Council tax for second and empty homes, and thresholds for non-domestic rates: consultation analysis

2: Second homes

The consultation paper reports that, in September 2022, around 1% of all residential accommodation in Scotland (over 24,000 homes) was classified as a second home for Council Tax purposes. In October 2022 there were 18,290 self-catering accommodation units on the valuation roll for non-domestic rates across Scotland: these may be second homes used as businesses and, as they are taxed differently, are additional to the 24,000+ homes on the Council Tax Register. The number of second homes varies considerably between, and within, individual councils, with the peak numbers found mainly in tourist hotspots, rural and island areas.

Definitions

For Council Tax purposes, the current definition of a second home is, ‘a dwelling which is no one’s sole or main residence and that is lived in for at least 25 days during the 12 month period of the Council Tax charge’.

Question 1 – Do you think the current definition of a second home should continue to apply?

Responses to Question 1 by respondent type are set out in Table 4 below.

Table 4: Responses to Question 1 by respondent type

Organisations	Yes	No	Don't know	Total
Campaign group or union	2	2	-	4
Community or Development Trust	5	1	-	6
Housing	2	-	-	2
Local authority	18	10	-	28
Public body or agency	2	1	1	4
Representative or professional body	5	2	1	8
Tourism, including accommodation provider	6	-	4	10
Other	1	-	-	1
Total organisations	41	16	6	63
% of organisations	65%	25%	10%
Individuals	356	450	69	875
% of individuals	41%	51%	8%
All respondents	397	466	75	938
% of all respondents	42%	50%	8%

Half of respondents – 50% of those answering the question – did not think the current definition of a second home should continue to apply. Of the remaining respondents, 42% thought it should and 8% did not know.

The proportion of organisations that thought the current definition should continue to apply rose to 65% and included a majority in all but the Campaign group or union category.

Please give reasons for your answer

Around 635 respondents provided a comment at Question 1.

Reasons for thinking the current definition should be changed

Many of those commenting referred to pressure on the housing stock in some areas and to high rental costs; this was often linked to the number of second homes contributing to the lack of ordinary residential supply in some areas.

The most frequently made point, also raised by many of those who did not think the current definition should continue to apply, was that the threshold of being lived in for at least 25 days is not high enough.^[4] Many of those commenting went on to suggest that:

“We need a definition with more days, so that houses are considered empty…and their owners have an incentive to put them back on the market/rent them out.” Individuals

A number of alternative thresholds were suggested; these ranged from 40 days to around 180 days.

In addition to comments about where any threshold should be set, many of those commenting questioned whether it is right to have a specific classification/definition for second homes at all.

In relation to the current definition, issues raised included that it can be open to interpretation and is difficult to prove or disprove. There were calls for any definition to be clearer, with specific suggestions including that the Scottish Government should define what is a long-term empty property. In terms of the definition of a second home, it was suggested that it should:

• specify that a second home should be furnished and in liveable condition
• specify by whom the property can be occupied, in terms of the owner or the relationship to the owner
• allow for exceptions and/or should recognise particular circumstances, such as the need for refurbishment work

Although most of those who disagreed with the current definition and commented were looking for it be made more stringent and/or have the 25-day threshold raised, there was also a view that it is already unfair targeting second home owners unfairly. The issues raised by those taking this view were generally similar to those highlighted by respondents concerned about an additional Council Tax premium being payable (as Question 3).

Reasons for thinking the current definition should continue to apply

In addition to general comments in support, and references to the current definition being appropriate or reasonable, it was suggested that for Council Tax purposes it is:

“…well-established and therefore fully tested, understood by those required to pay, and can be evidenced by Council Tax payers without incurring additional expense.” Local authority

Also from a local authority perspective, it was reported that collection rates for second homes are high, and that evidence can be verified and the administration is not overly burdensome. A Local authority respondent noted that any changes would require local authorities to review a large number of second homes to see if they would fit an altered definition.

In terms of the 25-day threshold specifically, it was described as fair and there was an associated concern that a higher threshold could result in properties being transferred to the Valuation Roll and removed from the Council Tax list.

A small number of possible improvements or changes were suggested, including that it would be helpful to have statutory guidance on what constitutes someone’s main residence.

The importance of retaining a separate definition of ‘self-catering’, including to avoid the issues surrounding second and empty homes being conflated with holiday accommodation, was also highlighted.

Council tax discounts

The consultation paper notes that eligible job-related dwellings and purpose-built holiday accommodation are entitled to a Council Tax discount of 50%. Purpose-built holiday accommodation is defined as a dwelling that is used for holiday purposes and has a licence or planning permission limiting its use for human habitation throughout the whole year. Job-related dwellings are defined as homes owned by someone who has to live elsewhere for most or all of the time as part of their job, or the home the person occupies to undertake their job if the person has another home that is their main residence. 

