Labour demands reversal of “secret £1bn giveaway to second homeowners”

Labour has demanded that the government reverse a “secret £1bn giveaway to second homeowners and landlords” that the party says has been “snuck out by the Chancellor” after his summer economic update.

The party argues that the Treasury “slipped out” the announcement that buyers of buy-to-let properties, holiday homes and other second homes will benefit from a substantial discount from July 8th.

In a letter to the Secretary of State for Housing, Communities and Local Government, Labour’s Thangam Debbonaire asked the government to justify the reduction in stamp duty on second home purchases from 8% to 3%.

She highlighted that the policy would cost the exchequer £1.3bn annually – at a time when the Local Government Association has predicted an immediate gap in local government finances of £1.2bn by the end of this year.

Debbonaire also pointed out that there are over one million people on council house waiting lists across the UK, and that the money could instead be put towards building “truly affordable housing” for sale or rent.

Commenting on the policy announcement, the Shadow Housing Secretary said: “It is unacceptable that the Chancellor tried to sneak out this huge bung to second homeowners and landlords while many are desperate for support.

“He should be targeting support to those who need it, not helping people invest in buy-to-let properties and holiday homes. An unnecessary subsidy for second home-owners will only worsen the housing crisis by reducing the supply of homes overall.”

She added: “We need a credible plan from Tory ministers to build the homes our country needs and get people on to the housing ladder. We didn’t see that this week.”

The Chancellor made a number of big policy announcements in his summer economic update to parliament on Wednesday. He has been criticised by Labour for not adopting a more targeted approach.

Below is the full text of the letter sent by the Shadow Housing Secretary today.

Dear Robert,

I am writing to you after the Chancellor’s financial statement in the Commons yesterday.

Subsequent to the Chancellor’s statement, the Treasury has revealed that the stamp duty changes will also provide a tax break for second homeowners. The Treasury has confirmed that those looking to buy a second property or buying to let, will only have to pay stamp duty at 3% up to £500,000, rather than the 8% from a quarter of a million up.

I’m seeking to clarify why your government is giving such a large tax break to owners of second homes at a time of an acute housing crisis. If someone bought a second home yesterday for half a million pounds, they would have expected to pay £20,000 more than they would today.

You’ll know that in total, since its introduction in 2016, around 29% of all liable transactions have been subject to the Higher Rate (of Stamp duty) for Additional Dwellings. The majority (88%) of HRAD transactions are on properties sold for under £500,000.

In 2019/20, 34% of homes bought were second properties meaning this policy could cost the exchequer £1.3bn. This could fund the immediate gap in local council finances, which the LGA predicts will be £1.2bn by the end of the year.

At a time when we have an acute local government funding crisis, I question how the government can justify giving a tax break to people already fortunate enough to own an existing property rather than giving councils the funding they need.

Over a million people are on council waiting lists whilst the number of new social homes has fallen by 80%. This money could be much better spent on truly affordable housing to buy or rent, rather than on a tax break for second homeowners.

The Chancellor had an opportunity to rebuild and invest in truly affordable housing to buy or rent. But he failed to take it. He talked about jobs but did little to address the skills shortage in construction sector.

Please urge the Chancellor reverse his decision to give a tax break to second homeowners. We are calling for clear action in the spirit of constructive engagement.

Yours sincerely,

Thangam Debbonaire
Shadow Housing Secretary