When is a house not a (holiday) home? Opportunities for purpose-built/provided holiday accommodation

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When is a house not a (holiday) home? Opportunities for purpose-built/provided holiday accommodation

When is a house not a (holiday) home? Opportunities for purpose-built/provided holiday accommodation

Stephanie Irvine & Helen Ashby-Ridgway 29 Feb 2024
Last Summer, Gwynedd Council consulted on proposals to implement an Article 4 Direction that would withdraw permitted development rights that would usually allow the change of use between primary homes, second homes and short-term lets. This consultation followed changes to planning legislation in Wales resulting in new and amended use classes[1] that differentiate between different uses of dwellinghouses:

The use of Article 4 Directions is one of a range of measures being introduced in Wales to manage the number of second homes and short-term holiday lets, including:

  1. The ability of local authorities to set council tax premiums on second homes of up to 300% from April 2023[2];

  2. Changes to the latest version of Planning Policy Wales (PPW) (February 2024) which now requires local authorities to consider localised issues “such as the prevalence of second homes” when setting housing requirements and states that local authorities can introduce a cap or ceiling on the number of second homes or short-term lets if this is justified by local evidence[3]; and,

  3. A proposed registration and licensing scheme for visitor accommodation: legislation now expected to be introduced to the Senedd before the end of 2024[4].

The underlying issues are not unique to Wales. Last week’s announcement from the Department for Levelling Up, Housing and Communities, Department for Culture, Media and Sport, Julia Lopez MP, and The Rt Hon Michael Gove MP indicates that England is now following a similar path in seeking to control the number of homes used as short-term lets.


Impacts of second homes and short-term holiday lets

The Welsh Government is responding to the pressures that concentrations of second homes and short-term lets can bring to local communities in some areas and its concerns regarding the supply and affordability of housing. In Lichfields’ Insight Focus: Sun, Sea, Sand and Article 4 Directions, we explore a number of assumptions regarding the impacts of second homes and short-term holiday lets in Wales to understand whether Article 4 Directions are part of the solution and what the implications might be for one of Wales’ most important industries – tourism.
Our analysis highlights that localised issues relating to house prices and the Welsh language need to be considered alongside broader factors such as housing market trends and demographic changes, and not attributed solely to the presence of second homes and holiday lets. It also highlights the wider problem of unmet need for general housing across Wales. The Welsh Government estimates that 110,000 dwellings are needed across Wales between 2019 and 2039[5],[6], whilst Lichfields has already put a spotlight on why this does not reflect the actual, higher, level of housing need.
Our latest Insight Focus also calls attention to the role of the tourism industry in the local communities, including the provision of second homes and short-term lets, in providing vital socio-economic benefits by generating employment and attracting visitor expenditure for these same communities. Attracting overnight visitors to Wales is of key importance, particularly in the context of international visitors having decreased in recent years. The number of international visitors to Wales was 33% lower in 2022 than pre-pandemic (in 2019)[7].
The potential consequences of measures to restrict the number of second homes and short-term lets are far from certain. However, an insufficient provision of these types of accommodation could result in limiting the number of visitors to an area, and in turn the loss of social and economic benefits. This should be a particular concern for many areas of Wales, where tourism accounts for a large proportion of the local economy.
In 2022, the tourism industry accounted for 8.7% of all employment and was the fourth largest sector across Wales[8]. Even higher levels of employment in the tourism industry were seen in several local authority areas, including Conwy (16.3%), Pembrokeshire (15.6%), Anglesey (14.6%), Ceredigion (13.3%) and Gwynedd (12.9%). Understanding the need to balance the pressures for communities, the provision of additional purpose-built/provided holiday accommodation could help to fill the gap in tourist accommodation resulting from the inevitable decline in conversions of primary homes into second homes and short-term lets. This could help to avoid unintended consequences for authorities facing pressures and also create new opportunities to support the tourism sector elsewhere in Wales.


