Balance to be struck on housing needs and visitor economy – Carmichael

Orkney and Shetland MP, Alistair Carmichael, has spoken about the need for a balanced approach to housing and furnished holiday lets in local communities, during a debate in Parliament. The debate on Wednesday afternoon was brought to discuss changes announced in the Budget in the taxation of furnished holiday lets, and the consequences for the availability of housing stock and the tourism industry.

Furnished Holiday Lets (FHL) are properties that must satisfy certain criteria to be eligible for certain tax breaks. Conditions include where the property is located, whether it is furnished, whether it is commercially let, and a number of ‘occupancy conditions’.

The government has proposed ending the FHL tax regime, partially in response to concerns that increased investment in holiday let properties would reduce the availability of housing for permanent residents. In 2022, the Office of Tax Simplification (OTS) suggested that the Government should consider whether the FHL regime was still needed. However, they added that abolishing the regime could introduce complexity and uncertainty.

Speaking in the debate, Mr Carmichael said:

“I understand the concerns about housing shortages, which I have in my constituency. The answer to the shortage of housing, however, is to build more houses; it is not to punish what is a very important part of the local economy, including in parts of the country like mine. The advantage of such a tax provision is that it allows for the improvement and professionalisation of the sector, which at the end of the day can only improve the visitor offering.”

Responding as leader of the debate, Peter Aldous MP said:

“I agree with the right hon. Member on both counts. There are other measures being introduced, such as the register, that I believe will help bring professionalism into the sector. In fact, I know from the constituents I have spoken to and the businesses that operate this type of furnished holiday accommodation that they are incredibly professional businesses.”

Reacting after the debate, Mr Carmichael said:

“We can all agree that more housing is needed in almost every corner of the country including the isles. I am concerned, however, that in making a one-size-fits-all taxation change to discourage furnished holiday lets, we may wind up doing harm to the visitor economy without improving the underlying housing issue.

“Ultimately what is needed is more houses for people to live in. Local authorities need the scope and support to encourage the right sort of housing development and to ensure that the visitor economy complements our local population without overwhelming it. I fear that these planned changes on the national level may tip the scales too far in one direction. There is a balance to be struck, but it should be informed by the specific local needs of our community.”