Question 2 – Do you think the discount eligibility for job-related dwellings and purpose-built holiday accommodation is appropriate?

Responses to Question 2 by respondent type are set out in Table 5 below.

Table 5: Responses to Question 2 by respondent type

Organisations	Yes	No	Don't know	Total
Campaign group or union	1	3	-	4
Community or Development Trust	1	3	2	6
Housing	1	1	-	2
Local authority	16	9	3	28
Public body or agency	1	2	1	4
Representative or professional body	4	1	1	6
Tourism, including accommodation provider	9	-	1	10
Other	1	-	-	1
Total organisations	34	19	8	61
% of organisations	56%	31%	13%
Individuals	330	430	117	877
% of individuals	38%	49%	13%
All respondents	364	449	125	938
% of all respondents	39%	48%	13%

Respondents were most likely to think that the discount eligibility for job-related dwellings and purpose-built holiday accommodation is not appropriate, with 48% of those answering the question of this view. Of the remaining respondents to the question, 39% did think it is appropriate and 13% did not know.

The balance of opinion was different amongst organisations, with a small majority – 56% of those answering the question – thinking the discount eligibility is appropriate.

Please give reasons for your answer

Around 615 respondents provided a comment at Question 2.

Reasons for thinking the current discount eligibility is not appropriate

The most frequently made comment, raised by many respondents, was that there is no reason why businesses should receive beneficial treatment.

“If the dwellings are purpose-built holiday accommodation, that would suggest they are part of a business and earn money for the owner. If the dwellings are job-related, these are also a business asset. Both should be charged at a non-domestic rate.” Individual

It was also suggested that creating exceptions increases the risk of people trying to fit under the discount eligibility criteria to avoid paying taxes.

However, many of those commenting also distinguished between job-related dwellings and purpose-built accommodation; they tended to the view that there should be clear discounts for specific job-related accommodation but not for purpose-built holiday accommodation that is used commercially.

Purpose-built holiday accommodation

Although the need for holiday accommodation was noted, it was also suggested that it needs to make an economic contribution to local communities in order to sustain local public services. However, there were occasional references to it being appropriate for purpose-built holiday accommodation which is only suitable for habitation during the warmer months to be eligible for a discount.

Job-related dwellings

Many of those who disagreed overall and commented, did think there should be discounts for specific, job-related accommodation. Reasons given for supporting a discount included the Council Tax payer’s terms of employment and recognition that they may have a liability at another home. However, there was an alternative view that the discount should be removed including because it is a personal choice if an individual takes up an employment position that requires them to ‘live-in’ or near to that employment.

Options going forward

If there are to be discounts, there were calls for any approach to be closely controlled to prevent loopholes. It was also suggested that:

• there may be advantages in having a more flexible approach to key worker accommodation given the recruitment and retention challenges faced, particularly by the public sector, in many parts of Scotland
• other specific exceptions should apply, with travellers’ accommodation being the most-frequently referenced

Reasons for thinking the current discount eligibility is appropriate

Comments in support of the current discount eligibility tended to be brief but included that the definition is appropriate or fit-for-purpose, including because both purpose-built holiday accommodation and job-related dwellings place fewer demands on the services that the Council Tax covers. Both discounts were also said to play an important role in helping support tourism:

“Receiving a 50% council tax discount for eligible job-related dwellings and purpose-built holiday accommodation plays an important role in helping support the local visitor economy, especially given the seasonal nature of Scotland’s tourism and hospitality sector.” Tourism

Purpose-built holiday accommodation

Further comments included that holiday accommodation is needed, and purpose-built accommodation is a good solution that does not take away permanent homes. As at other questions, there was reference to the use of local facilities, such as shops, and providing employment for local residents. It was also suggested that, where planning and licensing permissions place restrictions on occupancy, it is reasonable to expect a discount to be applied.

Job-related dwellings

It was seen as important that rural businesses are be able to attract workers to job-related dwellings in order to deliver goods and services in these settings, with the job-related discount seen as a helpful incentive, or at least not a deterrent. However, there were some concerns that the current definition of a job-related dwelling is complex.