Purpose-built/provided holiday accommodation

Purpose-built/provided holiday accommodation can include a wide range of options, from glamping pods to luxury resorts, and from holiday parks with static caravans to boutique hotels. These types of accommodation are restricted to holiday use only by way of planning conditions, legal agreements and/or licences. This means that they cannot be used for permanent occupation.
Many of the concerns raised in relation to the impacts of second homes and short-term lets on the housing market (discussed in our Insight Focus) do not apply to purpose-built/provided holiday accommodation. In particular, these types of accommodation do not have any impact on the local housing market or the ability of local people to compete in that market and does not reduce the number of permanent residents living in a community. Tourist accommodation also generates revenue through business rates[9], with visitors having a significantly lower draw on Council services than residents[10].
From our own work in Wales, we know there are fantastic examples of purpose-built/provided holiday accommodation supporting prosperity within local communities by attracting private sector investment, supporting direct jobs with holiday accommodation providers, generating visitor expenditure and supporting local businesses, thereby creating indirect and induced benefits in the supply chain. These socio-economic benefits can enable growth in accordance with Chapter 5 of PPW, which recognises tourism as an economic land use which is vital to prosperity in many parts of Wales. They can also help to diversify rural economies, reflecting PPW (Section 5.5) and Future Wales (2021) (Policies 4 and 5).


Need for support for holiday accommodation

With these potential risks and benefits in mind, local authorities should ensure that any measures to restrict the use of general housing for holiday accommodation are based on robust, locally-specific evidence. Furthermore, these measures should be accompanied by positive tourism policies to support the provision of purpose-built/provided holiday accommodation to cover the shortfall in visitor accommodation if there is a decline in conversions of primary homes into holiday lets.
The plan-making process offers opportunities for the tourist industry to fully engage and provide evidence to support the development of supportive policy frameworks for new holiday accommodation proposals.
At Lichfields, we work proactively on behalf of our clients to engage in the plan-making process and, drawing on our Economics expertise, can provide tailored analysis to assess the socio-economic impacts, needs and growth potential of the visitor economy in a given location. Please contact us if you would like to discuss any planning matters in relation to your tourism projects.

Image credit: Anthony on Unsplash

[1] Written statement: Changes to planning legislation and policy for second homes and short-term lets (September 2022): https://www.gov.wales/written-statement-changes-planning-legislation-and-policy-second-homes-and-short-term-lets

[2] Council tax on empty and second homes: https://www.gov.wales/council-tax-empty-and-second-homes-html

[3] Planning Policy Wales (edition 12, February 2024), para 4.2.5: https://www.gov.wales/sites/default/files/publications/2024-02/planning-policy-wales-edition-12_1.pdf

[4] Plans unveiled for statutory registration and licensing scheme for visitor accommodation in Wales (9 January 2024): https://www.gov.wales/plans-unveiled-statutory-registration-and-licensing-scheme-visitor-accommodation-wales

[5] Future Wales The National Plan 2040 (2021): https://www.gov.wales/sites/default/files/publications/2021-02/future-wales-the-national-plan-2040.pdf

[6] An annual increase of 7.5%

[7] Welsh Government, International inbound visits and spend to Wales (February 2024): https://www.gov.wales/international-inbound-visits-and-spend-wales-html#:~:text=IPS%20data%20revealed%20that%20in,%25%20lower%20than%20pre%2Dpandemic.

[8] ONS Business Register and Employment Survey (2022) – accommodation and food sector (as a proxy for the tourism sector).

[9] In Wales, business rates are collected by local authorities and paid into a national ‘pool’ administered by the Welsh Government. They are then redistributed to Welsh local authorities and Police and Crime Commissioners as part of the annual Local Government Settlement and Police Settlement. Source: https://senedd.wales/media/4i3dmvrd/18-036-web-english.pdf  

[10] Typically, the largest elements of local authority budgets are education, social services and housing services. In 2023-24, these services constituted 68.8% of local authority budgets (Source: https://www.gov.wales/sites/default/files/statistics-and-research/2023-06/local-authority-revenue-budget-and-capital-forecast-april-2023-march-2024-080.pdf). Visitors would only make minor use of other Council services, including policing, local environment services, roads and transport, libraries, culture, heritage and recreation, fire and planning and development.