Your guide to proposals to regulate short-term lets and holiday rentals

17 January 2022

Policy makers across England, Scotland, and Wales are proposing various ways to regulate short-term lets and holiday rentals to help solve the problem of low housing stock for letting agents, landlords, and tenants.

The government has confirmed that it will set out new rules for when second homeowners letting out their properties short-term in England can access business tax rates. England's not alone in proposing new and updated legislation in the sector. As a housing crisis threatens the UK, policy makers are turning to the short-term and holiday let segment of the market in search of a solution.

HubSpot Video

Business rates relief and a Tourist Accommodation Registration Scheme (England)

In England, holiday rentals will soon need to "meet an actual letting threshold before being assessed for business rates." It will align the criteria for English holiday rentals to access business rates with the rules in Wales, where properties need to be let for a minimum of 70 days a year and available to let for 140 days per year. This aims to ensure "only genuine holiday businesses can access the rate relief for small businesses", rather than paying council tax. The rules will apply in England from April 2023.

MP Tim Farron led a recent debate in Parliament proposing a seven-point plan around short-term lets. Two of the points he outlined are reflected in consultations currently underway in Wales: creating separate categories for second homes and holiday lets in planning policy and increasing council tax by up to 100% on second homes.

In response, Christopher Pincher, Minister of State for the Department for Levelling Up, Housing and Communities, re-confirmed intentions to launch a 2022 consultation on creating a registration scheme for holiday lets in England - which Airbnb has stated that it supports.

Keep your agency compliant:  Read our guide to lettings legislation  in the private rented sector 

Planning policy, tax-systems, and a registration scheme (Wales)

In Wales, several consultations are underway or awaiting government response as part of a "three-pronged approach" to address the affordability of homes in the Welsh Community, concluding that "there is no single solution".

One consultation seeks to clarify the planning permission required to change a primary home to a secondary home or holiday let to rent out - and to make the "prevalence of second homes and short-term holiday lets in a local area" a deciding factor in granting this permission. A pilot of the proposal will run in Dwyfor from January 2022.

Tax systems are also being evaluated, with results expected this year from a consultation held in 2021. Local authorities currently have discretionary power to charge higher rates of council tax on second homes, and the consultation has proposed increasing the maximum rate this premium can be set at. It also considers further strengthening the criteria required for second homes to register for business rates, alongside suggestions to make short-term holiday accommodation exempt from small business rates relief. 

A registration scheme for holiday homes has also been announced, but with further information yet to be shared.

Licensing Order (Scotland)

In Scotland, legislation has already been passed to allow "control areas" to be set up in regions where, as Social justice secretary Shona Robison explains, holiday lets are making it "harder for people to find homes to live in."

The next step, if approved, will require all local authorities to establish a short-term lets licensing scheme by October 2022. Anyone operating a holiday or short-term let will then have until 1 April 2023 to apply for a licence, and all short-term let properties in Scotland will need to be licensed by 1 July 2024. Final guidance on this licensing scheme will be published in early 2022.

Opposing arguments suggest that self-regulating registration would be a better solution, as, under the licensing scheme, "local authorities will have the power to refuse a licence. That means the business will be terminated," says SNP member, Fergus Ewing.

Want the latest lettings new delivered straight to your inbox every week? Sign up to our mailing list and stay up to date.

Further reading