Second-home owners across England are increasingly exploiting a regulatory loophole by converting their properties into holiday lets to avoid substantial council tax surcharges. This strategic shift comes as local authorities gain enhanced powers to impose financial penalties on non-primary residences.
Council Tax Premiums and the Holiday-Let Loophole
Since April of last year, more than 200 local authorities in England have implemented a 100 per cent council tax premium on second homes. This measure, designed to discourage property hoarding and free up housing for first-time buyers, has prompted a notable behavioural change among property owners.
A further 38 councils are set to introduce similar charges this April, intensifying the financial pressure on those maintaining secondary residences. However, many owners are circumventing these premiums by reclassifying their properties as holiday lets.
The Shift from Second Homes to Holiday Lets
Government data from the Valuation Office Agency reveals a significant trend. Between September 2024 and September 2025, the number of second homes in England decreased from 279,870 to 268,152—a reduction of over 11,000 properties.
Concurrently, the number of properties registered as holiday lets increased by 1.2 per cent, reaching 67,858. This inverse relationship highlights how owners are adapting to new fiscal policies.
How the Loophole Operates
The mechanism behind this shift is straightforward. Under current regulations, a property can be classified as a holiday let if it meets two criteria: it must be available for rental for at least 140 nights per year and actually let out for a minimum of 70 nights.
This classification allows owners to avoid the punitive council tax premiums applied to second homes, effectively creating a financial incentive to switch to short-term rental models like those on platforms such as Airbnb.
Concerns from Housing Advocacy Groups
Generation Rent, a prominent housing campaign group, has raised alarms about this practice. They warn that some property owners are exploiting the loophole by nominally switching to holiday let status without genuinely increasing availability for long-term residents.
Dan Wilson Craw, Deputy Chief Executive of Generation Rent, commented on the situation. "The changes appear to have started an encouraging decline in the number of holiday homes, although it seems that some owners have responded by switching their properties to holiday lets," he stated.
"That means there is still more work to do to bring homes back into residential use," Wilson Craw added, emphasising the ongoing challenge of ensuring housing availability for local communities.
Impact on Local Communities and Housing Affordability
The conversion of residential properties into holiday lets has broader implications for housing markets and community stability. Wilson Craw highlighted this issue, noting, "Everybody needs a secure home they can afford, but in many areas landlords have switched from tenants to tourists, driving families out of their communities."
He further pointed out that the number of holiday homes continues to rise in certain regions, exacerbating housing shortages and affordability crises.
Calls for Enhanced Local Authority Powers
In response to these challenges, Generation Rent is advocating for stronger regulatory measures. Wilson Craw argued that many councils lack the necessary tools to balance the needs of local residents against the growth of holiday lets.
"The government should give local authorities in England powers to license holiday lets and limit their number," he urged. Such powers could enable councils to better manage housing stock and ensure that homes remain available for long-term occupancy.
As the debate continues, the tension between generating tourism revenue and preserving residential communities remains a critical issue for policymakers and local authorities across the country.
