The growth in short-term lettings (England)

This Commons Library briefing paper examines the growth in short-term lettings through online peer-to-peer platforms. It outlines the positive impacts of the accommodation sharing economy, and growing concerns about the adverse effects of high levels of short-term lettings in some areas. The paper discusses calls from some sectors for greater regulation of short-term lettings in England, and provides a brief overview of the regulatory approaches in other countries.

There is evidence that the number of short-term lettings in England has increased significantly in recent years, in particular due to the development and growth of ‘sharing economy’ or ’peer-to-peer’ accommodation services. These online platforms essentially provide marketplaces which connect people who want to rent out their properties or spare rooms with people seeking short-term accommodation.

Proponents highlight the benefits associated with the accommodation sharing economy. However, the rapid growth in the number of properties being let through online platforms, and the concentration of short-term lettings in certain neighbourhoods, is a cause for concern in some areas.

Statistics on short-term lettings

There is no single, definitive source of data on short-term lettings in England. This is because of the diverse nature of the sector, which can range from commercial visitor accommodation, such as hotels and Bed and Breakfast accommodation, to individuals letting spare rooms through sharing economy platforms, and the fact that providers can offer accommodation across multiple platforms.

Airbnb is one of a number of online sharing economy platforms providing listings for short-term lettings. It is widely recognised as the market leader, consequently much of the available data on the growth of short-term lettings tends to focus on Airbnb. According to Airbnb, 223,200 active listing were posted between July 2017 and July 2018, 58% of which were for an entire property. London had more active listings (75,700) than other regions, but all regions saw substantial growth in the number of listings over the year to July 2018.

Analysis by external organisations, using data taken from Airbnb’s website, provides supporting evidence of the growth in short-term lettings. Data collected by Inside Airbnb, a campaign organisation, found around 88,100 listings in London in March 2020, almost five times higher than the number in April 2015.

Restrictions on short-term lettings

Temporary restrictions currently apply to short-term lettings in England. All businesses providing holiday accommodation (with some limited exceptions) were required to close from 26 March 2020 as part of the response to the coronavirus (Covid-19) emergency. The Government’s Covid-19 recovery strategy, published on 11 May 2020, indicates that restrictions on the ‘hospitality’ sector (e.g. food service providers, pubs and accommodation) will not be lifted before 4 July 2020.

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 up to the planning authority to make a judgement on the facts of the case as to whether a letting amounts to a material change of use, for which planning permission must be sought. However, different rules apply to London; home owners who wish to use residential premises for short-term accommodation for more than 90 nights in a calendar year must seek planning permission from their local authority. 

If it is determined that there has been an unlawful change of use – that is, a change of use where planning permission is required but has not been granted – then there are a number of planning enforcement options available to a local authority.

In addition to planning rules, in some cases tenancy, lease and mortgage agreements may prohibit or restrict short-term lettings.

Positive impacts of the accommodation sharing economy

The accommodation sharing economy provides positive benefits for consumers, providers and the economy as a whole. Consumers benefit from a choice of different types of accommodation in a range of locations, often at a cheaper rate than traditional accommodation options such as hotels. Property owners can benefit from earning additional income from their house, flat or spare room when they are not using them or in periods when demand for accommodation is high. A typical Airbnb host in the UK earned £3,100 in the year to July 2018.

The All-Party Parliamentary Group (APPG) for Tourism, Leisure and the Hospitality Industry has recognised that the sharing economy “provides enormous opportunities for tourism growth in the UK”. According to Airbnb, 8.4 million inbound guests travelled to the UK on the platform in the year to July 2018. Furthermore, 29% of guests said they would not have come to the UK, or stayed as long, if they had not used Airbnb. This suggests that the tourist industry overall is positively impacted by Airbnb. It is also argued that the provision of peer-to-peer accommodation outside of traditional tourist areas spreads the benefits of additional tourist spending more widely. According to Airbnb, the average guest in the UK spends £100 a day, with 43% of that figure spent in the neighbourhood of the host’s home.

Concerns around the growth in short-term lettings

The exponential growth in the sharing economy has transformed the short-term rental market. However, a range of organisations and interested parties, including local authorities, conventional tourist accommodation providers, residents in tourism hotspots and law makers, have raised concerns about the negative impacts of this rapid growth.

Key concerns include: commercial operators using residential properties as letting businesses in breach of planning rules; the challenges local authorities face in taking planning enforcement action; impacts on local housing markets; negative impacts on neighbours and local communities, for example from noise disturbance and anti-social behaviour; taxation compliance; compliance with health and safety regulations; and the implications for traditional short-term accommodation businesses such as hotels and Bed and Breakfast accommodation.

Calls for greater regulation of short-term lettings

In light of the detrimental impacts associated with high levels and concentrations of short-term lettings, there have been calls from a range of organisations and commentators for greater regulation of the sector.

The Mayor of London, Sadiq Khan, and London Councils (the local government association for Greater London) have called on the Government to introduce a mandatory local authority registration system for short-term lettings in London. This would require hosts to register their property before renting it and would enable councils to monitor the number of short-term lettings within their area and effectively enforce the 90-night limit.

In September 2019 Airbnb announced that it would collaborate with hosts, communities and politicians across the UK on proposals for a registration system for short-term rentals. It is currently consulting with stakeholders and plans to develop a white paper of recommendations to present to the Government in June 2020.

The All-Party Parliamentary Group (APPG) for Tourism, Leisure and the Hospitality Industry report (July 2018) on its inquiry into the accommodation sharing economy made a number of recommendations intended to encourage sustainable tourism, in particular: the implementation of a low-cost statutory registration scheme for all tourism accommodation providers; and powers for local authorities to set rules regarding the use of residential properties for tourism accommodation in their local areas.

In December 2017, Karen Buck introduced a Private Members’ Bill: Short and Holiday-let Accommodation (Notification of Local Authorities) Bill 2017-19 to require householders to notify local authorities of an intention to register accommodation for short-term or holiday lettings. The Bill aimed to facilitate effective enforcement action, by letting local authorities know where such lettings are taking place. The Bill failed to complete its passage through Parliament before the end of the session. Karen Buck has subsequently set up an All-Party Parliamentary Group (APPG) on the Short Lets Sector.

The Government has made it clear that it has no plans to ban the use of residential properties for short-term letting. It considers that further legislation would be overly bureaucratic, and could act as a barrier to households letting out their properties on a short-term basis. Instead the Government prefers a non-regulatory approach by encouraging the Short Term Accommodation Association to improve standards and promote best practice in the industry.

Regulation of short-term lettings in other countries

Northern Ireland is currently the only part of the UK that regulates short-term accommodation providers.

However, in January 2020 the Scottish Government announced that it will:

• introduce licencing for short-term lettings;
• prioritise work to give local authorities the power to designate ‘short-term lettings control areas’; and
• undertake a review of the tax treatment of short-term lettings.

Regulations giving local authorities these new powers are expected to be in place by spring 2021.

Outside the UK many countries and European Cities have introduced, or are in the process of introducing, measures to regulate short-term lettings. Regulatory approaches vary according to contextual factors, such as the housing market, tourism economy and local land use law, and include:

• limiting the number of nights per year that accommodation can be let, either setting a total limit or a limit after which different rules apply.
• requiring accommodation providers to register or obtain a permit or licence before letting their property.
• prohibiting the listing of more than one property per individual.
• requiring the host to live in the property during the rental period, effectively banning full-time whole property rentals.
• requiring platforms to share data about hosts, such as the number of properties, or level of income they are receiving.