In this year’s Spring Budget, the Chancellor announced that the Government will be abolishing the Furnished Holiday Lettings tax regime from 6 April 2025 [1], meaning short-term and long-term lets will be treated the same for tax purposes [2]. The details of the Budget explain that the change will “level the playing field between short-term and long-term lets and support people to live in their local area”. It will, of course, also increase revenue to the public purse.
This is the second announcement by the government in as many months that has an overarching intention of improving the availability of housing by limiting short-term lets. On 19 February 2024, the Department for Levelling Up, Housing and Communities (DLUHC) announced that new planning legislation restricting short-term lets in England will be introduced [3]. Explaining the rationale for the changes, the housing secretary, Michael Gove, said that in some areas “too many local families and young people feel they are being shut out of the housing market and denied the opportunity to rent or buy in their own community”.
From summer 2024, planning permission will be required to rent out a sole or main home [4] for short term lets for more than 90 days per year. A new planning use class and associated permitted development rights will be introduced to enable a property to change from a short term let to a primary or sole dwelling (and vice versa). To help areas where local authorities consider there to be acute challenges, we expect that the government will introduce the ability for councils to introduce Article 4 directions to restrict the permitted development rights thus introducing the need to make an application for planning permission to the authority where a new change of use class takes place.
In parallel, a new mandatory national register for short-term lets will be introduced. The intention is to give local authorities the information that they need about short-term lets in their area, hitherto, such information has been patchy or non-existent. This national register may also be used to assess compliance with key health and safety regulations.
The response to the reforms from those in the tourism industry has been mixed. The Tourism Alliance said it supported the idea of a mandatory registration scheme, but changes to planning rules were "more concerning". The Alliance's executive director, Richard Toomer, said: "While we understand the government's desire to tackle the lack of housing in some areas, it is vital that we don't harm the visitor economy in destinations which are reliant on a good supply of tourism accommodation.
“We continue to believe that the registration scheme must be implemented first, because it's only by using the data that this scheme will supply that local authorities can know if and where there are problems and have solid information on which to base their planning decisions."[5]
The UK Short Term Accommodation Association [STAA] CEO Andy Fenner commented: “We’ve been calling for a registration scheme for years, so it’s disappointing that when it finally arrives it completely fails to address the challenges the country is facing. The registration scheme could have been game changing for tourism in England had it covered all types of accommodation but, instead, what we’ve got is a missed opportunity that’s a half-way house at best.
The Welsh Experience
The challenge of balancing the availability of housing and short-term let tourist accommodation in local communities is not unique to England. The Welsh Government has already introduced similar changes to the use classes order and now local authorities are starting to consider the evidence for the introduction of the Article 4 directions to restrict movement between the uses. Whilst it’s still too early to understand the effectiveness of the changes in Wales, in our recent Insight Focus[6], Sun, Sea, Sand and Article 4 Directions, we highlight that it is vital to ensure that accommodation is available to serve tourist needs thus ensuring the continued social and economic well-being of areas that are reliant on the industry. The introduction of any Article 4 Directions should take place alongside a robust evidence base and the plan-making process to ensure the policies provide a positive framework for the delivery of both tourist accommodation and dwellings.
The Scottish Experience
Elsewhere in the UK, the Scottish Government already has legislation[7] which permits local authorities to establish short-term let ‘control areas’. Within these control areas, the use of a dwellinghouse (including flats) as a short term let will always be material and therefore require planning permission. Outside of a control area, it is for the Planning Authority to decide if the use of the premises as a short-term let is a material change and would require planning permission, or not. This is normally based on the character of the property, number of rooms, number of people staying, impact on public services i.e. on-street parking or the use of communal areas and shared access.
Scotland has also introduced a licensing scheme for all short term lets. However, to require a licence, applicants must demonstrate that they have planning permission, whether they are within, or outside of control areas (either by a certificate of lawful use, or a full change of use planning application). Reports of conflicting information and guidance on planning and licensing requirements issued by the Scottish Government has led to confusion and frustration among local authorities, and short-term let operators on how the legislation should be applied, particularly around short term lets that have been in operation for years. England should certainly consider the unintended consequences of future legislation and to seek to learn from the Scottish experience.
These changes alone are unlikely to make significant dents in meeting the housing need in England or Wales, but authorities will have the ability to actively consider local challenges and will have a greater number of tools at their disposal to make appropriate planning decisions that meet the needs of local communities and visitors. It’s important, however, that local authorities thoroughly examine these issues ‘in the round’ to ensure that their actions don’t impact the tourism economy which is the lifeblood of so many of our local communities.
Details on the forthcoming short-term holiday let changes in England are expected as part of the response by the Government to its consultation[8] that took place earlier this year. We will continue to monitor changes and keep you updated.
Image credit: Jaycee300s via Pexels
[1] Draft legislation will be published in due course
[2] HC 560 – Spring Budget 2024 (publishing.service.gov.uk) Paragraph 3.29
[3] Short-term lets rules to protect communities and keep homes available - GOV.UK (www.gov.uk)
[4] Terms to be defined in forthcoming legislation
[5] Restrictions in the number of short-term lets should be measured against other factors (i.e. employment, housing need and supply and other tourist accommodation stock. Ultimately, the short-term holiday let industry should not be responsible for the housing crisis.
[6] https://lichfields.uk/sun-sea-sand-and-article-4-directions
[7] The Town and Country Planning (Short-term Let Control Areas) (Scotland) Regulations 2021
[8] https://lichfields.uk/blog/2023/may/3/proposed-new-holiday-let-rules-a-help-or-hindrance-to-the-tourism-sector
