The issue of second homes in Scotland has become a focal point of policy discussions, with many residents and policymakers concerned about the impact of these properties on local communities and housing markets. In this blog, we will explore the facts and figures surrounding second homes in Scotland, the policy measures in place to manage them, and the ongoing debates about the future of second home ownership.
What Are Second Homes?
A second home is typically defined as a property that is not the owner’s main residence but is furnished and used for at least 25 days in a year. These homes may be used as holiday retreats, rented out as holiday lets, or occasionally used for longer-term stays. However, the classification of second homes does not include properties that are used exclusively as holiday lets or rented out for long-term residential use, as they are considered businesses and subject to different tax policies.
How Many Second Homes Are There in Scotland?
As of September 2024, Scotland had 21,606 second homes, which is a relatively small proportion (around 1%) of the total housing stock. However, there are considerable variations across different local authority areas, with rural areas experiencing much higher concentrations of second homes.
For example, in Argyll and Bute, there were 603 second homes per 10,000 dwellings, and in Na h-Eileanan Siar (the Western Isles), the rate was 598 per 10,000 dwellings. This stark contrast highlights the significant rural-urban divide in second home ownership.
Visual Representation: Second Homes by Local Authority Area
In rural parts of Scotland, second homes are more prevalent, especially in coastal regions and island communities. This has sparked concerns over the availability of affordable housing for local residents, as the presence of second homes can drive up property prices and reduce the supply of homes available for permanent residents.
The Impact of Second Homes on Local Communities
The presence of second homes in rural areas has both positive and negative effects on local communities:
Negative Impacts:
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Rising House Prices: The demand for second homes, especially in picturesque areas popular with tourists, can drive up property prices, making it harder for local residents to afford housing.
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Reduced Housing Availability: With many second homes lying empty for much of the year, fewer properties are available for local people to rent or buy, exacerbating housing shortages.
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Community Cohesion: Empty second homes or homes used infrequently can weaken local communities, as they contribute to lower population density and disrupt the social fabric of rural areas.
Positive Impacts:
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Economic Benefits: Wealthier second homeowners often spend money in local shops, restaurants, and other businesses, which can stimulate the local economy.
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Tourism Support: Second homes used as holiday lets can support the local tourism industry, providing accommodations for visitors and helping local businesses thrive.
While the benefits are evident, the negative impacts, especially in terms of housing affordability, have led to increased calls for policy interventions to manage second home ownership in Scotland.
Scottish Government Policies on Second Homes
The Scottish Government has implemented several policies aimed at regulating second homes and alleviating some of the pressure on local housing markets. These measures include changes to council tax rates, increased taxes for second property purchases, and regulations surrounding short-term lets.
Council Tax on Second Homes
Historically, second homes in Scotland were eligible for a 50% council tax discount. However, councils now have more flexibility to adjust this discount or even charge a premium:
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Council Tax Premium: Since April 2024, councils have had the power to charge a premium of up to 100% on second homes. This means that owners of second homes could pay double the standard council tax rate. This policy aims to encourage second homeowners to use their properties for longer-term occupancy or to free up housing for local residents.
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Non-Domestic Rates: Properties used as holiday lets for more than 140 days per year may be subject to non-domestic rates instead of council tax, which could also make second homes more expensive to operate as businesses.
Additional Land and Building Transaction Tax (LBTT)
When purchasing an additional residential property, buyers are required to pay an Additional Dwelling Supplement (ADS) on top of the standard land and building transaction tax. This extra charge aims to reduce the incentive for buying second homes as investments:
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ADS Rate: The ADS rate increased from 4% to 6% in December 2022 and is set to rise to 8% in December 2024 for properties priced above £40,000.
Short-Term Let Regulations
In response to the rise of properties being let out as short-term rentals (e.g., through platforms like Airbnb), the Scottish Government introduced a licensing system for short-term lets. Councils have the power to establish short-term let control areas where planning permission is required to use a property as a short-term let. This aims to curb the over-saturation of short-term lets in certain areas, which can exacerbate housing shortages.
Can the Purchase or Occupation of Second Homes Be Restricted?
While there have been discussions about restricting second home ownership, particularly in areas facing severe housing shortages, current policy mainly focuses on regulating the use of second homes through taxation and planning controls. Local authorities can impose restrictions on the use of land through planning conditions, but these measures are generally limited and can be difficult to enforce.
Some councils are considering introducing control areas that would make it more difficult for homeowners to convert properties into short-term lets without permission. These measures are seen as a potential solution to the problem of second homes in areas with high demand for local housing.
The Future of Second Home Policy in Scotland
The Scottish Government continues to explore additional measures to address the issue of second homes. A recent consultation with COSLA (Convention of Scottish Local Authorities) has suggested the possibility of allowing councils to charge more than a 100% council tax premium on second and long-term empty homes, though this would require new primary legislation.
In the meantime, the Housing (Scotland) Bill, which is currently under review, may introduce further amendments to council tax regulations for unoccupied dwellings. These potential changes are being closely monitored, as they could significantly impact second home ownership and availability of housing for local communities.
Second homes remain a contentious issue in Scotland, particularly in rural and island communities where their impact on local housing markets is most keenly felt. The Scottish Government’s approach to regulating second homes through council tax premiums, the ADS, and short-term let licensing represents a multi-faceted attempt to balance the economic benefits of second home ownership with the need to preserve affordable housing for local residents. With ongoing policy developments and consultations, the future of second homes in Scotland will likely continue to evolve.
