Why second home owners’ tax is failing to solve Tenby’s housing crisis (2024)

As one of Wales’s most popular and picturesque seaside destinations, Tenby has gladly welcomed tourists and outsiders for more than two centuries.

Almost every street is filled with holiday lets. And between 2017 and 2021, the number of second homes in Pembrokeshire rose by 45 per cent, partly as its popularity shot up during the pandemic. More than 28 per cent of properties are now owned by non-residents.

But this summer, however, something has shifted, and there are “for sale” boards on every other street. Is this a sign that Tenby’s second homeowner boom has turned to bust?

If so, it’s about time, say full-time residents, who have broadly supported a controversial “second home tax” introduced in 2021.

In this, they were ahead of the curve. One in four local authorities – including Pembrokeshire Council – have now agreed to double council tax on second homes.

A 50 per cent council tax “premium” for second homes was originally levied in Pembrokeshire in 2017. Then, in 2021, second homeowners were ordered to pay double council tax.

It could be worse: under Welsh law, this could be increased to three or four times the basic rate, as a tax of up to 300 per cent is now permissible. And yet this policy, designed to put homes back within reach of local people, is failing to address the issue at hand.

It hasn’t solved the problem at all, says Rhys Jordan, a local estate agent and county councillor: “All we’ve got now are empty properties on the market that aren’t being lifted and aren’t bringing anything to the economy.

“There are two properties for every one registered buyer in Pembrokeshire, and the properties aren’t selling because people aren’t able to afford them.” The average house price there is £371,705, up 44 per cent on three years ago.

He adds: “I’m not pro-second home-ownership, or against it. Fundamentally, it’s a huge part of the Pembrokeshire economy, and I think by driving them out, it’s going to cause huge problems long-term.”

The anti-second-home stance has backfired, he points out. A handful of sellers have been put off by the increased council tax, but Government legislation introduced in 2022 that requires holiday homes to be let for 182 days per year is having more of an impact.

It’s an “idiotic rule… Lots of people who bought second homes in Pembrokeshire used to rent them for the minimum period [of 70 days] or thereabouts to register for business rates, and now they’re no longer viable, so they stick them on the market,” says Jordan. As these properties are out of reach for local first-time buyers, they lie vacant, and that will have more of an impact on Tenby’s tourism industry than anything else.

It is thanks to second homes and holiday lets that Tenby has become a year-round destination, he says. “It’s a booming economy. And if we went back to a six-week holiday season, or even a 12-week season, the rates of unemployment will be through the roof… It’s a very short-sighted move. Tourism tax will be the next thing.” (The Welsh government has recently said it intends to push ahead with a “visitor levy” for tourists by 2026).

Jordan’s stance on it is simple, he says. “The Welsh Government has failed to build enough houses in the past 25 to 30 years.

“They have not had schemes that have allowed first time buyers to get on to the ladder. And now it’s coming home to roost.”

And so a deep divide has opened between residents, who say wealthy part-timers are pricing them out of the market, and second home-owners, who say they have been unfairly penalised and scapegoated for a lack of affordable housing. Some even report finding dog poo on their doorstep.

Anna, from Newport, bought a two-bed cottage in Tenby in 2016. Her family spends half the year there, and she visits around once a week. “We bought our house primarily for our use – it was never going to be a business,” she says. “A year after we bought the house the council tax went up, but we thought we’ll swallow that because we enjoy using it.

“When it went up to double, we decided that we needed to let it to cover the cost of the increased council tax… we’re looking at about £5,000 for council tax. We actually don’t mind paying double if it sustains our house. But we would mind paying double again.”

She doesn’t intend to sell. “We know lots of people and have friends here,” she says. But relations with a “small minority” of Tenby’s full-time residents are strained. “Between about January and May last year, there was a big whipping up of unpleasant feeling, led by a minority of people… [who] firmly put the blame for all the problems that Tenby is facing on second homeowners, blaming them for pricing people out of buying houses where they were born and damaging the Welsh language,” she says.

“The first time we came back after Covid, we got told to go away; they didn’t want our germs, and they’d enjoyed not having the tourists there.” It has become a joke, she says, that every problem facing Pembrokeshire is blamed on those with holiday homes. “Now if anyone says, ‘Oh, we’re shut on Monday, I go, is that because of the second home-owners?’”

Anna adds: “There are also a huge proportion of people from out of the area who’ve chosen to live there because it’s a nice place to live. And those are the ones who are most vociferous in damming the second homeowners.

“But we are Welsh, I speak Welsh, and I really object to being told, ‘you’ve done us out of homes,’ because at the end of the day, if our house went on the market tomorrow, all that would happen is somebody would pay cash for it and wouldn’t be bothered by paying three or four times council tax, because they can afford it.”

