OPINION

Second home bans? They hurt rather than help the average buyer

Posted On 17 Jul 2022 at 12:01 am

The idea of banning second home ownership has been growing in this country and others, and our council have recently voted in favour of exploring the possibility.

So, is this developer of seafront new-build properties in favour of such a ban? Is this turkey going to vote for Christmas? Er, no. But not for the reasons you might think.

Brighton and Hove would not be the first to implement such a ban. St Ives, Cornwall, brought one into effect in 2016 and a ban was made law across Switzerland as a whole in 2012. There is much we can learn from these.

I have another perspective too as there is no doubt that my company, which has just completed one new block of flats on Kingsway and is just starting another, has a vested interest.

Spacewords Brighton

In our first block we believe around 25 per cent of the flats went to second home buyers so it’s a large part of our market, even if it isn’t for most new homes.

Forgetting about us poor developers for a minute, such a ban is certainly a politically popular move – it sits well with a lot of voters. And if a ban fulfils its aims – to make property across the city more affordable and to stop homes being left empty, stifling communities – you can see why.

A ban is highly unlikely to affect existing properties though, which would probably require a change in law.

Instead, the city may propose implementing planning conditions in approvals of new flats that limits who they can be sold to, which is simple enough. This is how the ban works in St Ives.

Second homes are generally bought in new-build blocks in either the city centre or with direct sea views. It will obviously fluctuate each year as to how many blocks will therefore be affected, but even in ours we’re only talking about 13 flats.

There were 12,000 property sales in Brighton and Hove in the year to April 2022 but less than 5 per cent were new builds and most were not seafront or city centre.

It’s therefore a fair guess that this is going to affect well under 100 flats a year that might have gone to second home owners but would now be sold to “locals” under a ban.

Assuming you can establish that and buyers just don’t switch their primary home to be the new purchase, what effect will it really have?

Well, not exactly what was hoped it seems, as research on the ban in Switzerland, carried out by the London School of Economics, a well-considered in-depth study, shows some serious issues.

The ban didn’t help lower prices overall. It increased unemployment rates and it reinforced wealth inequality.

In St Ives there is no such exact study but we do know the ban increased the number of second homes sold – from 25 per cent before the ban to 32 per cent afterwards.

Buyers just switched to buying older-style properties, as they surely would in Brighton and Hove, buying up Palmeira, Brunswick and so on. It’s far from conclusive that the St Ives ban could be called a success.

The flats we sold (to all buyers) were among the most expensive in the history of the city. If we had to sell that 25 per cent to non-second home buyers, what price reduction would it have caused? Five per cent across the board? Maybe?

So honestly well out of reach to “average” buyers in any case – and, worse still, it would have changed our viability assessment and reduced the number of affordable homes sold to a housing association.

So, the number of homes built available to the average earner would have decreased – the very opposite effect to the one intended.

Overall, therefore, it doesn’t seem like these bans fulfil their objectives at all and cause negative ripple effects into other areas such as employment.

To misquote Mandy Rice-Davies: “Well he would say that, wouldn’t he?”

Guilty as charged, I suppose, but in fact I do believe it is wrong to sell vast swathes of new homes to people who intend to leave them empty.

Mandy Rice-Davies – Picture by Joop van Bilsen / Anefo / Wiki Commons

The outright bans so far appear to have materially failed and to do the same again hoping for a different result doesn’t seem sensible.

So, let’s try something else. The government’s extra stamp duty charge for second homes was a good start. But we need something at a local level that “penalises” those who purchase them as such.

Perhaps the extra stamp duty raised on second homes should go direct to the local authority not the government.

Additionally, councils also need ongoing income so we could look at raising council tax on empty properties.

Owners receive a 25 per cent discount for single occupants so what about a 100 per cent surcharge if it’s not your primary home and it is being left empty? That might just work.

Ed Deedman is a director of Cayuga Homes.

  1. Up at the Crack of Dawn Reply

    An awful lot of words to defend his profiteering. Fancy that.

    • Ed Deedman Reply

      Hi, as in my comment below we are limited to 18% profit by developer agreement with the council. In any case, the problem is that these bans just don’t work as far as the evidence suggests. I’m not against penalising second home owners as my last paragraph showed, and that will have an effect on values to a degree. More crucially though a different approach might actually work.

