Local Authority Powers to Control Second Homes and Short-Term Lets
Liberal Democrat · what the evidence says
An independent, source-checked look at Liberal Democrat’s policy “Local Authority Powers to Control Second Homes and Short-Term Lets” — what it would actually do across the things that affect your life. Every claim below quotes the source behind it. How this works.
Affordable housing — Helps
minor · moderate confidence
Allowing councils to charge up to 500% council tax on second homes and create a new planning class for short-term lets could nudge some properties back into the residential market, helping affordability at the margins — especially in hotspot areas. But the total number of second homes and holiday lets is small relative to England's overall housing need, and loopholes may blunt the effect.
The evidence
- Councils would be permitted to increase council tax by up to 500% on second homes, with a stamp duty surcharge on overseas buyers, and a new planning use class would be created for these properties. — libdems.org.uk (manifesto) — “Allowing them to increase council tax by up to 500% where homes are being bought as second homes, with a stamp duty surcharge on overseas residents purchasing such properties. Creating a new planning class for these prop…”
- As of early 2025, the number of second homes in England's council tax database stood at nearly 280,000. — hqnetwork.co.uk (media) — “The number of properties in England classed as second homes in the government's council tax database rose from 262,953 to 279,870 between 2020 and early 2025.”
- By April 2025, 71% of English councils were already charging a council tax premium on second homes, covering around 170,000 properties. — generationrent.org (media) — “In April 2025, 211 out of 296 (71%) English councils were charging second home council tax premiums, affecting 170,307 properties.”
- England currently allows only a 100% council tax premium on second homes (doubling the bill), not the 500% proposed. — hqnetwork.co.uk (media) — “currently, local authorities in England can charge an additional 100% Council Tax premium on second homes (effectively doubling the council tax) from April 2025, under the Levelling Up and Regeneration Act 2023.”
- Following the introduction of higher council tax charges, second homes in England fell by over 11,000 in 2025, with only a small net increase in holiday lets. — generationrent.org (media) — “the number of second homes in England fell by over 11,000 in 2025 following the introduction of higher council tax charges, with only a small net increase in holiday lets.”
- A record 128,000 households were living in temporary accommodation in England as of July 2025, illustrating severe housing need. — resolutionfoundation.org (institutional) — “A record 128,000 households were living in temporary accommodation in England as of July 2025.”
- A 100% council tax premium in Cornwall was estimated to generate around £24 million per year for affordable housing and council services; a 500% premium could generate substantially more but the revenue-to-supply conversion is not guaranteed. — hqnetwork.co.uk (media) — “Cornwall Council estimated that a 100% premium on its 12,400 second homes would generate approximately £24 million per year for affordable housing and other council services.”
- A key risk is that owners avoid the premium by registering properties as short-term lets and paying business rates, potentially qualifying for small business rate relief. — hqnetwork.co.uk (media) — “A significant challenge is that owners might seek to avoid higher council tax by registering their properties as short-term lets and paying business rates, particularly if they can qualify for small business rate relief.”
- The higher the council tax premium, the stronger the financial incentive to exploit the business-rates loophole, making avoidance more likely under a 500% regime. — hqnetwork.co.uk (media) — “The financial incentive created by a 500% council tax premium would likely lead to new attempts to navigate these rules.”
- Effective implementation of the new planning class and registration scheme will require robust data and sufficient local authority resources. — researchbriefings.files.parliament.uk (government) — “Effective implementation of new planning classes and licensing schemes will require robust data collection (via the national registration scheme) and sufficient resources for local authorities to monitor and enforce.”
Biggest unknown: How many second-home owners convert to business rates to avoid the premium, and whether the new planning class is robustly enforced with adequate local authority resources.
