UK government has no plans to regulate or ban short-term lets

 

The short-term lets market has expanded significantly in recent years. As it becomes a more mainstream asset class, would more regulation help or hinder the sector?

A growing number of people now use short-term letting platforms to rent out all or part of their homes. The idea isn’t a new one; popular rental platforms like Airbnb, SpareRoom, HomeAway and Couchsurfing have been offering their services for more than a decade now.

However, due to its exponential rise over the past few years, there has been much more of a focus on it by both the government and the housing industry. There are a number of benefits to it for both the property owner and the user, such as increased flexibility, greater affordability than hotels, and higher returns for owners than some long-term let options. But the sector has come under criticism and increased scrutiny, too.

Last week, the House of Commons Library published an extensive report looking at “The growth in short-term lettings” in England. The government is expected to discuss the paper later this month, while Airbnb also plans to develop a white paper in the coming weeks.

No increased regulation

Certain regulations already exist in the sector, such as the 90-day limit in London. Anyone in the city who wants to let out their property for more than 90 days a year must apply for planning permission. Also, some individual tenancy or lease agreements restrict short-term lets across the country.

There have been calls across certain parts of the industry to bring in more regulation for short-term lets. London Mayor Sadiq Khan believes there should be a mandatory local authority registration system in the capital for short-term lets.

Last year, he said: “Short-term lets are a benefit to visitors to London, and to Londoners themselves who want to earn a little extra money. But these benefits must be balanced with the need to protect long-term rented housing, and to make sure neighbours aren’t impacted by a high turnover of visitors.”

However, the report last week stated that the government does not plan to bring in additional regulations at this stage. It believes further legislation would be “overly bureaucratic, and could act as a barrier to households letting out their properties on a short-term basis”.

Instead, the government intends to take a non-regulatory approach, in conjunction with the Short Term Accommodation Association. It believes this will continue to “improve standards and promote best practice”.

The positives of short-term lets

The report covers a number of the positive impacts the short-term let industry has in the UK. It points out that the “accommodation sharing economy” that now exists as a result of the growth in the sector is a huge benefit to consumers from both sides of the market.

“Consumers benefit from a choice of different types of accommodation in a range of locations, often at a cheaper rate than traditional accommodation options such as hotels.

“Property owners can benefit from earning additional income from their house, flat or spare room when they are not using them or in periods when demand for accommodation is high. A typical Airbnb host in the UK earned £3,100 in the year to July 2018.”

The UK tourism industry as a whole also benefits from the likes of Airbnb, says the report. The hosting platform says that 8.4 million people visited the UK and stayed in short-term lets in the year to July 2018. Furthermore, while hotels mainly exist in already popular tourist destinations, short-term let locations vary. This “spreads the benefits of additional tourist spending more widely”.

Investing in the sector

Short-term and furnished holiday lets offer an attractive option for property investors. According to ARLA Propertymark, 2.7% of all landlords have moved from long-term tenants to short-term lets. This equates to around 46,000 properties.

In total, 16% of landlords in the UK currently offer only short-term lets. Meanwhile, 7% offer a combination of short- and long-term. This figure has increased due to a combination of factors including the increased flexibility of property use, more regulations in the private rented sector, and the potential for higher returns.

From a tax point of view, a furnished holiday let is treated quite differently to a buy-to-let property. For pension purposes, profits count as “earnings”. You can also offset your mortgage costs against your taxable gains, unlike with buy-to-lets (see this article on Section 24). Capital gains tax, which is 28% for property assets, is also treated differently when you sell a furnished holiday let. You could qualify for entrepreneurs’ relief, rollover relief and holdover relief.

Yields have the potential to be higher, too. Liverpool was last year named the highest yielding place for short-term lets. Yields in the city reached 27.2% based on an occupancy rate of 50% of the year. London, Edinburgh, Manchester and Birmingham are also hotspots.

BuyAssociation has property investment opportunities in the short-term lets sector, as well as buy-to-let. Browse a selection of our projects here, or sign up for free for more information.

Highgrove Mews

High Net Yield Freehold Houses

  • Commutable to London (27 mins to central Paddington station)
  • Rental demand extremely strong with large industry presence in Reading
  • Freehold with 4% net yield

£284,955 - £457,000

St Petersgate – Stockport Manchester

New Launch - Stockport Manchester, apartments from £160,000

  • Discounted launch prices from £160,000
  • Excellent transport links with 3 trains per hour to London Euston and only 9 mins journey to Manchester Piccadilly
  • Experienced development team

Assured Rent Housing Association Leases

Assured Rent Housing Association Leases

  • Assured rent & no rental voids
  • Tenant damage cover & newly refurbished inline with requirements of a corporate sitting tenant
  • Free property and lettings management

From £62,000

Emerging Birmingham Commuter Town With Properties From Just £104,000

The emerging Birmingham commuter town where properties are selling in an average of just 24 days

  • A collection of 62 two bedroom apartments and 28 one bedroom apartments.
  • DE14 is one of the fastest selling postcodes in the West Midlands.
  • 23 minute train journey into Birmingham New Street Station.

Properties from £104,000

Mill, Stockport

The Northwest's emerging property hotspot

  • Discounted off-plan 2-bed prices from £162,000
  • Completion date - Q4 2021
  • Rental yields - 6% plus

Discounted off-plan 2-bed prices from £162,000

South Central – Birmingham City Centre Apartments

Highly anticipated 28 storey launch in Birmingham City Centre with an impressive roof garden and communal facilities.

  • 154 units across 28 storeys
  • Residential multi-media community room, gym, roof garden and sky cinema
  • Excellent future connectivity via the metro system to other key transport hubs and locations around the city

from £205,800

ba-

Talk to us

Speak to our UK property experts today: 

+44 (0) 333 123 0320

Open from 9am-6pm GMT

+852 9865 4446

Open from 9am-6pm HKT

Stamp Duty Calculator

.

Unlock members only investment opportunities and full development details. Join now – it’s free, quick and easy.

Login

Not a member? Sign up for free

location housing property

UK government has no plans to regulate or ban short-term lets

Example

By submitting your details via this online form you agree to be contacted via email/phone/SMS by Direct Marketplace Ltd t/a BuyAssociation in relation to property investment and property developments . We do not share your personal details with third parties.  To view our full Privacy Policy click here.