Do we need to worry about the growth of short-term letting?
Summary
Over the past few years, there have been significant changes in the private rented sector and now provides homes for millions of households. The UK Government has implemented a range of changes from the reform of how landlords are taxed to the introduction of minimum energy efficiency standards.
Over the same period, there has been a dramatic increase in the number of short-term lets on online platforms such as Airbnb right across the UK and globally. This paper reports on research which looks into this increase whether the result is to remove properties from the long-term market?
Our research
We have been investigating the growth of these platforms for over two years, and we have published a number of reports that explore these issues.
Our first report identified that there were in February 2016 there were just over 33,715 listings in London, of which 52% were entire property/apartment listings. We further found that 65% were available for more than 90 nights per year and that 64% of the entire property/apartment listings were available for more than 90 nights per year.
While this deals with availability, not actual time booked, if these properties were reserved for the nights they were available then this would be unlawful and a breach of planning regulations. A further significant finding of this report was that 39% of the entire homes/apartment listings were multi-listings (where the hosts have more than one listing) and 78% of these were available for more than 90 nights. This indicated that business and professionals were entering this market swiftly after the liberalising of short-term lettings in London following the Deregulation Act.
Our second report published a few months later in 2016, examined the growth of short-term lettings in London over a 6-month period. We found that there had been a 27% growth in the number of listings between February 2016 and June 2016. This is a significant increase, and 61% of the entire home/apartment listings were found to be available for more than 90 nights per year.
Based on the data obtained from InsideAirbnb.com and their formula to estimate the number of nights booked, we determined that the highly available entire home/apartment listings were let on average for 98 nights per year. Indicating that there was a significant number of listings that were likely to be not complying with the regulations and could be removing the supply of homes that are needed right across the Capital.
Scale of growth
Our first report (published under the RLA banner) into the growth of short-term lettings explored how the number of Airbnb listings had grown in just over a 12 month period. Our findings of this research were incredibly striking, we found that the number of listings on Airbnb had increased by over 60% to over 53,000 listings.
We further found that there was a 75% growth in the number of multi-listings on Airbnb, indicating that there had been a significant increase in the number of professional hosts using the platform to rent out their properties. As part of this research, we surveyed 1,463 landlords and asked whether they had moved over to short-term letting. Of those sampled, 7% were moving properties from long-term lets to short-term/holiday lets, with over 1-in-3 landlords reporting this was due to the changes in Mortgage Interest Relief.
In some of our more recent analysis, we identified that there had been a 259% increase in the number of cumulative Airbnb listings in Cardiff in comparison to the previous year, and from this we were able to estimate that almost one-in-five homes to rent in Cardiff could be available to rent through holiday websites such as Airbnb.
All of the data and analysis over the past two years is showing clear findings; there has been a massive growth in short-term lettings and landlords are moving properties from long-term lets to short-term lets due to the Government tax changes. The later finding shows that the private rented sector is becoming much less appealing to private landlords and who are looking for ways to ensure their investment stays profitable.
Policy implications
This has a substantial policy implication, while the UK Government currently has a focus on increasing home-ownership, this does not serve the current households that rely on the sector for a home. Disincentivising residential stock to be used for the long-term and promoting short-term holiday lets does not increase the supply of homes for families and professionals across the country.
We need changes to our taxation policy so that landlords are incentivised to keep their property for long-term homes over short-term holiday lets. Restricting the supply of privately rented homes does not help current renters and is likely to put upward pressures on rents, placing more families and hard-working professionals under financial pressure.
This post was authored by Tom Simcock when he was a researcher with the RLA. These are his views. They are not necessarity those of the NRLA.
