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Could new regulation kill off short-term holiday lets?

The government is currently consulting on whether to regulate holiday rentals commonly advertised on platforms like Airbnb.

By Harry Clarke-Ezzidio

Following ever-intensifying debate, changes could finally be coming to how England regulates short-term lets and holiday homes commonly advertised on platforms like Airbnb.

Amid severe housing shortages, locals in rural and coastal towns that are popular with tourists and densely populated with short-term lets are dealing with sky-high rental and property prices – but that may soon change. The government is considering giving significant powers to councils: allowing them to refuse short-term lets if it’s deemed that the properties are taking too much capacity away from the local housing market.

Last month, the government announced two consultations on such regulation in England, due to be completed by the summer. The first, led by the Department for Levelling Up, housing and Communities (DLUHC), proposes requiring hosts to get planning permission from their local councils in order to use a home for a short-term let. The second, led by the Department for Culture, Media and Sport (DCMS), proposes creating a register of all such properties in the country.

Outlining its objectives for the consultation, the government said it wants to “give communities greater control over short-term lets in tourist hot spots”, while also “strengthening the tourism sector”. But is it possible to please everyone?

Some industry representatives, such as Andy Fenner, the chief executive of the UK Short Term Accommodation Association (STAA), believe that short-term lets are “one of the few successful rural business [models] and drivers of investment into rural communities”. Others, like Chris Bailey, the national campaign manager at Action on Empty Homes, which argues in favour of councils having the powers to refuse short-term lets, believes that they inflate prices for buyers and renters. Bailey says they make “housing that would have been available to people on a long-term basis cease to exist”

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[See also: After the news this week, I hoped my AirBnB wouldn’t have wifi]

Last autumn, the Welsh government announced changes to its planning system, which included a new special categorisation for short-term lets, which it said will allow councils to “control” the number of such properties “in an area”. The most consequential legal changes in the UK have come in Scotland, however.

Since October 2022, the Scottish government has required all prospective hosts to apply for a special licence before accepting bookings. (Those operating short-term lets prior to the new law were able to continue accepting guests while applying for a licence.) No national system was put in place for collating or processing this change; only guidance was issued. Each one of Scotland’s 32 local authorities has had to decide for itself how to implement the new law.

The result has been fluctuating fees, varying levels of detail needed in applications and the creation of different, sometimes peculiar, rules to get approval. Some councils, for example, mandated hosts to carpet secondary lets, or ensure “a similar floor covering”. Those who failed to comply could face fines of up to £2,500. In December, however, the Scottish government extended the registration deadline by six months to October 2023, citing the impact of the cost-of-living crisis.

The DLUHC consultation on a planning-permission system for England mimics that of Scotland’s licensing system. “If we do the same thing in England, the same thing will happen,” said Fenner. “It’s the wrong legislation. We don’t need additional burdens of planning [permissions]. The planning system cannot keep pace with housebuilding [targets], let alone having further things thrown on it.”

[See also: Why don’t we have a Department for Housing?]

In 2019, the Scottish government published a report into “the impact of short-term lets on communities across Scotland”. According to the research, Scotland had 31,884 active Airbnb listings as of May 2019, which represented “three-fold growth” from April 2016. Data Airbnb published in 2018 claimed that each listing in Scotland generated 52 visitors to the country, bringing in a total of 1.6 million extra guests. The 2019 Scottish government report concluded that those extra visitors contributed to “increased spend [and] increased availability of jobs, often all year round”.

But there were problems, too. Following surveys and interviews with residents, hosts and local businesses, the research identified that properties were often changing from “long-term private lets and owner-occupation into [short-term lets]”, contributing to a “shortage of housing supply and affordability”. Those issues resulted in a shortage in “availability of labour supply” in the rural areas of Fort William and Skye (two of five case-study areas) as people were priced out of the buyer and rental market.

The short-term lets sector argues that overbearing regulation will damage national tourism and hinder economic growth. “The holiday lets that we’re talking about are small businesses in areas of the country where there is no other investment,” said Fenner. “We have to respect the fact that tourism is a vital driver [of income] and brings well-earning jobs into our communities.”

[See also: Inside Britain’s housing crisis]

Giving councils powers to regulate the sector may go some way to closing housing gaps in rural and coastal communities. But it cannot compensate for successive governments failing to build enough affordable housing stock.

“I wouldn’t have been able to buy a house in the rural village I grew up in 25 years ago, before Airbnb, because house prices were too high then, and they’re too high now,” said Fenner. “Not one new house has been built since I was born there – and that’s over 40 years ago.” Bailey added: “If we had [a bigger] supply of housing that was affordable and available to people on a long-term basis in secure tenancies – ie social and council housing – then we wouldn’t necessarily be having this debate, because the [short-term lets] market would be separate.”

Housing shortages in coastal towns, he continued, mean places like Cornwall “have a shortage of people who can afford to live in the area to do the jobs required to keep its tourist industry alive”.

The government recently retreated from its 2019 manifesto pledge to build 300,000 homes a year. Overall, there’s a balancing act at hand: housing shortages are driving up rent and property prices, and while the amount of property used for short-term lets is small in comparison to what is needed to satisfy overall demand, it is nonetheless contributing to the problem – the extent to which is of fierce debate. But, if new regulation reduces the short-term lets available in coastal and rural towns, the local tourism industry across the country will also likely suffer.

“National landlord bodies have quietened the narrative about landlords being driven out of the market by new legislation, because the private [letting and second home] sector is actually still growing,” said Bailey. “But even if that was the case, would it be a bad thing? It would only be a bad thing if they were providing genuinely affordable housing on a mass scale – and they’re not.”

This piece features in the new Spotlight supplement on Regional Development, published May 4. Read here

[See also: Housing crisis: A generation locked out]

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