The Welsh Government has proposed that more categories of properties will be excepted from paying the council tax premium on second homes, managing the impact of new local tax rules to distinguish between second homes and self-catering accommodation.
There will also be additional guidance on the discretion local authorities will have in the application of the premiums.
It follows ongoing discussion and engagement with councils, communities and the tourism industry.
The tax changes, which will be in place from 1 April 2023, are intended to develop a fairer housing market and ensure owners make a fair contribution to the communities in which they own homes or run businesses. The changes provide a clearer demonstration that the properties concerned are being let regularly as part of genuine holiday accommodation businesses.
The criteria for self-catering accommodation being liable for non-domestic rates instead of council tax is increasing from being let for at least 70 days in any 12month period to being let for at least 182 days.
The change announced today will mean two further categories of property will be exempt from council tax premiums if they no longer meet the letting criteria. It will apply to all properties that are restricted by planning conditions which mean that they can only be used as short-term holiday lets or which prevent them from being used as someone's main residence.
Updated guidance being issued to local authorities for consultation also confirms the discretion available in the event that holiday lets fail to meet the new letting criteria.
The move is intended to ensure the changes being taken forward are made as fairly as possible and strike the balance between the needs of communities with large numbers of second homes and holiday lets as part of a sustainable tourism sector.
As part of the Cooperation Agreement with Plaid Cymru, the Welsh Government is committed to taking immediate action to address the impact of second homes and unaffordable housing in communities across Wales, using the planning, property and taxation systems.
Rebecca Evans, Minister for Finance and Local Government, said:
I recognise the strength of feeling among self-catering operators in response to the changes to the letting criteria, and I have listened to the representations from individual businesses and industry representative bodies. These changes will give more flexibility to local authorities and will ensure that the contribution property owners make to the communities where they have homes or run businesses is fair.
Designated Member Sian Gwenllian MS said:
By working together on a cross-party basis in in the Senedd, we have been able to act quickly to begin to address longstanding injustices and market failures in the housing system that have an impact on communities across Wales. Our aim is to increase the availability and affordability of housing for local people to rent and to buy. Today's announcement is a sensible step to take to ensure that the package of measures we are taking forward can be implemented as effectively as possible - to make the biggest difference to people and communities whilst mitigating any unintended consequences.
There are a number of existing exceptions from the council tax premiums. For example, properties which are subject to a planning condition preventing occupation for a continuous period of at least 28 days in any one-year period cannot be charged a premium.