A cool down of London’s sharing economy? Airbnb enforces 90-day letting rule

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A cool down of London’s sharing economy? Airbnb enforces 90-day letting rule

A cool down of London’s sharing economy? Airbnb enforces 90-day letting rule

Matt Pochin-Hawkes 08 Dec 2016
In what has been dubbed as a dramatic policy shift Airbnb has announced that it will introduce a 90-day cap on the letting of entire homes in London from 2017.

In the context of worldwide opposition to Airbnb, the cap stems from concerns by local authorities and residents that the homesharing platform is exacerbating London’s housing crisis and having a negative effect on communities.

The change in approach is informed by research undertaken by the Institute of Public Policy Research (IPPR). It concludes that London’s housing crisis has been and is being primarily driven by the failure to build the new homes that London needs and that the effects of homesharing are “likely too small to be a significant contributor to the housing challenges that London faces”.

Notwithstanding this, the research warns that, if left unchecked, homesharing has the potential to damage housing supply by encouraging more landlords to move their properties out of the private rented sector and into the short-term lettings market. With letting agents’ fees scheduled to be banned (and potentially picked up by landlords or incorporated in higher rents), Airbnb’s change could make short-term lets an even more attractive option to landlords than long-term rental.
City of London, Westminster, Kensington and Chelsea and Hackney – the London boroughs where Airbnb homes* represent more than 3% of the boroughs private housing stock (IPPR 2016)

Up until 2015, planning permission was required for the change of use of residential premises (Use Class C3) to provide temporary sleeping accommodation under the Greater London Council (General Powers) Act 1973. The purpose was to protect London’s existing housing supply for the benefit of permanent residents.
Designed to encourage the sharing economy whilst retaining control over commercial lettings, the Deregulation Act 2015 enabled Londoners to participate in the sharing economy by allowing short-term lets for a maximum of 90-days per year without having to apply for planning permission for a change of use. If the cumulative number of days exceeds 90 planning permission would be required for change of use to serviced apartments, short term accommodation or hotel use (Use Class C1 or Sui Generis). This change in legislation, together with the tax breaks for letting spare rooms announced by George Osborne earlier this year, has made participation in London’s sharing economy more accessible than ever.

The number of properties let for more than 90-days per year is not insignificant: IPPR’s research identified that nearly a quarter of home* listings were booked for more than 90-days per year, amounting to over 4,900 homes. Without the sharing economy, some of these homes may otherwise have been occupied and/or let on a longer-term basis providing residential accommodation rather than visitor accommodation.
23% – The percentage of Airbnb’s London home* listings in 2015 deemed to be commercial under the Deregulation Act, amounting to 4,938 homes (IPPR 2016)

Airbnb’s 90-day rule reinforces legislation. It will no doubt make it more difficult for home-sharers to disregard planning rules, reducing the number of properties in London that are let on a short-term basis for more than 90-days and providing more homes for long-term rental.

Airbnb’s move draws into focus the challenges London Mayor Sadiq Khan faces en route to realising his vision set out in A City for All Londoners. In 2016, London attracted around nearly 20 million international overnight visitors a year, who contributed an estimated of $19.8 billion (£15.6 billion) to the economy[1]. Many of these visitors stayed in hotels, but a growing number now chooses to stay in accommodation provided by the sharing economy. Nearly 9 million people also call London ‘home’ and the population is projected to grow by almost 100,000 people annually over the next 25 years, according to ONS.

One of the affinities between Khan’s vision and Airbnb’s aims is the promotion of non-traditional areas to tourists. IPPR’s research finds that homesharing means that parts of London outside the centre benefit from tourists who might not ordinarily visit them. This trend was also noted in our analysis undertaken earlier this year which highlighted the higher proportion of Airbnb listings in locations that have fewer hotel rooms, such as the boroughs of Lambeth, Southwark and Wandsworth.

Similarly, A City for All Londoners aims to spread the economic benefits of tourism throughout London, and promote hotel development in Opportunity Areas and town centres in Outer London (assisting in meeting the target of at least 40,000 additional hotel rooms by 2036). The document also sets out that the London Plan will “promote hidden gems to international visitors” and “encourage participation in culture in all parts of the city”, not just central London.

If we are going to see a cooling down of London’s sharing economy, what does this mean for hotel developments? Will Airbnb’s new cap increase demand for hotel bed spaces at the expense of Airbnb’s? And what locations are likely to be most affected?

Notwithstanding the likely continued dominance of Inner London hotels, well-connected Outer London town centres are likely to provide strong opportunities to increase and diversify London’s hotel provision. Compared to central London hotels, such locations have the benefit of providing an arguably more ‘authentic’ experience of the capital while also providing easy access to Central London. Outer London hotels also (generally) have cheaper room rates, unlocking additional visitor spending in the local economy.

Whilst the competing demands on London as a place to live and a place to visit will need to be balanced in the new London Plan, local planning authorities should plan proactively for more hotels in Outer London to meet the demand for alternative accommodation evidenced by Airbnb.

Given that we work on a wide range of hotel, residential and mixed use projects in London and across the UK, changes to the sharing economy are of great interest to NLP. For more information on how we can help you please have a look at our Hotels page or get in touch.

Twitter: @mattpochin89

[1] MasterCard (2016) Global Destination Cities Index, September 2016.
*Entire home lets rather than space rooms