There's no denying that the visitor accommodation sector has been through some significant changes over the past 15 years and forms a key component to the UK’s leisure and business visitor economy. The growth of digital platforms facilitating peer-to-peer sharing, including the likes of Airbnb, Expedia and Booking.com (to name a few), have changed the way the guest accommodation sector operates and a significant shift towards short-term letting of residential properties has been created. The move towards short-term lets has provided an increased choice and variety for tourists and those attending sporting and cultural events.
Between 2016 and 2019, the number of active Airbnb listings in the UK tripled from 76,000 to more than 225,000[1]. In England, there were approximately 257,000 short-term and holiday letting listings in 2022[2]. These figures (which are likely to be underestimates) demonstrate the scale of this market. Imbalances have also been reported with the numbers of “entire places” for rent in coastal locations having increased by 56% between 2019 and 2022 compared with 15% in non-coastal areas in England and Wales[3]. Similar pressures are also seen in national parks and some cities.
It has been argued that the increase in the number of short-term lets has led to increasing house prices, knock-on affordability issues for local communities and a more limited supply of longer-term domestic rental properties which have been converted to more profitable short-term lets in visitor destinations. MPs warn of consequences to the viability of local shops, schools and services, particularly during winter periods while others highlight that short-term and holiday lets can create noise and anti-social problems for local residents[4].
Unlike other types of guest accommodation which are required to provide assured accommodation through existing regulation and quality schemes, there is currently said to be insufficient or no meaningful regulation and monitoring of short-term let accommodation in England. This creates an uneven “playing field” amongst providers of short stay lets and other forms of visitor accommodation. That said, a variety of visitor accommodation is important to attract visitors and support local economies.
Within England, only London requires residential premises for short-term accommodation for more than 90 nights per year to obtain planning permission. Outside London, there is no specific limit on the number of days a property can be let out on a short-term basis. It is currently up to the LPA to decide if the letting of a property is a material change of use, for which planning permission must be sought. Many local authorities do not have an accurate understanding of how many short-term lets are operating in their areas.
What are other places doing to manage the rise in short-term lets?
The pressures on local communities are not unique to England. According to The Airbnb Statistics (2023) there are currently over 4 million Airbnb hosts worldwide and over 6 million active listings in over 100,000 cities worldwide.
As a result, many local and national governments around the world have intervened to regulate this market over recent years. Variations of light-touch digital registration schemes through to strict limits on the number of nights per year a property can be rented out have been rolled out globally.
For example, municipalities in the Netherlands can opt into a national registration scheme for short-term lets which requires a one-off registration. Additional permits are required in Amsterdam in addition to a registration number which allows you to rent out a home or houseboat for a maximum of 30 nights per year to a maximum of 4 people at a time. Permits are obtained annually and failure to comply attracts a fine of up to 21,750 euros.
Anyone wishing to provide short-term let accommodation in Portugal must register electronically before doing so. Registration is free and registrants must provide a range of details including the capacity of the premises and any lease or rental agreement. Local councils in Portugal have the powers to implement ‘containment areas’ within their locality to restrict the number of short-term rental properties. In some parts of Lisbon, no new registrations are being processed because more than 20% of the properties are short-term lets.
Some parts of the UK have already made efforts to get a handle on the increasing numbers of short-term lets. The Scottish Government has given local authorities the ability to introduce ‘short-term let control areas’ and has introduced a mandatory licensing scheme for all short-term let accommodation across Scotland. The Welsh Government has also sought to balance and manage the numbers of second homes and short-term lets through the creation of two new Use Classes and the ability for local planning authorities to restrict the change of use class through area defined restrictions (Article 4 Directions). It has also recently consulted on the implementation of a statutory licensing scheme for holiday lets.
Now, it’s England’s turn…
Consultation, consultation, consultation
The Department of Levelling Up, Housing and Communities (DLUHC) published a consultation on the introduction of a new Use Class for short-term lets (proposed Use Class C5) and a new permitted development right that would allow the change of use from a dwellinghouse (Use Class C3) to a short-term let in England. Where a local authority removes permitted development rights (through an Article 4 Direction), planning permission would be required where there is a material change of use to a short-term let. An alternative is also proposed in the consultation whereby short-term lets are not put into a use class (sui generis).
Whilst recognising some flexibility for limited short-term letting of domestic dwellings can be helpful, the DLUHC is proposing a threshold to the number of nights (per year) a dwellinghouse is let before it is considered a material change of use to Use Class C5. The consultation asks whether this should be 30, 60 or 90 days in a calendar year. Second homes that are additionally let out for part of the year will fall into the new Use Class C5.
This differs to the approach taken in Wales whereby planning legislation was amended to create new use classes differentiating between ‘dwellinghouses, used as sole or main residences’ (Class C3), ‘dwellinghouses, used otherwise than as sole or main residences’ (Class C5) and ‘short-term lets’ (Class C6).
