Short-term lets - overdue common sense or political manoeuvring?

15 March 2024

William Reeve, Goodlord CEO, wonders whether proposed new rules for holidays lets are common sense or just Gove getting ready an election?

Originally posted in The Negotiator

In recent days, Housing Secretary Michael Gove announced a set of proposed new rules for short-term lets. This includes the need for people to seek permission from the council to turn their home into a short-term let and a mandatory national registration scheme.

This type of regulation is long overdue. Although there is a general lack of data on how many properties are being used as short-term lets and its exact impact on the private rental sector, there’s no doubt it’s squeezing the availability of rental stock. This is particularly true in coastal areas, tourist hot spots, and big cities, where holiday makers offer the prospect of quicker, bigger bucks than renters. 

With the announcement now made, the real questions start. Will these changes usher in smarter regulatory systems for short-term lets and help ease PRS pressures, or are they just a political manoeuvre designed to win over marginal seats ahead of an election?

Better regulation for short-term lets

Few would argue that better regulation is needed in this section of the housing market. This is particularly against the current backdrop of market pressures: rising rental costs for tenants, acute demand for available stock, and pressures driving landlords out of the market. Whilst most moves to regulate the housing market are met with a mixed response, most lettings professionals and PRS landlords agree that more needs to be done here.

Long time coming change needed for short-term lets

They would also agree that change has been too long in coming. This frustration is also felt by locals who are at the sharp end of the short-term lets boom. These include residents who can’t rent in their own towns and areas where holiday rentals have hollowed out the community. Adding to the frustration over how long it’s taken to get to this point is the fact that the Government could find multiple examples of how other countries have effectively tackled this. Paris, New York, Amsterdam, Barcelona; they’ve all stepped in to stop short-term lets getting out of control. And it’s worked. Tourism wasn’t killed and locals weren't squeezed out to make room for more Airbnbs. 

Can short-term lets succeed?

Will the Government be able (and incentivised) to deliver a similar success on these shores? If so, they’ll need to make sure any new regulations have teeth and close down any loopholes. 

For example, it’s vital that we address tax discrepancies as part of this change. If we level the playing field between conventional lettings (where mortgage interest is only partially deductible and Furnished Holiday Lets, which are eligible for a range of tax incentives), we can ensure managing full-time, tenanted properties isn’t less attractive. To the same end, the Government needs to make sure beneficiaries of short-term lets are under the same rules and transparency with HMRC when it comes to reporting income - that, for instance, the sames rules around Making Tax Digital (which is due to come into force in 2026), will apply to both types of lets. 

However, before we can make sure new rules are enforced fairly and effectively, the Government needs to turn promises into action. 

Political move or actual change for short-term lets?

The sceptics amongst us might see this as a political move, designed to curry favour with voters. There are lots of votes to be won in marginal constituencies that have issues with housing, particularly in coastal and rural areas. With the clock running out of time ahead of a General Election (and polls suggesting the Tories won’t be around to implement any new rules), is there sufficient incentive to drive through these proposed new rules and make them stick?

Following the huge delays around the Renters Reform Bill and the musical chairs approach of Housing Ministers over recent years, it’s hard to get one's hopes up. However, for the sake of the private rented sector and the communities most affected by short-term rentals, let’s hope that this isn’t the case. It’s time for the Government to put its shoulder to the wheel and get some sensible changes onto the statute books.

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