Number of ‘second homes’ soar due to tax loophole

THE number of unoccupied properties classed as second homes is soaring in Manchester.

Campaigners say that the increase is likely due to a ‘perverse incentive’ to declare so-called buy-to-leave properties as second homes in order to avoid tax premiums.

Official government figures show that 6,013 houses and flats in the city were classed as second homes for council tax purposes as of the end of September 2018.

The number was up 16 per cent from 5,191 second homes in 2017, and is the highest recorded since at least 2010, when the figures begin.

That year, there were just 591 second homes in Manchester, meaning the number has increased more than 10-fold in the last nine years.

Buy-to-leave is the practise of purchasing dwellings as investments and leaving them unoccupied in the expectation that their value will rise.

Since 2013, if a home is both substantially unfurnished and unoccupied for more than two years, the owner may have a premium added to their council tax of between 50pc and 100pc meaning they may have to pay up to twice as much as occupied properties. The premium is optional, and it’s up to individual councils whether they apply this or not so far it’s being enforced by 299 out of 326 authorities. However, if a house is fully furnished it can be classed as a second home and is not officially considered empty, even if no one lives there - meaning it won’t attract the premium. There is also no limit to the number of second homes that an individual can own.

The number of properties classed as second homes in Manchester soared between September 2011 and September 2012, just before the premium was put into action. In 2011 there were 579 second homes in Manchester, compared to 5,440 at the end of 2012.

Campaigners believe this is masking the true scale of vacant housing.

There were 3,732 empty homes in Manchester in 2018 - nearly half the number of second homes - 1,132 of which had been vacant for more than six months. The number has been dropping since 2012 as the number of second homes has increased.

Will McMahon, director of Action on Empty Homes, said: “There is a perverse incentive to declare longterm empty properties, which owners do not intend to rent out, as second homes.

“Discussions with officers around the country lead us to the conclusion that the definition of second homes requires tightening and that any burden of proof of their usage as such should be shifted to owners.

“It has been suggested that a limit of one second home per owner should be considered by the government,” said Will.