Evaluation of the Second Homes and Affordability Pilot: phase 1 report (2023 to 2024) (summary)

Housing affordability in Wales has become a growing concern in recent years. According to the UK House Price Index ^{[footnote 1]}, the average property price in Wales reached £217,000 in September 2024, while the average annual price change over the past five years (2020 to 2024) was estimated at 6%. This rise could largely be attributed to above-target inflation since 2021, but the limited supply of new dwellings in Wales should also be considered. In 2020, the Welsh Government published updated estimates of future housing needs, suggesting that between 6,200 to 8,300 additional housing units would be required annually from 2019/20 to 2023/24, with a central estimate of 7,400 units. ^{[footnote 2]} However, current supply levels fall short of these estimates. StatsWales data ^{[footnote 3]} indicates that between 4,300 and 5,700 new dwellings were completed annually from 2020/21 to 2023/24.

The combination of reduced housing supply and rising house prices has likely contributed to declining housing affordability in Wales. The Office for National Statistics (2024) reported that full-time employees in Wales needed 6.1 times their annual earnings to buy a home in 2023, surpassing the affordability threshold of 5. ^{[footnote 4]} A similar trend has been observed in the private rental sector, which has also experienced increasing pressure in recent years. Since October 2022, rental prices have experienced steady annual growth, reaching 7.9% by October 2024 after remaining below 2% from October 2015 to October 2021 and accelerating to 5.5% in 2022 and 9.7% in 2023. ^{[footnote 5]} Rising rental costs and house prices, coupled with above-target inflation since 2021, have exacerbated affordability challenges, especially for lower-income households.

The issue of affordability is further complicated by the presence of second homes, empty properties, and short-term lets across Wales. As of 2024/25, local authorities reported approximately 22,000 second homes and 23,000 long-term empty properties liable for council tax. ^{[footnote 6] [footnote 7]} These factors may drive up property rent and house prices, making it difficult for individuals, particularly young people, to afford renting or buying properties in their communities. While second homes and short-term lets can boost local economies, they can also disrupt community cohesion, impact the sustainability of Welsh as a community language and strain local services.

In response, the Welsh Government launched initiatives aimed at improving housing affordability. One such initiative is the Second Homes and Affordability Pilot, which was announced in the Dwyfor area of Gwynedd in June 2022. This Pilot aims to test strategies for managing future numbers of second homes, empty properties and short-term lets, improving housing affordability, and supporting local communities. The Welsh Government has commissioned Alma Economics and OB3 Research to carry out a comprehensive evaluation of the Pilot, running from August 2023 to December 2026. The evaluation is divided into three phases, beginning with Phase 1, the scoping phase, including data mapping and exploratory research, followed by Phase 2, the process evaluation phase, and concluding with Phase 3, the impact and economic evaluation of the Pilot. The findings from the first phase, which concluded in October 2024, are presented in this report.

Phase 1 included scoping and exploratory research. In the scoping research stage, the first objective was to clarify the scope and priorities of the Pilot programme. The policy landscape was recognised as complex, with uncertainties among stakeholders about the various interventions and their intended impacts. To address these complexities, the research team first undertook a comprehensive review of existing research on issues related to second homes, empty properties and short-term lets, specifically in Wales. To gather further insights, stakeholders involved in the Pilot's design and delivery were consulted through introductory meetings with Welsh Government officials, which provided a clearer understanding of the policy context, Pilot objectives, data availability, and potential risks and challenges. Delivery partners were also interviewed to assess progress, expected impacts, and potential areas for improvement.

An interactive Theory of Change (ToC) was also developed to outline the Pilot’s activities, intended outputs, outcomes, and impact, providing a visual representation of the pathway from activities to long-term goals. This ToC was then translated into an online platform that allows users to track outcomes back to specific interventions. Concurrently, the research team began mapping out key datasets to be used in future research phases, focusing on understanding housing patterns, the status of second homes, empty properties and short-term lets, as well as housing affordability. Both public and non-public data sources were explored to address identified gaps. Based on these efforts, a feasibility plan for the impact evaluation in future research phases was prepared, detailing how the effectiveness of the Pilot programme will be assessed.

In the exploratory research stage, the approach involved an online survey, interviews, and focus groups with young people, local community members, affordable housing applicants, and owners of second homes and short-term lets. A survey targeting young people aged 18 to 35 in the Dwyfor area was conducted, resulting in 139 responses from 18-35-year-olds and 383 responses from those aged 36 and over. Additionally, six interviews were conducted with owners of second homes and short-term lets to gather qualitative insights. Further engagement was carried out through interviews and focus groups with 38 individuals, including young people, local community members, and affordable housing applicants. Despite initial recruitment challenges, engagement succeeded in gathering insights from a broad range of stakeholders, enhancing the comprehensiveness of the exploratory research.

Scoping interviews were held with 16 Pilot delivery partners and Welsh Government representatives over September and October 2023. Findings provide a snapshot of the context and these groups’ understanding of the Pilot activities at the early stages of the evaluation, which informed our own understanding of the Pilot’s aims, activities, and progress. It is important to note that some of these findings may now be outdated but provide a useful picture of the state of the Pilot at the start of this evaluation as a baseline to inform later stages of the evaluation.

Homebuy - Wales and the Empty Homes Grant were widely considered to be having effect. There was also enthusiasm for Self Build Wales and a deposit support scheme, but some uncertainty around practicalities of these. Collaboration between Cyngor Gwynedd, the Pilot team, and housing associations was viewed as crucial to promoting community-led housing.