Council Tax premiums

A premium is charging more than the full normal rate of Council Tax. A 50% premium equates to a charge of one and a half times the normal rate, a 100% premium to double the normal rate, and a 200% premium to three times the normal rate. The consultation paper notes that potential factors that could be considered by councils when deciding whether to introduce a premium on Council Tax for second homes include:

• the numbers and percentages of second homes in the local area
• distribution of second homes and other housing throughout the area and an assessment of their impact on residential accommodation values in particular areas
• potential impact on local economies and the tourism industry; patterns of demand for, and availability of, affordable homes
• potential impact on local public services and the community

However, councils might decide not to use the powers or could choose to disapply a premium for a specific period of time, for example:

• where there are reasons why the home could not be lived in as a permanent residence; where there are reasons why a home could not be sold or let
• where the owner’s use of their accommodation is restricted by circumstances not covered by an exception from the premium
• where charging a premium might cause hardship

Question 3 – Do you think councils should be able to charge a council tax premium on top of regular council tax rates for second homes?

Responses to Question 3 by respondent type are set out in Table 6 below.

Table 6: Responses to Question 3 by respondent type

Organisations	Yes	No	Don't know	Total
Campaign group or union	4	-	-	4
Community or Development Trust	6	-	-	6
Housing	4	-	-	4
Local authority	26	1	1	28
Public body or agency	4	-	-	4
Representative or professional body	5	2	-	7
Tourism, including accommodation provider	6	3	-	9
Other	1	-	-	1
Total organisations	56	6	1	63
% of organisations	89%	10%	2%
Individuals	470	413	16	899
% of individuals	52%	46%	2%
All respondents	526	419	17	962
% of all respondents	55%	44%	2%

Percentages may not sum to 100% due to rounding

A small majority of respondents – 55% of those answering the question – thought councils should be able to charge a Council Tax premium on top of regular Council Tax rates for second homes. Of the remaining respondents, 44% did not think so and 2% did not know.

The balance of opinion was different amongst organisations, with 89% of those answering the question thinking councils should be able to charge a premium. There was no organisation type in which a majority of respondents did not support a premium being chargeable.

Table 7 below compares views on whether councils should be able to charge a premium rate of tax on second homes of those who reported that they owned one or more of a second home, long-term empty home or short-term let/self-catering accommodation with those who did not.

Table 7: Views on Council Tax premiums by property type owned

	Yes	No	Don't know	Total
Owns a second home, long-term empty home or short-term let/self-catering accommodation	43	297	11	351
% of above	12%	85%	3%
Does not own a second home, long-term empty home or short-term let/self-catering accommodation	483	122	6	611
% of above	79%	20%	1%
All respondents	526	419	17	962
% of all respondents	55%	44%	2%

In contrast to 55% of all respondents, only 12% of those who own a second home, long-term empty home or short-term let/self-catering accommodation thought councils should be able to charge a Council Tax premium, while 85% thought they should not.

Please give reasons for your answer

Around 805 respondents provided a comment at Question 3.

Why councils should be able to charge a premium

Impact of second home ownership

The most frequently raised issue, highlighted by many of those who commented, was the impact of second homes on local housing supply. Associated points were that:

• second homes are a significant driver of higher prices in some areas, under circumstances when many people find renting or purchasing unaffordable
• if key workers cannot find somewhere to live in the local area it may not be possible to deliver essential services
• the tourism and hospitality sectors face challenges in retaining and recruiting staff and accessing affordable housing options

Whilst it was recognised that second homes which are used as holiday lets can be an essential part of the local visitor economy, there were concerns about the impact on the wider local economy, including because properties may be empty for extended periods, resulting in little or no money being spent locally. However, it was also noted that there is a large difference between a second home which is available as a dedicated short-term let all year round, and a second home which is occupied by the owners for part of the year but sitting empty at other times.

There was also reference to the impact on local services, for example with fewer permanent residents leading to lower school and nursery rolls.

Given the potential impacts on local communities, many of those commenting saw it as reasonable to expect second home owners to compensate those communities; it was suggested that if you can afford a second home, you can afford to in some way mitigate the negative impact that your second home ownership may be having.

“They are taking away from the local economy by not actually living in their 'second home' so they should contribute more than the rest of us through council tax, to in some small way make up for that…” Individual

In terms of the positive impacts, there was reference to a premium:

• acting as an incentive to bring much-needed stock back into mainstream use, including through sale or being made available for private rent
• generating revenue that can be used by local authorities to deliver services and support local economies

Use of any funds raised

Reflecting comments about the need to prioritise the provision of more affordable housing, there were suggestions that any funds raised through charging a Council Tax premium should be used to help address housing shortages in communities. A Representative or professional body respondent suggested that where a second home is not let as a private rental, there should be a requirement in legislation that any revenue generated through the premium is allocated directly towards increasing housing availability.