  2. fed-up with brighton politics Reply

    Ed, what you don’t seem to appreciate, and this is nothing to do with you in a way, is that the second homes ban was proposed by an East Brighton councillor to try to stop a wholly inappropriate high-rise and crammed ‘luxury’ development on the East Brighton gasworks site. The developers concerned there are not guys like you trying to earn some bucks with a fairly modest development, but really big boys (a giant plc with multiple subsidiaries, a bad track record re gasworks sites and no local knowledge at all) who don’t give a stuff about locals, have no understanding of (and care even less) about the effect of their plans on locals or the local area – it’s just about their profits and nothing else at all. End of. So, if a second home ban goes through and you and other smaller developers are collateral damage, please try to understand that this proposed ban is much bigger than you and designed, in the first instance, to send the greedy big boys away and think up something more appropriate for the site, hopefully. 800 odd high-rise flats on a very constrained and toxic site (where the council originally thought 89 dwellings were about right, is what we are talking about) There are heritage implications, toxicity issues,fire safety issues, totally blocking off light to existing residents, plus no proposals for extra infrastructure, and a very cavalier attitude to the parking and transport issues that the proposal would cause, is what this is about.

    • Ed Deedman Reply

      Hi, thanks for your comments. I started to look it this scheme when you raised it previously. There are a lot of documents (500+) to review before I could really form any valuable opinion on the proposal. What I will say is that regardless of any opinion about the developer or their scheme, they will be limited to 18% profit by their section 106 agreement (if they stray over then they have to provide affordable or financial equivalent). In any event the fact remains that as far as I can tell these second homes bans just don’t achieve their aims and have other, negative, effects. I think that the council need to try a different approach to this specific issue.

    • Mark Reply

      Here come the usual parade of NIMBY boomerists telling every successive generation “NO, WE WON’T ALLOW A PROPERTY TO BE BUILT SO YOU WILL HAVE TO MOVE ELSEWHERE”.

      “Affordable housing” comes not from whinging about developments, but from building sufficient of them that supply meets demand. It’s as simple as that, no whinging boomerists can successfully argue otherwise

      • fed-up with brighton politics Reply

        And your point is what exactly?

        If you’re having a go at the hundreds of residents who oppose the proposed gasworks (totally unaffordable) development, then you have your opinion completely ‘a’ over ‘t’. These residents (mainly not boomers, whatever boomers are supposed to be) do want a build on the gasworks site, but something safe that locals could possibly afford, something to start off a community we could all participate in, rather than a crammed, high-rise and dangerous (as currently proposed) mini-Manhattan which would be completely unaffordable for anyone who needs a home and wants to get on the property ladder.

        If that’s not what you’re saying, please clarify what you are saying.

  3. fed-up with brighton politics Reply

    And PS: Not all that long ago in response to one of your posts, I told you about how the council was trying to squeeze just one extra and very nasty flat into a block up in Whitehawk, and you said you didn’t know and would look at it, which you most obviously haven’t, and you have no idea what is going on over this side of the City. The housing situation in the far-east of Brighton is totally dire – it is a deprived area, where no ordinary residents can afford anything to buy, and a luxury development for absentee landlords/investors by a plc developer is the very last thing that is needed in the east of Brighton. So, please think on, and consider why the word ‘developer’ goes down so very badly on this side of the city. That is what the second homes ban proposal is all about, mate.

    • Ed Deedman Reply

      Hi again! I understand your point – lots of people see developers as the root cause of a lot of problems and nothing I could write here would change that opinion, especially as some developers are pretty amoral in the way they do business. But looking at this specific issue of second homes we need to focus on what will actually solve the problem, not just bash developers because it’s a popular thing to do. The amoral ones will find ways around it and the problem wont be solved. Let’s try something else.
      In terms of the flat in whitehawk, apologies for not coming back to you. It’s not exactly overwhelming I agree, but it’s difficult to take major issue with it in isolation. The council just needs to get in with delivering other land too – I can think of dozens of better areas to focus their attention.