Interviewees felt that Article 4 could have a substantial effect on stabilising Gwynedd’s housing market. However, they also identified several risks which could impact on local people and delivery partners.

The council tax premium was described as funding proposals within Cyngor Gwynedd’s Housing Action Plan. At the time, interviewees had expected the visitor levy to come into effect in 2025/26, which would be too late for this evaluation.

Our research team reviewed publicly available datasets related to housing, second homes, empty properties, and affordability in Wales. This review was guided by the ToC, which outlined key outputs, outcomes and impacts associated with the Pilot’s activities in Dwyfor. Various datasets were identified, encompassing aspects such as housing and rental prices, housing stock, tenure, and housing quality, at different geographical levels ranging from community to local authority.

Several data gaps were identified. Meetings with stakeholders from the Welsh Government and other data-holding organisations were conducted to discuss these gaps and explore data accessibility. Key challenges encountered during the data review included defining the boundaries of the Dwyfor area and the lack of data at the community level.

Recommendations for future data collection include enhancing the availability and granularity of information, such as more geographically detailed workplace earnings data necessary to calculate the housing affordability ratio, as well as increasing the frequency of data on housing stock in Wales. These improvements emphasise the need for consistent tracking of key outputs and outcomes, which would help assess the effectiveness of similar interventions in the future.

To assess the impact of the Second Homes and Affordability Pilot Programme, we will adopt a realist evaluation approach aligned with HM Treasury Magenta Book guidelines. ^{[footnote 8]} This methodology incorporates both quantitative and qualitative data, guided by the ToC, to explore the connections between Pilot activities and observed outcomes while considering the socio-economic context that influences stakeholder responses. A mixed-methods strategy combining quantitative analysis – such as comparing the prevalence of second homes or housing affordability in Dwyfor against regions facing similar challenges (e.g., high concentrations of second homes or comparable housing affordability issues) or comparing these with official statistics to examine shifts over time – will be complemented by qualitative insights, providing a comprehensive understanding of the Pilot's overall effectiveness.

We will also explore the evaluation of specific interventions that are already active and currently running, such as Homebuy - Wales, and the Empty Homes Grant. We aim to gather mixed-methods evidence to understand their impacts by comparing the uptake of the approaches trialled in Dwyfor with those implemented in the same or similar way in other Welsh areas where challenges, such as a high prevalence of second homes or significant housing affordability issues, are also present. We will combine this quantitative data with insights from engaging with local stakeholders. Other components of the Pilot, such as regulatory activities that are either not fully determined or still in progress, will be assessed mainly through qualitative approaches. The current impact evaluation plan will be informed during Phase 2 of the evaluation as the policy landscape evolves and the evaluation team updates existing datasets and accesses new ones.

Exploratory research fieldwork included an online survey, interviews, and focus groups to gather the views of young people, those eligible for affordable housing, second homeowners, and local community members.

Findings from the survey suggested that most 18-35-year-old respondents felt that their own current housing situation is affordable. The majority of 18-35-year-old respondents also expressed that second homes and holiday lets have an overall negative impact on their area and that they negatively impact (i) sense of community, (ii) Welsh language, and (iii) affordability of housing.

Findings from interviews and focus groups showed that the majority of young people, affordable housing applicants, and local community members felt that housing is unaffordable within Dwyfor. These groups also stated that second homes and holiday lets in the area are having negative impacts on sense of community and Welsh language. However, some interviewees also said that the area is dependent on tourism and that these properties can create employment opportunities. There was mixed awareness of Pilot activities among young people, affordable housing applicants, and local community members. Activities with the most awareness were (i) the council tax premium for second homes, (ii) Article 4, and (iii) support offered through Tai Teg. Second home and short-term lets owners were aware of the Pilot via Cyngor Gwynedd, regional and national news, and social media groups, but only one felt that its measures were justified. They discussed impacts of the Pilot such as having to sell properties, uncertainty around Article 4 for local people, and positive impacts of Homebuy - Wales.

Phase 2 (October 2024 to September 2025) will involve a process evaluation, refining stakeholder engagement strategies, and gathering further qualitative insights. Key stakeholders, including local authorities, housing associations, and community groups, will be consulted through interviews and focus groups to understand what has worked well in implementing the Pilot, what has not, and why. The research team will also develop case studies on specific interventions to inform a comprehensive Phase 2 report.

[1] HM Land Registry, 2024. UK House Price Index Wales: September 2024

[2] Welsh Government, 2020. Estimates of housing need: 2019-based

[3] StatsWales: new dwellings started by period and tenure

[4] Office for National Statistics, 2024. Housing affordability in England and Wales: 2023

[5] Office for National Statistics, 2024. Index of Private Housing Rental Prices, UK: January 2024

[6] StatsWales: Chargeable empty and second homes, by local authority (number of dwellings)

[7] There is no robust data on the number of short-term lets across the country.

[8] HM Treasury Magenta Book – Central Government guidance on evaluation

Report authors: Alma Economics (2025)

Views expressed in this report are those of the researchers and not necessarily those of the Welsh Government.

For further information please contact:
Housing Research Team
Social Research and Information Division
Knowledge and Analytical Services
Welsh Government
Cathays Park
Cardiff
CF10 3NQ
Email: HousingResearchTeam@gov.wales

Social research number: 14/2025
Digital ISBN: 978-1-83715-308-4