How to fix the broken housing market

Should we tighten the regulations for holiday and short-term lets?

March 8, 2024 6 Minute Read

By Angharad Cole Jen Siebrits


There has been a rapid increase in the number of properties rented out on a short-term basis. This has been facilitated by the growth of online ‘peer-to-peer’ accommodation platforms such as Airbnb, and Expedia. Many of these properties were previously rented in the private rental sector, but are now let out for weekends and holiday periods only. This switch in use has added to the supply pressures on the rental market.

It is difficult to quantify the scale of the short-term or holiday let market. There is no real consensus on what is classed as ‘short-term’, and a current lack of obligation for homeowners to declare information on their lettings. It was estimated that around 250,000 properties were available for short-term let in England in 2022, of which 70% of these lettings were for “entire” properties. This suggests that 175,000 flats and houses which could be used as permanent homes are being used as short-term holiday lets. If these are only being used for weekends and peak holiday periods, that would be causing a huge underutilisation of the housing stock.

The recent growth has been more acute in certain parts of the UK. There were 77,000 properties listed in London on Airbnb in 2019, a fourfold increase from 2015. By the end of 2023 this had risen a further 20% to 91,000. If this latest growth rate continues, there could be a further 28,700 properties in London switched from the private rental sector to the short term holiday lets by 2030. Other major cities like Edinburgh, Manchester and Bristol are seeing similar trends. Coastal areas are also acutely affected. The number of listings for entire properties on Airbnb in coastal areas of England and Wales increased by over 50% between 2019 and 2022. This meant that 1 in every 67 properties in coastal areas was listed on Airbnb in May 2022.

Rising demand for peer-to-peer accommodation over traditional hotels is contributing to this growth. However, greater returns and lower fees from short-term lettings are also persuading landlords to move away from traditional private renting. Our recent report, “Why are landlords leaving the rental market?”, highlighted the increasing cost pressures that landlords are being faced with, and switching from the traditional rental model to letting their property on Airbnb or may be a way to offset these costs.

At an estimated 175,000 properties, the number of short-lets in the UK is equivalent to an area the size of Dorset and is taking housing stock out of the mainstream rental market. And despite growing, the build to rent sector has as yet been unable to replace this stock, with around 100,373 BtR completions since 2013. This is clearly adding to the supply issue and competition in the rental market is increasing – agents are receiving an average of 11 enquiries per rental property compared to just 4 during the same period in 2019.

The Mayor of London has called for a licencing scheme to be introduced, stating that the number of homes being lost to short-term lets is exacerbating London’s housing crisis by pushing up rents.

Legislation has been introduced in some parts of the UK to curb this issue, including in London. Since 2015, properties in London can only be let out on a short-term basis for a maximum of 90 days a year without changing its planning use. However, it has proved difficult to enforce. And moreover, under this provision properties can be let for 85% of weekends and still comply with regulations, which is not likely to be restrictive enough for an owner to change its usage patterns. Other cities have also introduced controls. For example, in Blackpool there are restrictions on change of use and in Scotland new hosts need to obtain a licence.

Still, for clarity, a uniform approach to legislation across Britain maybe preferable rather than the current bespoke approach.

Housing Secretary Michael Gove has recently announced new legislation that will require anyone in the UK who is letting out their property for holiday or short-term lets to seek permission from the local council under a new “use” class. A mandatory national register will also be set up, providing councils with information on short-term lets in their local authorities. We think this will create more transparency across the market and help assess the long-term impact the short-let market is having on the private rental sector. 

Holiday and short-term lets are a key part of the visitor industry in the UK and we would caution against introducing harsh measures against them as this would have detrimental effect on UK tourism. However, introducing legislation that allows a differentiation between short and longer term lets would be beneficial. Not least as it would highlight the transfer of stock from one sector to another and allow decision makers to better understand how short-term lets are impacting housing supply.

In the recent Spring budget, the Government recognised this as an issue and announced amending the tax breaks which make it more profitable for second homeowners to let out their properties to holiday makers rather than to long-term tenants to rent. These include being able to offset mortgage interest payments against profits and using income for tax-advantaged pension contributions. However, we would like to see further actions considered to mitigate any further negative impact to an already turbulent housing market.


How to fix the broken housing market

This series endeavours to share a range of interventions and solutions to improve the functioning of the British housing market.

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