  4. Billy Rumble Reply

    2 people on benefits, angry that straight facts don’t suit their proviso, quelle surprise.
    Think you both need to re-read the article, rather than jump to what you think is a smart conclusion, before embarrassing yourselves. Irritates me a lot, I tried to buy a flat in a new build block recently and lost out on the one i wanted, drive past it all the time. After 4 months nobody has moved in, so clearly a second home. Can’t fight the facts about second home bans though, they just need greater barriers to entry. Higher levies is a great idea. If the outright ban goes ahead, they’re just going to buy in their partners name, or a company name, or make it their main residence [on paper].
    In any case, the greens will never see sense past virtue signalling, let alone implement anything. All talk no action with them

    • fed-up with brighton politics Reply

      Which posts do you think are people on benefits, Billy? This is not clear.

    • mart Burt Reply

      Billy Rumble
      You criticise others and say embarrass themselves then make a vital error.
      You state as a fact :After 4 months nobody has moved in, so clearly a second home:
      That is not nessicaryly the case, it can take at least 18 weeks on a straight forward purchase.
      There can be a chain of properties involved that can delay things further and, there’s the possibility that the purchaser may not plan to move in due to other circumstances, like a friend who brought a flat but then offered a 6 month work contract in Germany.
      Lets not assume anything until we have all the facts.

  5. Tom H Reply

    Interesting comments on this topic and an admirable effort from Ed to reply to all (thank you).

    Anyway, I think you are right Ed that restricting how property can trade just creates inefficiencies which are a net negative in any market. If you limit the number of potential buyers for property then lower demand could lead to a lower price initially but it will in turn lower the incentive for developers to pursue new projects and hence with time you have less demand, less supply and still high, difficult to afford prices which is really the nub of frustration in some of these posts.

    I don’t see it necessarily as a negative if there are second homes being bought in Brighton provided there is a mechanism to ensure they are either made available to rent (short or long term) or, if vacant for periods of time that they generate a council revenue that can be used to benefit those who do reside in the city.

    I don’t know what the solution is for generally difficult affordability – ultimately it’s to increase supply (build more property, relax planning rules etc etc), tax land ownership so it’s not banked and made available for development etc. Or, on the other side of the ledger it is to lower demand (essentially lower the population but that doesn’t happen quickly and with it brings a lot of other issues).

  6. Benjamin Reply

    I quite disagree with Ed’s opinion, although respect his viewpoint. Has Ed considered some of the new schemes currently been trialed in the other parts of the country that helps first time buyers get onto the market?

  7. fed-up with brighton politics Reply

    Shall we just cut to the chase here, guys. Ed is a fairly small-time local developer (mostly in Hove and to the west of Hove). He is the face behind Cayuga and I have looked them up at Companies House, and basically it is just him with some local Hove finance bloke behind him and propping him up financially. As with the big guys (i.e. rich Berkeley Homes and their many impenetrable subsidiaries – he has set up subsidiary companies, just like Berkeley Homes) The finances re Cayuga, if you drill down into the accounts, don’t look that fantastic.

    To be clear, I have nothing against Ed personally – he is just trying to make some bucks for himself (although I question why he is allowed all these opinion pieces on the website, which largely go unchallenged and seem to be believed by some readers).

  8. MegA Reply

    Brighton has a very long history of many people having second homes in the city. Swathes of the city were built to satisfy the appetite of wealthy Londoners in the 19th Century for a seaside second home. People usually only buy second homes in highly desirable locations and pay a premium for the privilege. Never in a million years would such homes be accessible to those wishing to get on the housing ladder. Trickle down effect of a ban would be negligible. Great value can be found a few miles East and West of Brighton and Hove.

  9. Gareth Reply

    The lack of afforable housing available in Brighton & Hove has many causes. The market in second homes; the massive explosion in buy to let feeding off of the expansion of Sussex & Brighton universities. A large number of properties in Brighton & Hove are owned by off-shore investors who have been encouraged to launder their money through UK property aquisitions.
    Levying full council tax on second homes would be a step forward, perhaps levying additional tax on BTL investors. Banning off-shore Trusts and individuals from owning property in this country would also help dampen down the property market.

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