2018/19	2019/20 [Note 1]	2020/21
1: Under 70 days	5%	6%	13%	21%
2: 70 to 79 days	2%	6%	16%	15%
3: 80 to 89 days	4%	2%	11%	9%
4: 90 to 99 days	3%	5%	10%	10%
5: 100 to 181 days	44%	46%	39%	35%
6: 182 + days	40%	35%	11%	9%

Note 1: Due to rounding, these percentages sum to 98% and 99% respectively. When unrounded these percentages sum to 100%.