There is growing concern in the Private Rental Sector that as Landlords face a continuing raft of legislative changes they will withdraw from the sector opting for short-term lets. ARLA Propertymark launched their Impact of Short-Term Lets report on 31st January 2020. Read it here. It highlights a substantial hike in the short-term letting sector already. For instance, listings on Airbnb UK rose in 2018 by 33% to 223,000 compared to 168,000 in 2017.
Along with greater flexibility in how a Landlord can use their property, legislative changes to capital gains tax relief, minimum EPC ratings (come 1st April the rating will need to be E or above, or face a possible £3,500 improvement bill), mandatory electrical testing, abolishing Section 21 possession notices – Landlords are re thinking what works best for them in 2020.
ARLA (our governing body) estimate 500,000 properties could make the switch. If the supply chain dwindles, particularly when demand for long-term rentals continues to increase, Tenants are unlikely to escape the impact. David Cox, ARLA Propertymark Chief Executive says “The growth in short-term lets is particularly concerning for the traditional private rented sector. As landlords are continuously faced with increased levels of legislation, it’s no surprise they are considering short-term lets as a chance to escape this. Unless the sector is made more attractive, landlords will continue to exit the market resulting in less available properties and increased rent costs”.
The Government will no doubt catch up and look to regulate the short term lettings sector in due course. Restrictions already exist in some cities and regions e.g. London, Edinburgh, Glasgow. Many traditional Landlords will still prefer the peace of mind that long term renting offers. Short term lets are typically fully furnished so there can be a high start-up cost. Arguably they also need a more hands on way of managing the weekly or nightly bookings and visitors unless you pay an agent to do this on your behalf (fees can be anything up to 25+ %). Other things to consider are; the uncertainty of voids; who will do the ‘turn overs’; higher running costs for things like cleaning, breakages, gardening, maintenance & break downs; greater wear and tear; leasehold and mortgage restrictions; the complexity of regaining possession if a visitor does not leave.
The team at AB recommend that Landlords always weigh up the pros and cons carefully and seek professional advice before they make the switch.
