A recent move by councils in Wales to inflate council tax rates on second homes in a bid to ease the housing crisis and raise millions of pounds is backfiring, according to some homeowners and businesses who have spoken to Sky News.

Picturesque Tenby, a tourist haven, has among the highest second-home ownership in Wales

The number of second homes being put up for sale in one part of Wales has increased by more than 250% – as homeowners and businesses criticise the Welsh government’s council tax premium.

Many councils in Wales now charge an inflated tax rate for second homes, up to 300%, with the aim of freeing up rarely used housing stock for locals and generating income.

In Pembrokeshire, the council tax premium increased to 200% in April, trebling the cost for homeowners and leading to many selling up.

Figures show that this July 135 second homes were listed for sale in the county, a rise of 255% compared to the 38 on the market at the same time last year.

Despite the influx of listings, actual sales are at a record low.

Estate agent Hamptons says second home sales accounted for just 4.5% of sales in Pembrokeshire in the first six months of 2024 – compared to 21% a decade ago.

Local agents say the properties coming onto the market are too expensive for first-time buyers – and that many homes are being listed in a loophole to avoid the increased tax.

Rhys Jordan, from Nested Estate Agent Pembrokeshire, told Sky News the new policy wasn’t working.

“Quite frankly, here in Pembrokeshire, wages are low. Anything in reach for first-time buyers needs to be below £250,000,” he said.

“All they’ve done is create a glut of unsuitable properties for long-term use on to the market,” he added.

Second homes for sale are exempt from council tax for up to one year and he said properties are “definitely” being listed to avoid the new council tax premium.

“There’s no denying that many properties are priced not to sell purely to sit on the market to avoid paying council tax,” he continued.

There are also concerns that falling numbers of second homeowners will hit the local economy.

Matthew Ronowitz runs three restaurants in Tenby, employing 75 people.

He told Sky News: “I think the influx of second homeowners has helped us get more of a 12-month year for business trade, which from my point of view is a positive thing.

“It does kind of worry me that if these second homeowners feel like they’re being pushed out by the local authority with the way that they’ve structured things.

“It could impact the business and for the jobs we are able to provide for local people.”

Further down Tenby’s high street, John Mather runs the Nook gift shop.

He said: “They’re [second homeowners] an all-year customer. Tenby has a lot of visitors that just come during the holiday times, whereas the second homeowners are here all year.

“They kit out their homes, they’ve got a disposable income, and they support the businesses in town.”

Ifor William Hywel has owned his second home in Tenby harbour for the last 30 years.

His council tax for the property has risen from around £2,000 to £7,000 a year.

“I understand the theory behind it, but frankly I don’t think it works. It’s just another tax,” he said.