The Short Term Accommodation Association has accused councils of cracking down on short-term rental stock rather than concentrating on bringing empty homes back into use.
Some 58% of local authority areas have more long-term vacant homes than holiday lets, analysis from the association shows, despite holiday lets commonly being blamed for dwindling long-term rental stock.
Andy Fenner, chief executive of the STAA, said “holiday lets are not to blame for the housing crisis, but rather the blame lies with councils allowing homes to sit idle. Holiday lets create much-needed jobs in communities up and down the country, empty homes produce nothing. Most councils are sitting on so many long-term empty homes that they eclipse the numbers of holiday lets in their area. This is where policymakers should be looking to solve the housing crisis, not scapegoating an industry responsible for jobs and investment in areas that often have nothing else. This is rampant hypocrisy when councils across the UK are being encouraged to strangle this industry with council tax surcharges, planning requirements and licensing schemes. Empty homes benefit no one, and can even have negative effects on neighbours and local communities when left unattended and in disrepair, while short-term lets are a vibrant part of our tourist industry, bringing in visitors from around the world."
In some areas councils are limiting the number of short-term lets, while holiday lets will be subject to a harsher tax regime from April next year.
There are some tourist hotspots where empty homes dwarf holiday lets.
In Arun Borough, which includes the seaside town of Bognor Regis, there are over 400 long-term empty homes, 6.7 times more than the 66 holiday lets in the area.
Welsh councils like Caerphilly and the valleys of Rhondda Cynon Taf have over five times more empty homes than holiday lets, while the Highlands in Scotland have 4.4 times as many.
The biggest difference in raw numbers is in Aberdeen, where there are 4,370 more empty homes than holiday lets — 4.6 times more. These are thousands of properties that bring no value to the local community in Scotland’s third largest city.
Fenner added “the way people are being demonised for letting out their homes to families who want to enjoy a holiday in the UK is outrageous, especially while empty homes are barely talked about as a problem. The housing crisis is a complex issue, and it cannot be solved overnight, but making use of our existing housing stock would be a great place to start. Tourism is something we should be proud of and encourage. This country has amazing cities, beautiful countryside and world class visitor attractions. Holiday lets allow people to explore all that this country has to offer. We should be helping them and protecting the thousands of jobs they support.”
Councillors launch attack on unruly behaviour in Airbnbs
The BBC is reporting that councillors in Manchester have launched a series of attacks on users of Airbnb and other short let platforms. The Labour-led council in the city has received a report saying about 3,600 properties or spare rooms were listed on Airbnb in the winter, with more expected to be listed as short term lets on rival websites; the peak was summer 2023 when 3,911 were listed - an increase on the pre-pandemic level of 3,429.
One councillor, Marcus Johns, is quoted as saying short term lets in his apartment block are causing "issues every weekend" with unruly behaviour including smashed lifts and kicked doors in. Another city councillor, Irene Robinson, says tenants in the city centre are letting out properties solely as Airbnbs, and 'often [the landlord] does not know', Even where there are clauses in the building [leases] where you are not allowed to sublet, they are just ignored. We need to be able to shut these down."
Fiona Sharkey, another member of the council, is quoted as saying "we will work proactively with landlords. In the past, we have issued closure notices. We have worked with Airbnb and Booking.com to provide good neighbour advice. But the lack of a registering regime does hamper us."
The council report calls for a register of short let hosts and urges the introduction of laws to require planning consent before being allowed to short let.
How holiday let landlords can prepare for new regime
The holiday let regime is being replaced on April 5 2025, as the UK government looks to put landlords who operate short-term rentals like Airbnbs on the same playing field as the long-term equivalent.
The new rules will mean that mortgage interest will no longer be fully deductible when calculating taxable profits from a rental property. In addition various capital gains tax reliefs will no longer be available, including business asset disposal relief, business assets rollover relief, and gifts holdover relief – while profits from holiday lets will no longer count as ‘earnings’ for pension contribution purposes.
The new rules will also mean that owners will no longer be able to claim tax relief on the original cost of domestic items purchased for use in the property. In order to prepare for the new regime, Handelsbanken Wealth & Asset Management urged holiday let landlords to make a number of changes.
One change recommeded by Handelsbanken could mitigate a new rule, that will mean holiday lets owned jointly by spouses or civil partners will be liable for tax on 50% of the rental profits. This could have significant consequences for anyone whose income is close to the threshold of a higher income tax bracket, increasing their personal income tax burden.
To avoid this automatic ‘50:50’ taxation, spouses/civil partners could alter the beneficial ownership of their property to unequal shares. To make this happen they would need to submit a formal application to HMRC to change the split of income from the property for tax purposes.
Another measure that can be taken is maximising tax relief by topping up pensions during this tax year. If short-term holiday lets provide the only source of earnings, landlords could maximise their personal pension contributions this tax year and therefore be eligible to bring forward extra tax relief from the previous three tax years.
Holiday let landlords could also gift their property to a family member before the current tax year, in order to claim capital gains tax ‘gifts holdover relief’.
However, the amount of gain that may be ‘held over’ may need to be time-apportioned if the property has not qualified as a short-term holiday let. There may also be stamp duty issues to consider. If landlords occupy the property personally then they must pay an open market rent to ensure the gift is effective for inheritance tax purposes.
Lastly, for those who want to exit the market, you could sell up this tax year to secure business asset disposal relief at the current 10% capital gains tax rate.