Another second homeowner, Rachel, 52, bought a property in Tenby in 2016, having holidayed in a static caravan in Pembrokeshire since 2000. She recognises that she is fortunate, and is willing to pay the premium – up to a point. “I think 200 per cent council tax is fair, and I pay it; but if it’s £8,000 per year, I think that’s a little unfair,” she says. “[But] that wouldn’t put us off. We’ve bought this because we love the area, and it’s just an added cost… but if we sell then a bigger fish will come along with a lot more money.”

The only thing that could make them move is the frosty reception they have received in Tenby. Not only are they second homeowners, she jokes, they are English second homeowners. Although they have spent half their time here for the past six years, Rachel and her husband “wouldn’t say [they’re] welcome… I never realised that we were not liked until Covid,” she says. “There was a lot of, ‘if you see a light on in a second home, stick dog poo through their door.’”

Others tell a very different story. Michael Williams, the county councillor for Tenby North and leader of the Plaid Cymru group, is a vocal supporter of a council tax hike for second home-owners. “I have been approached by a few second home-owners who do feel they are not welcome. But if you take the time to explain the impact they’re having on the community… they can then begin to understand what’s happening. Because the very soul is being taken out of the community in Tenby.”

It is not just the townhouses on the seafront that have been bought up; Williams says, on his road, only four of the 21 dwellings are permanently occupied. Another resident on a pretty terraced street says she is the only full-timer.

First time buyers have been hardest hit by rising costs. “Young people are being absolutely priced out… If they’re lucky enough to get employment in Tenby, which is a relatively low wage area, they’ve got no chance of buying their own property. And they’ve been priced out of the rental market now as well,” says Williams. At the time of writing, there is just one long-term rental property available online – a premium studio flat, on the market for £800 per month.

“A few [second homeowners] have sold up because they couldn’t afford it, but other than that, it hasn’t really made a difference. Our kids won’t be able to afford a property in Tenby and they won’t even be able to rent one,” says Caroline, 54, a Tenby resident for two decades. “My daughter lives in Kilgetty because she can’t afford Tenby, because the holiday homes price everyone out.”

One common complaint is that landlords are turning longer-term rentals into holiday homes, which can command up to £4,000 per week in high season. Another is that the character of the high street is changing to cater to holidaymakers rather than residents. One small business owner says: “You should see it in winter. Every year, there might be 10 more houses bought up as holiday homes. I can find staff, but they can’t afford to live here.”

Yet even those who are broadly in favour of capping second home ownership say the council tax premium hasn’t had the desired effect. One full-time resident was told his basement annexe, which isn’t rented out, was technically a second home. He was ordered to pay double council tax on it as well as a basic council tax rate for the rest of the house above it. “This is going on all over the county. People have basements, caravans, converted garages” they have been taxed on, he claims. The council has issued him dispensation, “so I’m not paying the premium at the moment, but I feel they could take that away at any time.”

As there is no distinction between commercial holiday let owners and the “third generation” second homeowners who spend much of their time in Tenby, the policy has “thrown the market and is opening a whole can of worms,” he says.

“It really pulls the rug from under all the locals who have bought a property – a little terraced house in Tenby – as their secondary, or indeed primary income… you’re not just penalising ‘rich people from England,’ you’re talking about locals.”

Why second home owners’ tax is failing to solve Tenby’s housing crisis (2024)

FAQs

Is the United States in a housing crisis? ›

According to the most recent estimates from Freddie Mac, the country is short about 3.8 million units of housing, both for-rent and for-sale — meaning there aren't enough homes to keep up with the number of new households that are forming.

What state has the worst housing shortage? ›

California currently has the largest deficit of homes at 978,000, while Mississippi fell short by 1,000. Metro areas were also affected by the crisis, as Up for Growth data shows 230 metro areas experienced housing underproduction from 2012 to 2019.

Will the US housing downturn be worse in 2023? ›

In conclusion, while the housing market may be experiencing a slowdown in year-over-year growth, the data and forecasts do not suggest an imminent crash in 2023. Home prices continue to rise, albeit at a slower pace, and market indicators provide a generally positive outlook.

Is America on the verge of a housing collapse? ›

Is a crash coming in the housing market? No, most industry experts do not think the market will crash. Housing economists point to five main reasons that the market will not crash anytime soon: low inventory, lack of new-construction housing, large amounts of new buyers, strict lending standards and fewer foreclosures.

Why is there a US housing shortage? ›

Several factors have together caused constraints on the construction of new housing: density restrictions (e.g. single-family zoning) and high land cost conspire to keep land and housing prices high; community involvement in the permitting process allows current residents who oppose new construction (often referred to ...

Are we in a housing bubble in the US? ›

With that in mind, the U.S. housing market is not currently experiencing a rapid increase in home prices that indicates a growing housing bubble, but the bubble that has formed in recent years may be seeing some mild correction.

Why is housing so unaffordable in the US? ›

That's largely due to the shortage of housing supply, which has hit middle income buyers the hardest. Thanks to elevated mortgage rates, the housing market is missing around 320,000 homes priced at or below $256,000 – the maximum price a middle-income buyer earning up to $75,000 can afford.

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