Other suggestions included using funds to support local services or ring-fencing funds to be used to the benefit of the community in which the second homes are located. However, there was also a view that, to support local decision-making, it is crucial that revenues generated from levying a premium are not ring-fenced thus ensuring that spending decisions can be decided by councils based on local priorities.

Local decision-making

With reference to how any premium could or should be set, a small number of Local authority respondents were amongst those suggesting that local authorities should have discretion over a Council Tax premium. It was noted that the principle of subsidiarity, and the recently signed Verity House Agreement^[5], support an approach based on local decision making as the default approach. Allowing local authorities to match charges to the specific needs of their communities was seen as beneficial.

Recognising the need for exemptions

It was also suggested that any future arrangements also need to acknowledge the many diverse reasons for owning or renting a second home, and that there may be circumstances when it may not be reasonable for a premium to be payable. The need for exemptions or exceptions was raised both by those supporting and not supporting a premium being chargeable. This issue is returned to at Question 5.

In terms of how or when exemptions could be made, there was reference to discretion being applied on a case-by-case basis, or at a very localised level. However, there was also a call for clear statutory guidance on when discretionary exemptions should be awarded.

Wider Council Tax reforms

Finally, it was suggested that decisions relating to second homes should not be taken in isolation, and that the cumulative impacts of all proposed changes to the Council Tax system need to be understood and fully assessed. There was reference to:

• proposals to reform the Council Tax system to introduce mandatory measures
• discretionary powers to apply annual inflationary increases to Council Tax

Why councils should not be able to charge a premium

Many of those who did not think that councils should be able to charge a premium and went on to comment pointed to unfairness:

“This is an unfair tax. There is no reason to single out people who have two homes in Scotland for additional taxation. Your suggestion that people with second homes can afford this is a supposition and is incorrect as far as I am concerned. I know I will not be able to afford to pay additional council tax and it will eat up all my disposable income.” Individual

The range of associated points included that it would be unfair to penalise people who bought a second home at a point when no premium was payable, and that they are already paying Council Tax, may have paid the additional Dwelling Supplement to Land and Buildings Transaction Tax (LBTT), and may have invested significant resources in renovations or repairs. There was also a concern that any further premium would make second home ownership the preserve of the rich. Second home owners who reported that they were not themselves wealthy, but had worked hard and made sacrifices to purchase a second home, were amongst those making this point.

Many of those commenting also saw it as unreasonable to expect second homeowners to subsidise the finances of local authorities, especially as they are not entitled to a vote at the relevant local elections. It was suggested that, in any case, Council Tax should reflect the cost of providing the services to a property, and that this will be lower for a second home.

Other comments addressed the wider impact of a second home premium being chargeable and included that:

• it may not lead to the sale of second homes or, by extension, to more homes being available for home ownership as a primary residence
• even if properties are released onto the market, they might not be of the type/size needed as permanent homes or be affordable to those wanting to buy
• the loss of many second homes could have a negative impact on the Scottish tourism and hospitality economy, including if people chose to buy property and/or holiday abroad instead

Question 4 – If you have answered yes to Question 3, what do you think the maximum premium councils could charge should be?

Responses to Question 4 by respondent type are set out in Table 8 below.^[6]

Table 8: Responses to Question 4 by respondent type

Organisations	50%	100%	150%	200%	250%	300%	Other	Total
Campaign group or union	-	-	-	-	-	3	-	3
Community or Development Trust	-	2	-	-	-	4	-	6
Housing	-	-	-	-	-	1	-	1
Local authority	-	8	-	1	-	7	2	18
Public body or agency	-	-	-	-	-	2	-	2
Representative or professional body	1	1	-	-	-	-	1	3
Tourism, including accommodation provider	-	1	-	-	-	-	-	1
Other	-	-	-	-	-	-	-	0
Total organisations	1	12	0	1	0	17	3	34
% of organisations	3%	35%	0%	3%	0%	50%	9%
Individuals	37	63	17	50	8	257	0	432
% of individuals	9%	15%	4%	12%	2%	59%	0%
All respondents	38	75	17	51	8	274	3	466
% of all respondents	8%	16%	4%	11%	2%	59%	1%

Percentages may not sum to 100% due to rounding

A small majority of respondents – 59% of those answering the question – thought the maximum premium councils could charge should be 300%. Of the remaining respondents, 16% favoured a 100% maximum premium and 11% favoured 200%. The 50%, 150% and 250% maximums were preferred by 8%, 4% and 2% of those answering the question respectively.

Relative to all respondents, organisations, and particularly Local authorities, were more likely to favour the 100% maximum premium (35% of all organisations and 8 out of 18 Local authorities).