Our reading: The policy has two main levers: a large council tax premium and a new planning use class. The evidence shows that the existing 100% premium already drove a fall of over 11,000 second homes in 2025 — a real, measurable signal that financial disincentives shift behaviour. A 500% premium would be materially stronger, and the new planning class (mirroring Wales and Scotland's approach) adds a structural tool to limit conversion of residential stock into holiday lets. That combination gives a credible mechanism for returning some properties to the residential market, particularly in hotspot rural and coastal communities where second homes concentrate. However, the absolute numbers matter: roughly 280,000 second homes in England against a backdrop of 128,000 households in temporary accommodation alone means the freed stock, even in an optimistic scenario, addresses only a fraction of housing need. The business-rates loophole is the central risk — a 500% premium creates a very large incentive to register as a short-term let and claim small business rate relief, potentially neutralising much of the effect unless tightening of qualifying criteria keeps pace. Enforcement of the new planning class also requires local authority capacity that is not guaranteed. On balance, the policy is directionally positive for affordability — especially in specific geographies — but the magnitude is minor at national scale, and delivery risk is real. The evidence does not support a 'worsens' case on O1; the tourism-economy concern is a separate lever not a housing-affordability harm.
Tax & the money you keep — Hurts
moderate · moderate confidence
This policy raises council tax by up to 500% on second homes and adds a stamp duty surcharge for overseas buyers of such properties, directly reducing take-home value for those affected. The tax increase lands on a specific group — second home owners and overseas purchasers — not the average household.
The evidence
- Local authorities can increase council tax by up to 500% on second homes, with a stamp duty surcharge on overseas residents purchasing such properties. — libdems.org.uk (manifesto) — “Allowing them to increase council tax by up to 500% where homes are being bought as second homes, with a stamp duty surcharge on overseas residents purchasing such properties”
- As of April 2025, 211 out of 296 English councils were already charging second home council tax premiums, affecting 170,307 properties. — generationrent.org (media) — “In April 2025, 211 out of 296 (71%) English councils were charging second home council tax premiums, affecting 170,307 properties”
- The number of properties classed as second homes in England rose from 262,953 to 279,870 between 2020 and early 2025. — hqnetwork.co.uk (media) — “The number of properties in England classed as second homes in the government's council tax database rose from 262,953 to 279,870 between 2020 and early 2025”
- England currently allows an additional 100% council tax premium on second homes from April 2025 under existing legislation. — hqnetwork.co.uk (media) — “currently, local authorities in England can charge an additional 100% Council Tax premium on second homes (effectively doubling the council tax) from April 2025, under the Levelling Up and Regeneration Act 2023”
- A higher council tax premium would likely incentivise owners to register properties as short-term lets and seek business rates relief, partially avoiding the tax. — hqnetwork.co.uk (media) — “The ability of property owners to switch from council tax to business rates has been a known "loophole." While criteria have been tightened, the financial incentive created by a 500% council tax premium would likely lead…”
- The existing UK stamp duty higher rate for additional properties is already 3%. — commonslibrary.parliament.uk (government) — “The UK already has a 3% higher rate of Stamp Duty Land Tax (SDLT) for those purchasing additional properties”
Biggest unknown: How many second home owners switch to business rates to avoid the council tax premium, and whether that loophole is effectively closed, determines the real tax burden ultimately borne.
Our reading: This policy directly increases the tax burden on two specific groups: owners of second homes (via council tax up to 500%) and overseas buyers of such properties (via a stamp duty surcharge). Both are unambiguous tax rises on those groups, which worsens O11 for them. The affected population is not the typical household — it is the roughly 280,000 second home owners in England and overseas purchasers. For those households, the increase from the current 100% premium (doubling council tax) to a potential 500% premium is a very substantial rise in their tax liability, warranting a 'moderate' magnitude rating. The stamp duty surcharge adds further cost at point of purchase for overseas buyers. The main complication is the business rates loophole: evidence indicates a strong financial incentive to reclassify properties as short-term lets, which would reduce actual tax paid. This partially limits how much of the stated 500% premium translates into real additional burden, introducing uncertainty around the true magnitude. Nevertheless, even accounting for avoidance, a portion of second home owners will bear higher taxes — and for them the effect is clearly a worsening of O11. The policy does not affect the tax burden of the general population, so the distributional incidence is narrow but real within the affected group.
