The announcement by the Leeds Building Society that it would no longer lend to second homeowners “exceeds their role as a lender”, according to a leading property firm.
Leeds are Britain’s fifth-largest building society and have lent £19.7 billion to buyers. They are the first big lender to ban second home ownership in such a way. Richard Fearon, Leeds’s chief executive, said:
“We don’t believe support for second homes is compatible with our purpose to put home ownership within reach of more people. Second homes reduce the number of properties available for people to live in, at a time when there’s a consensus housing supply is inadequate to meet demand.”
Lenders intervening directly in the operation of the housing market for social, moral, or societal reasons is not their remit, and they should be extremely cautious about such interventions, according to DJ Alexander Ltd, based in Scotland.
Their stated reason that second homes are one of the causes of housing shortages in the UK is “at best, disingenuous and, at worst, inaccurate”, the firm said. They suggested that this year’s Westminster report – “Second homes and holiday lets in rural communities” – found inconclusive evidence on the negative impact of second homes. It states that they may increase prices and reduce availability, but there is also evidence that they increase the economic prosperity of rural areas and benefit other homeowners in the vicinity. A similar report commissioned by the Welsh Government came to the same conclusion.
David Alexander, CEO, DJ Alexander Scotland, said that “you would have to question whether it is their role to intervene in the housing market in this way”. He continued:
“The notion that not lending to second homeowners will allow more people to join the housing market does not really make sense unless they hope that prices will fall as a result of their intervention.
This is extremely unlikely as the popular tourist destinations where this is a major issue are unlikely to be impacted by this change in policy. They will remain popular as long as people want to live there, and they will find other companies willing to lend to facilitate this. St. Ives, which has a restriction on second homeowners, has seen prices increase by 26% since the policy was introduced in 2016.”
Alexander went on to question the impact this may have on other lenders – and the market – moving forwards:
“You have to ask where does this end? Will banks refuse to lend for car purchases or holidays because of the impact of these purchases on the climate? Or should they not fund smokers and those with an unhealthy lifestyle who will ultimate produce greater strain on the NHS? These are not decisions for financial institutions and will make no difference to the market.
At the heart of this issue is supply and demand. Supply has not kept up with demand, so prices have risen, and affordability has become more difficult. Increase the supply of housing in popular areas and you will soon see prices level off and even reduce making more homes affordable to a wider range of people. Intervening in the market always has unforeseen consequences and should not be the function of lenders but left to policymakers.”
One Response
Has the Leeds BS really thought about what it is doing!
I accept steps need to be taken to get young people on the housing ladder, but does the Leeds really think this is the way to do it.
Take Wales as an example, according to recent data there are c5,500 second home owners and the new tax regime coming in next year is aimed at getting rid of them all; in addition, the tax will attack holiday let businesses, with c1,400 forecast to close as a consequence of not being able to reach the 182 day letting threshold therefore having to pay 300% extra in council tax. If the new tax regime achieves what is intended it could have a catastrophic impact on local communities with tourism income and the provision of employment (cleaners, maintenance, food outlets, etc) taking a massive hit!
I wonder if the Leeds is aware that the Welsh government, according to a recent FOI request, hasn’t even carried out an assessment looking specifically at the impact the loss of second homes and holiday let businesses could have on local communities; apparently it doesn’t have enough data about these to do this, yet has enough to be able to model its potential new tax take!
The solution to the housing problem is to provide more affordable housing, not destroy local communities that rely on historic income streams and employment opportunities!