Please give reasons for your answer

Around 515 ^[7] respondents provided a further comment at Question 4. Many of those who did not think councils should be able to charge a Council Tax premium for second homes often referred back to their comments at Question 3 or simply stated that there should be no premium.

General reasons given for supporting a premium also tended to reflect those highlighted at Question 3, with respondents most likely to comment that:

• second homes are exacerbating the housing crisis and are hollowing out local communities
• Councils should be able to raise funds from second home owners to contribute to local services and the provision of new social housing

Reasons for supporting particular options

Relatively few respondents commented on why they had selected the particular option they had chosen. However, the option-specific comments that were made are summarised below.

300% premium

This was the preferred option for many of those raising concerns about the impact of second homes on housing supply and local communities. Councils being able to raise additional funds was seen as a mechanism through which second home owners could make a contribution to local services and mitigate the impact on local communities of properties not being used as primary homes. In addition to general comments about supporting local services, there were specific references to using funds raised through a premium for the provision of more housing, and particularly social housing.

“There is a housing crisis. If large taxes don't disincentivise second home ownership, it can at least help fund social housing etc.” Individual

However, there was also a view that the 300% option would be a level that should help manage the number of second homes, for example by discouraging people from buying properties which are going to be used very occasionally and by extension improving market conditions for local buyers.

However, many of those who selected the 300% option and went on to comment suggested either that the maximum should be higher or that there should be no maximum premium. This issue is picked up again below under ‘Other’ options.

200% premium

It was suggested that this level of premium could be sufficient to deter some second home owners without being overly punitive, that those who can afford a second home can afford to pay a higher rate of tax on it, and that the premium paid would help to raise additional funds for local authorities. There was also reference to compensating for the impact of second home ownership on local communities.

100% premium

A 100% premium tended to be seen as a reasonable or fair response, and again as not overly punitive. It was also seen as taking into account that:

• second home owners will not use a number of key local services, such as education, housing and social work.^[8]
• there are a range of circumstances which mean second homes may not easily be brought into use as someone’s main residence

50% premium

A 50% premium was thought to reflect the fact that second home owners are likely to use fewer of the services provided by local authorities. It would also not be high enough to entirely discourage second home ownership and hence would not have a significant impact on areas that rely heavily on tourism.

‘Other’ options

Most of those who had selected the 300% rate at Question 4 and then went on to comment suggested either a higher rate or that the premium should be unlimited. Specific suggestions ranged from more than 300% up to 1000%. The most-frequently-made suggestion was a 500% premium.

There were also a very small number of comments in favour of the maximum premium being set at below 50%, for example 20% or 25%. Reasons for supporting this lower rate included that it could apply if there is little or no local demand for the particular type of housing in the area.

Points made by the small number of respondents who selected the ‘Other’ option included that any rate should be determined by individual local authorities based on market conditions and economic tolerance, or that the rate should vary according to the amount a property is used.

Approaches to setting a premium

Other comments addressed how any premium should be set, with the most frequent suggestion being that it should be at the discretion of individual local authorities. A number of Local authority respondents were amongst those taking this view. In overall terms, it was suggested that a premium of the type proposed is primarily about regulating the market and disincentivising second home ownership and that local authorities would be best placed to set a rate that is appropriate to their local context.

In terms of possible parameters for local discretion, options put forward included that:

• it should not be constrained by a national maximum premium
• it should be within an established range
• there should be no maximum level set nationally but that there should be a minimum premium
• local authorities should be free to apply different rates in different areas of their region

It was also suggested that any premium should mirror that for a long term empty property. This was connected to concerns about onerous administration and owners switching use for financial gain. The specific concern was that a higher second home premium compared to the empty home premium could encourage home owners to leave their property empty.

Question 5 – What factors should be taken into account by councils when deciding whether to introduce a premium on council tax for second homes? Please list the factors and provide reasons for your answer.

Around 845 respondents provided a comment at Question 5. Some of these comments reiterated points made at earlier questions, and at Question 3 in particular.

Potential factors

The consultation paper listed factors which could be considered by councils when deciding whether to introduce a premium on Council Tax for second homes. A number of the comments, particularly amongst the respondents who said that they thought Councils should be able to charge a premium at Question 3, noted their agreement with one or more of the factors set out.

Those factors are set out in turn below, ordered according to the frequency with which they were referenced by respondents.

