At the general election, many voters in rural and coastal communities, for the first time, put their trust in Labour and Liberal Democrat candidates to represent their interests. Voters hope their new MPs would champion their concerns, help protect jobs in their community and stand up for the local economies they represent. Well, their first opportunity to prove their commitment has arrived. Rural and coastal MPs can represent a vital sector for their constituencies in a Westminster Hall debate on the regulation of short-term lets.
On 29th July, the new government announced they would continue with the previous government’s policy to abolish the Furnished Holiday Lettings (FHL) tax regime. The regime has been in place since 1984 and is the lifeline for traditional holiday lets in rural and coastal areas. This will have a detrimental impact, particularly on rural and coastal visitor economies.
The holiday let sector has faced increasing scrutiny and in the last 24 months has faced a wave of national and local government intervention, some of which I supported. Homes for long-term rent and purchase are increasingly out of reach for people who grew up in these communities. It’s right to take proportionate action, and we clearly need a better balance for communities — but this isn’t the answer.
Some policymakers believe making the holiday let sector unattractive will see FHL properties suddenly appear on the market for sale or long-term rent. The latter is distinctly unlikely, as many landlords appear to be exiting the market. The reality is the location and even planning permission on holiday lets makes them irrelevant for families looking for a home to call their own.
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Whilst the sector is a fragile one, it is not insignificant. Holiday lets support 230,000 jobs in rural and coastal economies and generates £9.3 billion in economic activity. And the jobs supported by the FHLs are well paid — 66% of suppliers earn more than £15 an hour and 40% make over £17.50. Using those numbers we can do some maths. If we assume a modest 20% reduction in FHLs as a result of abolishing the tax regime, that will wipe out £1.9 billion in GVA and 46,000 UK jobs. Ouch.
But the value of the sector doesn’t stop at jobs. The FHL tax regime is an investment enabler and should be considered a great example of the kind of vehicle that the new government have told us all they are pursuing to “kickstart” economic growth. The regime has played an important role in property owners turning underused buildings into desirable holiday accommodation, attracting additional tourists. This in turn helps local businesses — from restaurants to pubs and shops — that depend on a steady stream of tourists. A survey by the Professional Association of Self Caterers (PASC UK) showed 92% of FHL’s will reduce their investment if FHL is abolished.
With all that said, I do believe there are challenges in the holiday let sector. There are bad actors, and there have been cases of tenants placing their properties on online travel agent sites. These practices must be stopped, but let’s remember that most holiday let owners are committed to providing quality experiences and genuinely contribute to their communities. We should focus on better regulation and compliance rather than dismantling a system that has been beneficial for so many.
Maintaining the FHL tax regime is vital to achieving these aims. If the government truly cares about our rural and coastal communities, it will look instead at introducing a national registration scheme for holiday lets. Something holiday let owners have been calling for years. The scheme would also provide crucial data to inform future policies, all without imposing additional costs on taxpayers, as the burden would fall on the businesses themselves. It’s a balanced approach that addresses compliance issues while supporting the tourism sector and is ready to be implemented.
When I was the Chair of the All-Party-Parliamentary Group for Hospitality & Tourism, I saw the holiday let sector’s eagerness to engage constructively with the government. The sector’s positive impact on rural and coastal visitor economies can enable growth and jobs in these hardest to support areas. This can only be achieved through collaboration with the new government and by maintaining policies that enable growth, such as the FHL tax regime, while introducing sensible measures like a national registration scheme to ensure accountability and compliance.
By reconsidering the proposed abolition of the FHL tax regime and supporting the national registration scheme, MPs can address the issues within the sector without compromising the visitor economies that their constituencies rely on. MPs across the country have an opportunity to argue for a fairer approach, which won’t hurt the local economies they were elected to look after.
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