Mark Collins, head of tax at Handelsbanken Wealth & Asset Management, said “with holiday season around the corner and a significant shift in the tax regime on the horizon, it should come as little surprise that we’ve seen a significant uptick in advice requested by customers thinking about selling their current holiday let property, or halting the buying process altogether. With the planned changes all designed to bring tax rules for holiday lets into line with tax rules for other residential property lettings, it is crucial for current or potential owners to understand what this means for them.”
Holiday lets boom appears to be fizzling out
The UK’s short-term rental market appears to be running out of steam with a new report highlighting a rise in listings – but a worrying drop in occupancy rates and revenue. The research from lettings and estate agent Benham and Reeves looked at key market metrics across popular holiday destinations.
While the number of short-term rental listings has climbed in most areas, occupancy rates have dipped significantly. It says there are more than half a million active short-term listings currently in the UK.
Landlords and the short-term rental market
Marc von Grundherr, a director of Benham and Reeves, said “many traditional landlords have succumbed to the allure of the short-term rental market in recent years, as they’ve looked to boost the profit margins of their rental portfolio following a string of legislative changes to the PRS sector. This is a trend that has continued over the last year with the vast majority of areas we analysed seeing an increase in active listings. However, the data also suggests that the heat may be dying down with respect to consumer demand, with occupancy rates falling significantly and denting annual revenues in the process. As a result, it seems as though short-let providers have ramped up daily rates in order to compensate, but this is a tactic that is unlikely to resonate with consumers given the current economic landscape.”
Nationwide surge in short-let listings
The firm’s data reveals a nationwide surge in listings, with London leading the way with more than 52,494 active lets, a 22% increase year-on-year.
Manchester is close behind with a 29% rise, alongside notable growth in the Peak District, the Lake District and the Cotswolds. However, this surge in supply hasn’t translated into higher profits.
All 10 locations saw a fall in occupancy rates compared to last year, with Devon, Dorset and the Cotswolds experiencing the most significant drops. That meant that annual revenue growth has remained stagnant for most areas, with some even experiencing a decline.
Short-term let owners saw yearly revenues dip
Short-term let owners in Devon, Cornwall, London and Manchester saw yearly revenues dip, while other regions like Dorset and the Cotswolds saw minimal growth. To counter these losses, the owners have resorted to raising average daily rates.
Edinburgh, the Lake District, Somerset, the Peak District and Cornwall have seen the most substantial price hikes.
Sell off of Airbnbs leads to glut of properties on market
There’s been a big rise in the supply of homes for sale - 20% up on this time last year. This is likely to keep capital appreciation muted this year warns the organisation behind the figure, Zoopla.
The portal says the growth in supply, which is now at an eight-year high, has been driven by a rebound in the number of three and four-plus bed homes for sale as existing owners return to the market and feel more confident to move. The average estate agent office has had 31 properties for sale, compared to 26 properties this time last year.
While most homes for sale are new to the market, 31% of homes for sale were marketed in 2023. Rising mortgage rates saw demand weaken, but homeowners have now returned to the market to seek a home move.
This increase in the supply of homes for sale boosts choice for buyers and is expected to keep house price growth in check over the rest of 2024. Sales agreed are up 13% year on year, but across most regions the growth in new homes for sale is outpacing the growth in the number of sales being agreed.
Zoopla says one notable region that has seen well above average growth in the number of homes for sale is the South West.
There are a third more homes for sale compared to this time last year. Tax and planning changes in relation to holiday lets and the prospect of double council tax for second homes are likely to exacerbate the increase in homes for sale in this region, which has the highest levels of second home ownership.
The general election in early July is expected to have a modest impact on housing market activity. There are currently 392,000 homes in the sales pipeline working their way through to completion over 2024. An increase in fall-throughs is unlikely due to the election announcement as there is not a huge divide in policy between the two main parties.
Some buyers early in the home buying process may look to delay decisions, but the underlying motivations to move remain strong for others who are likely to continue their search for a home and secure a sale in 2024. The pace at which sales are being agreed is likely to slow in the coming weeks which means the total number of sales for 2024 could drop below 1.1m.
The north and south divide in annual house price growth continues with modest house price falls across Southern England. This split in house price inflation is most evident at a city level with the the strongest house price growth in Belfast (+3.6%), Burnley (+2.5%) and Bolton (2.4%), and the highest house price falls in Ipswich (-3%), Hastings (-2.7%) and Norwich (-2.4%).
The variation in house price growth is primarily driven by affordability pressures in the face of higher mortgage rates.
Across the south of England, price falls are focused on coastal cities and those where prices jumped higher over the pandemic during the ‘race for space’ where demand is now weaker. House prices are rising in cities with below-average house prices where the impact of higher mortgage rates is less pronounced.
Zoopla expects this north/south divide in house price growth to continue for the remainder of 2024 as incomes and house prices re-align across the country.
Commenting on the latest report, Richard Donnell - executive director at Zoopla - says “the growth in the supply of homes for sale is evidence of renewed confidence amongst homeowners, some of whom delayed moving decisions in 2023. The quarterly rate of house price inflation has picked up in recent months as more sales are agreed and prices firm. The announcement of the election will slow the pace at which new sales are agreed while greater choice for buyers will keep house prices in check over 2024. It's essential that those serious about moving in 2024 price their homes realistically if they want to achieve a sale.”