Patterns of demand for, and availability of, affordable homes

As at the previous question, the most frequently raised theme, raised by many of those commenting, related to availability of housing, and particularly affordable housing. In terms of housing need or demand indicators that could be used, there was reference to housing shortages, and specifically to:

• homelessness statistics, including growing homelessness in local areas and demand for homelessness services
• social housing waiting lists

The importance of understanding residents’ experiences and housing preferences was also highlighted. In terms of local residents’ experiences, an example given was needing to move elsewhere for cheaper rent or being displaced or evicted to make way for second homes. In terms of understanding preferences, it was suggested that this would help to identify whether second homes, long-term empty properties and self-catering accommodation provide viable and attractive options for those seeking homes now and into the future.

Potential impact on local public services and the local community

Although many of those commenting noted that they agreed with Councils taking the potential impact on local public services and the community into account, they tended not to make substantive further comment. However, there were references to the importance of reversing the decline in rural communities, including the size of the permanently resident population and the loss of service provision that results.

Respondents also made references to the importance of taking the views of the local community into account. It was suggested that the impact on of second homes on local culture and quality of life could be among the issues about which communities should be consulted.

Numbers and percentages of second homes in the local area and Distribution of second homes and other housing throughout the council area and an assessment of their impact on residential accommodation values in particular areas

The other more frequently referenced factors were the number and distribution of second homes, albeit that comments did not always make a clear distinction between the two possible factors set out in the consultation paper.

Further comments from respondents included that local authorities could consider the numbers and percentages of second homes in the local area and consider when the proportion of the local stock in use as second homes is well in excess of the national average. Other suggestions were:

• the number of empty dwellings in a given area
• the number of second homes that are not short-term lets
• the distribution of both short-term lets and empty second homes in an area

Respondents also referred to considering rental values, including rising rent levels.

Potential impact on local economies and the tourism industry

Further comments relating to the potential impact on local economies and the tourism industry tended to focus on the importance of appropriate housing being available for the local workforce, but this needing to be balanced with the needs of the tourism economy. It was also noted that these two issues are clearly linked and that in tourism destinations it will be important to balance to the need for an adequate supply of tourist accommodation with accommodation for seasonal workers and accommodation for residents.

Understanding the direct and indirect contributions that second homes make, including from employment across a range of sectors, such as tourism, retail, and trades, was also seen as important. There was also a call for further analysis to understand the extent to which second homes are contributing directly and indirectly to reversing de-population and achieving re-population in remote and rural communities, and the extent to which local communities would be impacted by second homes policy changes.

Other existing measures or policies that are aimed at increasing housing supply and the availability of affordable housing

Although the least frequently referred to factor, a small number of respondents did highlight local strategy, policy or other measures that could be of relevance to, or help inform, any decision on whether to introduce a Council Tax premium. There was reference to:

• Local Housing Strategies and Local Place Plans
• Housing Supply Targets
• Strategic Housing Investment Plans

Other suggested factors

Respondents were also asked if they had suggestions for other factors that local authorities could consider. One suggestion was that councils should consider the level and geographic distribution of poverty in their area, and how any premium on Council Tax for second homes is anticipated to effect this.

Ideas relating to addressing housing supply issues included consideration of:

• availability of land suitable for housing development
• the prevalence of land banking, brownfield sites or greenfield sites already built on in an area

Finally, there was reference to the impact on or for local authorities themselves, including the collectability of taxes and how this could impact on future revenue.

Possible exemptions

The consultation paper also suggests that local authorities may decide not to use the powers or to disapply a premium for a specific period of time, and again set out a number of possible examples.

General observations from respondents included that having exemptions and delays to charging would be essential to providing a practical and workable approach to second home charging policies. An associated suggestion was that a national exercise to establish lessons learned from the long term empty home discretionary policies would be beneficial.

Where the owner’s use of their accommodation is restricted by circumstances not covered by an exception from the premium

Respondents were most likely to comment on this possible exemption, generally going on to make suggestions regarding the type of circumstances that might give rise to this exemption being made. These suggestions came from both those who thought Councils should be able to charge a premium and those who did not (as at Question 3).

They included on compassionate grounds, for example for a period after a property is inherited due to a bereavement. Further comments included that in these circumstances some beneficiaries may not have funds to do any works to the property, potentially making it difficult to sell or rent it out. Being charged double Council Tax in these circumstances could be counterproductive.

Other suggestions were if a property is:

• rented to, or lived in, by a close family member
• being used to allow someone to access healthcare, to provide support or care to a family member, or to have access to children
• being used as work accommodation or to allow someone to carry out their business activities
• undergoing major repair or restoration, including if it has been rendered uninhabitable due to serious fire or water damage

On the last issue, there were references to some of the challenges that come with restoring a property, particularly in rural areas, in terms of difficulties in sourcing tradespeople, escalating costs for materials, and rising interest rates.