Prosperity & living standards — Mixed picture
moderate · moderate confidence
The policy could free up housing for local workers and essential employees, improving economic opportunity in affected areas, but may also reduce income for hosts and dampen the local tourism economy that supports many rural and coastal communities. Both effects are real and evidenced.
The evidence
- Local authorities may increase council tax by up to 500% on second homes and impose a stamp duty surcharge on overseas buyers, plus create a new planning class for these properties. — libdems.org.uk (manifesto) — “Allowing them to increase council tax by up to 500% where homes are being bought as second homes, with a stamp duty surcharge on overseas residents purchasing such properties. Creating a new planning class for these prop…”
- Second homes in England rose from around 263,000 to nearly 280,000 between 2020 and early 2025. — hqnetwork.co.uk (media) — “The number of properties in England classed as second homes in the government's council tax database rose from 262,953 to 279,870 between 2020 and early 2025.”
- When existing (lower) council tax premiums were introduced in England, the number of second homes fell by over 11,000 in 2025, with only a small net increase in holiday lets. — generationrent.org (media) — “the number of second homes in England fell by over 11,000 in 2025 following the introduction of higher council tax charges, with only a small net increase in holiday lets.”
- A record 128,000 households were in temporary accommodation in England as of July 2025, indicating acute housing pressure. — resolutionfoundation.org (institutional) — “A record 128,000 households were living in temporary accommodation in England as of July 2025.”
- Reducing second homes could help essential workers afford to live locally, supporting local labour markets and economic opportunity. — rsnonline.org.uk (media) — “reducing second homes can prevent communities from being "hollowed out" and ensure essential workers can afford to live locally.”
- A 500% council tax premium would create a strong financial incentive for property owners to switch to business rates, potentially undermining the policy's effect. — hqnetwork.co.uk (media) — “The ability of property owners to switch from council tax to business rates has been a known "loophole." While criteria have been tightened, the financial incentive created by a 500% council tax premium would likely lead…”
- Effective implementation requires adequate local authority resources and robust data from the national registration scheme. — researchbriefings.files.parliament.uk (government) — “Effective implementation of new planning classes and licensing schemes will require robust data collection (via the national registration scheme) and sufficient resources for local authorities to monitor and enforce.”
Biggest unknown: Whether the net gain in housing availability and local workforce mobility outweighs the loss in tourism-sector income and the behaviour of property owners shifting to business rates to avoid the premium.
Our reading: This policy works through two channels that pull O13 in opposite directions. On the positive side: the existing evidence (E8) shows that even a lower council tax premium measurably reduced second home numbers in England, and with 280,000 second homes and a record 128,000 households in temporary accommodation (E31, E33), releasing housing stock into the primary market could meaningfully improve economic opportunity and workforce mobility in constrained local economies. If essential workers can afford to live near work (E26), local labour market efficiency and productivity should improve — a genuine long-term living-standards gain. On the negative side: short-term lets and second homes sustain local tourism economies in many coastal and rural areas (E27, E28). Restricting them could reduce income for hosts, cut visitor spend, and shrink local business dynamism — worsening living standards for communities that depend on the visitor economy. The 500% rate also creates a strong avoidance incentive via the business-rates loophole (E29), and enforcement requires resources councils may not have (E30). The Welsh and Scottish precedents (E14, E15) show the planning-class mechanism is deliverable, but comparable evidence of net economic gain at scale is not yet available in the provided evidence. On balance, the housing-opportunity channel likely dominates in high-pressure areas, but the tourism-income cost is real in visitor-dependent communities — making the verdict genuinely mixed, with effects felt over the long term as housing stock and labour mobility adjust.