Through the Levelling up and Regeneration Bill, The Department for Culture, Media, and Sport (DCMS) also launched a consultation on a registration scheme for short-term lets in England last week which is running concurrently with the DLUHC consultation. A register of solely short-term lets would provide data to enable local authorities to better understand which premises are being let out in their area. In turn, this would help manage the impact of high numbers of short-term lets upon the housing market. The DCMS have presented three options of how a registration scheme might look:
An opt-in scheme for local authorities, within the framework set nationally.
An opt-in scheme for local authorities within the framework set nationally, and a review point to determine whether to expand the scheme to mandatory.
A mandatory national scheme administered by one of: the English Tourist Board (Visit England), local authorities, or another competent authority which would also require operators to meet health, safety and quality assurances standards and regulations.
The DCMS suggests that the registration scheme would provide local authorities with information about which premises are being let out in their area, to help manage the housing market impact but also act as a platform to address inconsistencies in short-term let provision. The consultation seeks views on how this registration would work.
These planning changes would be introduced through legislation later this year if passed through the consultation stage.
Both the DCMS and DLUHC have stated that they are working closely together to ensure that different measures being considered across government that apply to the short term lets sector are proportionate, complementary and easy to understand. At this stage, it is unclear if there is a risk of regulatory duplication.
Initial Industry Responses
Although the consultations are still in their early stages, initial responses from the tourism sector are mixed with an emphasis towards highlighting the significant contribution short-term lets make towards the economy.
Andy Fenner, Chief Executive of the Short-Term Accommodation Association[5] said “We support a registration scheme but introducing a planning permission requirement completely ignores the contribution short-term rentals make to the economy. It’s important this issue doesn’t become a political football when the short-term rental sector is a key reason why the UK is so attractive to international and domestic tourists. Its role in providing local employment is routinely overlooked and measures to solve housing shortages should instead be focused on building new homes in sufficient numbers”.
Airbnb[6] has long called for a national register for short-term lets and welcomes the Government taking this forward with Amanda Cupples, General Manager for Northern Europe at Airbnb, saying “Hosting provides vital income to many families across Britain as the cost of living continues to rise. Clear and simple rules are good news for everyone and will help more families share their homes to boost their income, while making communities stronger.”
Thoughts from a tourism perspective…
Costs and Higher standards: The consultation seeks views on who should administer the registration scheme, suggesting it could be local authorities, Visit England or an alternative existing or new body set up to take responsibility. If planning permission is needed, increased workloads for local authorities will inevitably need ringfence resource to facilitate planning applications and to ensure decision making doesn’t cause time delays or greater pressures on planning authority resources.
From an industry perspective, could an increase in fees, associated financial penalties (as suggested in the DCMS consultation) and enhanced management costs (through gas, fire and electrical safety standards) cause some providers to drop out, creating a reduction in bedspace and reduced financial benefits to local economies?
Availability: Tourism hotspots would be targeted. Limitations to the number of days a property can operate as a short-term let without the need for seeking planning approval or the introduction of minimum standards for operators may reduce the amount of provision available. Reducing the numbers of short-term lets may help the housing sector but could reduce the numbers of visitors to an area if there are insufficient total bedspaces available for overnight stays in areas reliant on visitors. This might serve to reduce the economic benefits associated with the tourism sector.
Plan-making: Local and neighbourhood plans in areas of pressure are likely to introduce policies specifically relating to the new C5 use class. These could be restrictive for operators which means that property owners should be encouraged to engage in the plan-making process from an early stage. From experience, this engagement tends to be limited. It will therefore be incumbent on authorities to ensure that in planning for their areas that sound evidence is collated to inform any new policies so that the total bedspace provision for guests (from both short term lets and serviced accommodation) meets the required need.
The Government and local authorities will need to strike a balance between protecting and supporting the local visitor economy whilst protecting the availability and affordability of existing housing stock and the vitality of local communities.
For local communities, the numbers of short term lets are skewing the availability of homes. The Government appears to be targeting ‘smaller scale’ issues (short term lets) rather than dealing with the wider issue of getting homes built (and many are needed) in the right place. Whilst this will take time and does not mean short-term holiday lets should not be regulated and registered, it is part of seeing the bigger picture about the supply and availability of homes. The DLUHC and DCMS consultations end on 7 June 2023 and can be found at:
Consultation on a registration scheme for short-term lets in England - GOV.UK (www.gov.uk)
Introduction of a use class for short term lets and associated permitted development rights - GOV.UK (www.gov.uk)
[1] Kommenda and Brooks (2020) “Revealed: the areas in the UK with one Airbnb for every four homes”
[2] DCMS (2023) Consultation on a registration scheme for short-term lets in England
[3] Johnson (2022) “Alarm over sharp increase in Airbnb listings in coastal areas of England and Wales”
[4] DLUHC (2023) Consultation on Introduction on a use class for short term lets and associated permitted development rights
[5] Roger Baird (April 2023) “Govt. consults on stricter holiday let planning rules”
[6] Airbnb (October 2022) “Airbnb backs government proposal for short-term let register”
