Short-term let rules: Retrospective changes and delayed deadlines
Short-term lets in England, Scotland, and Wales face new and proposed regulation in the coming months - here's a breakdown of what to expect.
New tax rules, licensing, and a holiday-let register are among the proposals set to come into force or advance further in 2023, across England, Scotland, and Wales. This is to alleviate some of the pressures on landlords in the private rented sector - particularly those operating in tourist hotspots across Great Britain.
This article is an extract from "Your guide to lettings and the law: 1st edition 2023". Download the full e-book, for free, on Newsagent.
Why the government plans to regulate short-term lets
Housing supply issues in England, Scotland, and Wales have led to an increase in government policies to regulate short-term and holiday lets.
This is a change in direction for the government. Short-term lets have arguably been given favourable treatment in light of their economic benefits for the tourist industry and to homeowners making money from spare rooms and second homes.
Alongside previous changes for landlords around their taxable profits for mortgage interest costs, Ben Beadle, Chief Executive of the National Residential Landlords Association, says that more landlords were incentivised to join the short-let sector, “to the detriment of long-term sustainable renting”.
“What we see today is entirely a problem of the government’s own making, which has decimated rented housing supply when demand is at record highs,” he says.
A recent Propertymark survey backs this up, with 69% of agents feeling that the rise of short-term lets will have a negative impact on the private rented sector.
What are the new criteria to qualify for business rate relief on short-term rentals?
The government has therefore proposed a number of measures to make accessing the benefits of renting on a short-term basis more stringent.
To benefit from business rate relief instead of paying council tax from April 2023, second home owners in England and Wales will need to prove that they’ve let their properties out for a minimum of 70 days in a year.
The property must also be “available” to let out for a minimum of 140 days.
This threshold will need to have been met in the 2022-2023 tax year for hosts to continue to benefit from business rate relief.
“Not only could this retrospective evaluation take some holiday let owners by surprise but it could also have significant financial impacts on them if they are suddenly switched from Business Rates to Council Tax charges,” says Richard Bond, Founder of Finest Retreats.
How does the Scottish licensing scheme work?
A new licensing scheme in Scotland was also launched in October 2022. Local authorities are now required to have a licensing scheme in place for short-term lets, including Airbnb.
While this means that new hosts now need a licence before they can welcome guests, the deadline for any hosts that were operating before 1 October 2022 to apply for a licence on each property that they manage as a short let has been pushed back to 1 October 2023.
This gives hosts an extra six months to prepare for the change, and will help “spread the cost of the licence fee” in light of the cost of living crisis, says Housing Secretary Shona Robison in the government’s press release on the extension.
What does the Welsh visitor accommodation licensing scheme consultation address?
The Welsh government has launched its own consultation to introduce a statutory licensing scheme for all visitor accommodation providers in Wales.
The government says that the scheme would aim to “provide a comprehensive database” to help monitor how many visitor accommodation businesses operate in Wales.
It would also help the government understand the “scale and nature” of this sector - similar to the aims of the proposed register in England.
There's still time to submit entries, with the consultation closing on 17 March 2023.
What will a tourist accommodation registration scheme in England hope to achieve?
A proposed tourist accommodation registration scheme in England aims to more clearly define the size of the sector, its impact on long-term stock levels, and the impact of the new policies, as outlined in the Developing a tourist accommodation registration scheme in England consultation document.
There are plenty of estimates from various sources on the growth of holiday lets across the UK. The CRPE reported a 1,000% increase across the UK between 2015-2021, while the BBC reported a 40% increase in holiday lets between 2018 and 2021.
Inadequate data about the size and nature of the sector makes enforcement difficult. The registration scheme consultation document also highlights the “unlevel playing field” in how current regulations are applied and enforced, especially for key health and safety legislation.
The future of the short-term let sector
Reports show that holiday-let mortgage options doubled between October 2022 and January 2023.
Sykes Holiday Cottages also saw 14% more new holiday-let owners in 2022 compared to 2021, despite the regulatory changes on the horizon.
The industry waits to see if the new regulations will put a dent in that popularity in the coming year.