Where charging a premium might cause hardship

Views were mixed on this possible exemption, with one view that, if you can afford to have a second home, you are unlikely to be in financial hardship and that any challenges associated with paying a premium would be minor by most people’s standards. An alternative perspective was that there may be circumstances when it might be reasonable to give an exemption based on financial hardship, including if personal circumstances and escalating costs mean that a property cannot be made habitable and/or made into a state when it can be sold. It was suggested that it would be counterproductive to charge a premium that actually led to properties becoming long-term empty homes and/or which led to properties falling into or remaining in serious disrepair.

Where there are reasons why the home could not be lived in as a permanent residence

Those who commented on this exemption sometimes noted that there are some properties that cannot be used as permanent residences, either because of planning status or because of their build type or location. On this latter point, there was reference to properties in remote locations and/or that cannot be made suitable for habitation over the winter months.

Where there are reasons why a home could not be sold or let

Again, there were references to situations where a home could legitimately not be sold or let, with examples given being because of a low Energy Performance Certificate rating or because of being on a private water supply.

One suggestion was that, if owners can demonstrate that they have been trying to either sell or let a property, but have not been able to do so, they should be entitled to an exemption on any second home Council Tax premium.

Other comments

Final comments from respondents included that any premium should only be chargeable for properties purchased after any provision has been brought in and, by extension, that the current owner of a second home should not be expected to pay a Council Tax premium on that home.

Behaviours of second home owners

At Question 6 second home owners (and potential owners) were asked what they would do if applicable Council Tax rates were to increase, but the threshold for a property to qualify as self-catering accommodation for non-domestic rates purposes stayed the same. The current threshold for defining premises as self-catering holiday accommodation liable for non-domestic rates is that it must be available to let for 140 days or more and actually let for 70 days or more in the same financial year. (Potential changes to this threshold are covered at Questions 13 - 18.)

Question 6 – If you do, or were to, own a second home please tell us what you would do if the applicable rate of council tax were to increase, and the ‘thresholds’ to be classed as self-catering holiday accommodation for non-domestic rates purposes stayed the same?

Responses to Question 6 by respondent type are set out in Table 9 below.

Table 9: Responses to Question 6 by respondent type

Option	Number of respondents	% of all respondents
A: The home is (or would be) already used as self-catering accommodation and liable for non-domestic rates	67	13%
B: The home is (or would be) already used as a private residential tenancy and the tenant is liable for council tax	64	13%
C: I would continue to use it purely for personal use and pay the higher rate of council tax	91	18%
D: I would continue with split use between self-catering accommodation (below the non-domestic rates threshold) and personal use, and pay council tax	21	4%
E: My second home already has/would have split use between self-catering accommodation (below the non-domestic rates threshold) and personal use. Rather than pay the higher rate of council tax, I would increase the number of days the accommodation is available to let and actually let in order to meet the non-domestic rates thresholds	30	6%
F: My second home is purely for personal use. However, in order to stop paying council tax, I would make it available as self-catering accommodation for 140 days or more and actually let it for 70 days or more in order to be liable for non-domestic rates	49	10%
G: I use my second home purely for personal use but I would change its use to a private residential tenancy	24	5%
H: I use my second home as self-catering accommodation (below the non-domestic rates threshold) but I would change its use to a private residential tenancy	7	1%
I: I will seek reclassification as an empty home and pay council tax	9	2%
J: I will sell the second home	149	29%
Total	511

Percentages may not sum to 100% due to rounding.

Respondents were most likely to say that they would sell their second home if the applicable rate of Council Tax were to increase, and the ‘thresholds’ to be classed as self-catering holiday accommodation for non-domestic rates purposes stayed the same; 29% of those answering the question said they would sell.

A further 18% said they would continue to use their property purely for personal use and pay the higher rate of Council Tax, while 13% respectively said that either the home is (or would be) already used as self-catering accommodation and liable for non-domestic rates, or is (or would be) already used as a private residential tenancy and the tenant is liable for Council Tax.

Please give reasons for your answer

Around 445 respondents^[9] provided a comment at Question 6.

As a general point it was argued that, as this question invites views of respondents if they own or were to own a second home, some responses are hypothetical and that answers should not be regarded as fully indicative of the behaviour of actual second home owners.

A: The home is (or would be) already used as self-catering accommodation and liable for non-domestic rates

Respondents who indicated that their home is already used as a self-catering property highlighted difficulties in meeting the current thresholds to qualify for the non-domestic rates regime, including challenges relating to the short tourist season in Scotland or a location that means a property is only suitable for use in summer.

