Vouch: What agents and landlords need to know about the booming short-term let sector

16 September 2021

Short-term lets can be beneficial to landlords and tenants looking for a more flexible solution than a long-term contract can provide - but some say this may pose a threat to the buy-to-let sector.

Short-term lets are seen as both a boon and a threat to the rental sector. Now that the hospitality industry is starting to kick into gear after a period of Covid-related restrictions and limited activity, short-term lets are making headlines - but is it to the detriment of buy-to-let landlords?

Investor and tenant benefits

Short-term property lets - or properties that are let for less than six months at a time - offer homeowners and investors more flexibility than longer term buy-to-let mortgages, plus mortgage interest costs can be offset against any income for tax purposes on those properties, creating a further cost benefit.

As restrictions ease and the market starts to rebound, short-let landlords are starting to see the performance of their investments growing, but the positive effect of an in-demand short-term lets sector doesn't simply apply to property investors.

Tourism in local areas

Local economies may also gain from an influx in tourists as a variety of accommodation options at affordable rates can attract more visitors to a region.

For tenants, short-term property lets can give them extra flexibility that they wouldn't otherwise see when signing a long-term contract, and can provide them with a solution when between homes, deciding if they like an area before signing up for the long term, or simply looking for a more homely holiday accommodation option.

Explore this year's entire State of the Lettings Industry Report 

The current short-term let landscape

Despite the extra costs that can come with renting out a property on a short-term basis with a high turnover of tenants, the short-term let market is growing rapidly.

In London, for example, properties listed on Airbnb quadrupled between 2015-2019.

In June of this year, research shows that short-term lets outperformed hotels and serviced apartments in London in occupancy rates - 62.7 percent on average for short lets.

An increase in revenue per room

The average Revenue per Available Room (RevPAR) also increased by nearly 60 percent to £79.20 versus the same period in 2020. A positive outlook for the sector, with the "main business indicators [...] looking in much better shape", according to Merilee Karr, chair of the UK Short Term Accommodation Association.

A problem for buy-to-let?

The point of contention lies in the impact of short-term lets on housing supply. When short lets, such as Airbnb, gain popularity, this can exacerbate an already pronounced lack of buy-to-let property stock.

As the Harvard Business Review explains: "By making short-term rentals easier, Airbnb could cause some landlords to switch their properties from long-term rentals, which are aimed at local residents, to short-term rentals, which are aimed at visitors."

Low supply and rents

A low supply of buy-to-let properties then pushes up rents, according to Generation Rent, which says that this has already taken effect in some of the holiday hotspots this summer, with renters "priced out of their own local communities".

Research by the Economic Policy Institute in 2019 explains how an influx of short term lets could push up the rent for long-term tenancies: “Because housing demand is relatively inelastic (people’s demand for somewhere to live doesn’t decline when prices increase), even small changes in housing supply (like those caused by converting long-term rental properties to Airbnb units) can cause significant price increases."

Solutions proposed

Different councils, particularly in those holiday hotspots, are starting to call for local measures to help combat the issue.

Removing tax incentives

Solutions proposed by the Leader of North Devon Council, David Worden, include "removing mortgage interest and Capital Gains tax relief from holiday rental properties and allowing councils to set higher council tax on second homes."

Licensing short-term lets

Oxford council wrote to Housing Minister Chris Pincher calling for the ability to license properties rented as short lets in the area, to put them "on a level playing field with other rented properties and rental businesses like hotels and guesthouses" - something which Airbnb itself has echoed.

In a statement in response to criticism, it says it has "led calls for a UK host registration system to help local authorities regulate home sharing." We wait to see if any solution will win out to even the playing field for all rental properties.

Goodlord and Vouch are part of the Goodlord Group. Goodlord also offers a referencing service to complement its pre-tenancy lettings software for agents. Learn more

Further reading