Laos was swapped for London, Panama for Plymouth and Malaga for Manchester. An unprecedented number of holiday goers around the UK sprung into the domestic holiday market during the COVID-19 pandemic. Short term lets listed on sites such as Airbnb and Booking.com provided holiday makers with the perfect staycation opportunity. However, as the Government looks to understand the Short Term Lets market in England, how should the balance be struck between the entrepreneurial hosts and the cities and places who host them?
The Government has recently published a call for evidence regarding the creation of a tourist accommodation registration scheme in England. The purpose of the consultation, which continues until 21 September 2022, is to compile a library of evidence concerning short term holiday lets in England. Representations have been requested across a number of fields that offer an insight into topics such as:
The current market size and shape to the perceived opportunities; and,
The perceived opportunities and challenges that prolific short term let operator-agents such as Airbnb and Booking.com create for the general housing market.
The consultation also seeks comment on the effect of potential policy interventions on the supply of short-term accommodation. In Scotland, planning policy was introduced in 2021 to help continue to forge effective relationships between short term let properties and the places that host them. Edinburgh is first Scottish council to consider introducing the short term let controls offered by Scottish Government and this was documented last year in our blog Scotland’s First Short-Term Let Control Area: Consultation on New Rules for STL’s in Edinburgh. A similar mechanism has also been introduced within ‘Rent Pressure Zones’ (RPZs) in Northern Ireland where short term lets are required to have planning permission.
The prevalence of Short Term Holiday Lets
Short Term Lets are not a new phenomenon. Traditional holiday cottage websites and booking portals have been a mainstay for holiday goers for years but new technologies now mean that anyone can book, and more importantly, anyone can turn their extra space into a hosting business in minutes.
In January 2022, A research briefing to the House of Commons provided an insight into the rapid growth of short term lets as a popular solution for visitor accommodation. The graph below demonstrating the meteoric rise in listings posted on Airbnb prior to the COVID-19 outbreak, with a 240% increase in the number of listings in the UK between 2016 and 2020. The report highlighted that outside of London, there is no limit to the number of days a property can be let out on a short-term basis. The report also noted that 58% of listings on Airbnb in the UK are for an entire home rather than a room or shared room within a home. Other short term let organisations such as Sykes Holiday Cottages experienced a 91% increase in enquires from individuals looking to list their home with the operator during the first quarter of 2021.
Why is regulation being proposed?
The strengthening of the market for domestic holidays, and the demand for short term holiday lets has had a direct impact on the wider housing market. Prospective investors have found themselves competing against – and often out-competing – local people to purchase property, the price of which has been forced up as a consequence of an increase in demand for popular holiday destinations. Ultimately, as more homes are bought up for the purpose of short-term lets, the net supply of housing for local people in an area has fallen. In areas where the demand for short term lets has been particularly acute, this has deepened the housing crisis.
Given the demand for holiday accommodation and the ability of investors and outside buyers to commonly outperform local people in a constrained, high price housing market, many areas have become flooded with short term holiday lets. This has shifted the character and socio-economic make up of towns and some city areas. In planning terms, a change in the way that a building is used or its operation can often equate to a material change in the character and use of the property. Whilst a ‘material changes of use’ would, in most cases, require planning permission, short term lets in England currently do not.
Regulation currently exists in England only in London. In the capital, the 2015 Deregulation Act states that hosts are not permitted to rent their property for more than 90 days without obtaining a licence through the local council (via submission of a planning application). Many think that it is time that policy stretches across the country, especially as some popular holiday destinations have an even larger proportion of Short Term Lets to standard tenure properties than London. For example, Woolacombe and Croyde each have the highest concentration of Airbnb properties per 100 in the country (23), higher than some of the most popular London boroughs (15/100).
The key with regulation is balance; tourism accommodation is essential for a developing and growing economy both in urban and rural areas. However, as soon as unregulated tourist accommodation begins to impact the ability for local people to meet their housing needs then intervention may be needed to help accommodate the interests of all parties.
Recognising the importance of short term holiday Lets
Airbnb and other short term let platforms have made it easier than ever for the general population to both rent out their property and find a place to stay beyond the walls of a hotel room or traditional holiday rental agencies. They offer important benefits to holiday makers and the economy of their destinations and it is important that the benefits of the short term let market are not lost in the undercurrent of the price and supply issues mentioned above. However, a balance must be struck between the needs of local people and visitors, recognising that the displacement of local communities – as a result of house price inflation caused by increased competition for accommodation as more people seek to purchase properties for holiday rentals – can have a heavy social and economic cost.
The key benefit in the rise of short term lets is the wider economic impact. In the UK, hosts listing property on Airbnb earnt more than £1.5 billion in 2021 with the wider short term let sector contributing even further to the economy. In addition, Airbnb predicts that worldwide it supports over 300,000 jobs, all of which are likely to be a part of the rebounding tourism industry within which short term lets play a vital role as one of the many contributors in propping up the sector.
Finally, the positive impact of short term lets on rural areas must not be overlooked. City breaks in the bright lights may be popular, but short term lets have offered a new lease of life to rural areas that lack high quality hotels and facilities. Now that there is an easy, convenient way to book accommodation ‘in the sticks’, many rural and coastal areas can reap the benefits of increased tourist trade. Drawing down economic investment from holiday makers remains a large part of economic and planning policy for the future as has been the intent of the Government’s Levelling Up and Regeneration Bill.
What could regulation look like?
The task of striking the right balance between market freedom and strict regulation and enforcement in relation to the sensitive topic of short term lets is not easy. However, it is clear that some form of regulation is necessary to make short term lets safer and the communities that they are part of better able to cope with this growing sector.
Recently introduced regulations in Scotland and Northern Ireland have introduced areas where planning permission is required to run a short term let, with Northern Ireland further requesting that every short term let must obtain a licence from the tourism board. These interventions are helping to ensure that the provision of accommodation meets a high quality standard whilst addressing the need for planning decisions to be made to protect both the character and property market of an area.
But are these changes too little too late? In a market that has become increasingly saturated after the COVID staycation boom, will we continue to see an increase in short-term letting accommodation? If not, any regulation could only influence a fraction of the emerging market.
Planning has always been about regulation and with human habits and processes everchanging, planning as a regulatory tool must be adaptive and dynamic. The relaxation of some planning requirements during COVID represent a prime example of this. However, the introduction of new policy on short term lets – which is not something to be afraid of – has possibly slipped through the cracks. It is now a case of planning playing catch up.
If you deliver holiday schemes of any scale, Lichfields is happy to work with you to progress both your project and shape the future of short-term holiday lets regulation in England.