B: The home is (or would be) already used as a private residential tenancy and the tenant is liable for council tax

Some respondents who chose this option and gave reasons for their answer indicated that they do not or would not own a second home, while others commented on the need to address the housing shortage or provide permanent homes for people who need them. It therefore seems likely that a proportion of those who suggested their property is or would be used as a Private Residential Tenancy (PRT) were selecting an option that they would like to see, rather than necessarily as likely behaviour in relation to a property they might own.

Among the small number of respondents who made points with respect to current letting arrangements for their own properties, comments included that since their tenants are liable for Council Tax, any tax increase would also increase tenants’ living costs. It was also observed that, as landlords, owners would be liable for the tax during void periods and that concerns with respect to this liability might increase the chance that they decide to sell. Other costs associated with increased regulation were also highlighted.

C: I would continue to use it purely for personal use and pay the higher rate of council tax

Among respondents who explained their reasons for choosing this option, a small number noted that they would struggle to meet the higher rate of Council Tax, or that they might also decide to sell, sometimes noting that this would depend on the level of premium imposed.

Reasons that the respondent would choose to retain the home for entirely personal use included that some homes have been in a family for many years and are used by other family members, and that others are intended as the owner’s permanent residence when they retire. Respondents also highlighted the time and money that may have been put into their property or the extent to which they would be forced to cut back on local spending in order to meet an additional Council Tax charge.

D: I would continue with split use between self-catering accommodation (below the non-domestic rates threshold) and personal use, and pay council tax

Few respondents selecting this option explained their reasons, although one noted that their property is let out to help cover running costs.

E: My second home already has/would have split use between self-catering accommodation (below the non-domestic rates threshold) and personal use. Rather than pay the higher rate of council tax, I would increase the number of days the accommodation is available to let and actually let in order to meet the non-domestic rates thresholds

Among respondents who explained their reason for choosing this option, some indicated that they would struggle to pay a Council Tax premium. Others expressed concern that, in some parts of the country, it may not be possible to meet the non-domestic rates thresholds, or noted that second home owners may actually use a property for more time than the occupancy required by the non-domestic rates threshold.

F: My second home is purely for personal use. However, in order to stop paying council tax, I would make it available as self-catering accommodation for 140 days or more and actually let it for 70 days or more in order to be liable for non-domestic rates

Some respondents who explained their reasons for selecting this option indicated that they might also opt to sell. Others indicated that they would let their home as self-catering accommodation if doing so makes keeping the property as a second home more affordable, although reservations were expressed with respect to potential impacts on neighbours who may be friends, the possibility that neighbours might object, or that planning restrictions will mean they are unable to do so.

G: I use my second home purely for personal use but I would change its use to a private residential tenancy

Among respondents who chose this option, some noted that they would be unable to afford a Council Tax premium on their second property, and one, specifically, that they would not convert to holiday accommodation because they felt this would adversely impact their neighbours.

H: I use my second home as self-catering accommodation (below the non-domestic rates threshold) but I would change its use to a private residential tenancy

Only a very small number of respondents chose this option, with few additional comments, most frequently that the owner might also be forced to sell.

I: I will seek reclassification as an empty home and pay council tax

Again, only a very small number of respondents chose this option. One noted that although their job would require a temporary move, they would eventually want to return to the property.

J: I will sell the second home

Although selling the home was the most frequently chosen option, it should be noted that (as with respect to option B) some indicated that they do not, and do not plan to own a second home.

Other respondents indicated that they cannot afford or are not prepared to pay a Council Tax premium. Some explained reasons that they would not be prepared to rent out the property including potential disturbance to neighbours, previous adverse experiences in dealing with tenants, increased levels of regulation and associated costs, or that the property would not currently meet required standards for either self-catering or a residential tenancy.

A small number of respondents expressed an intention to purchase a different property, either in an area where there is no Council Tax premium, or outside Scotland.

Other actions

Some respondents who did not answer the closed question went on to make a comment at Question 6, with the most frequent being:

• that the respondent does not own (and, in some cases, and would not seek to own) a second home, or that they cannot afford to purchase one home
• that the respondent is unsure what they would do at this point, or will decide only when potential premiums are set
• that the policy of charging a Council Tax premium on second homes is unfair or unjustified, with some respondents expressing an intention to attempt to challenge any additional charge

Smaller numbers of respondents indicated that they would consider:

• switching a second home to become their primary residence
• having a child or partner move into the property as their main residence, in some cases legally separating from a partner such that each individual can make a different property their main residence

Others highlighted potential limitations on their choices, including barriers (as also noted at F above) to operating as self-catering accommodation.