How Holiday Lets are leaching rented homes off the market in London

So all are agreed there is a housing shortage.

Talk abounds about possible solutions but nobody seems to disagree on this basic fact, not government, not landlords not councils.

In London, the housing shortage is even more apparent than elsewhere, given that 12 million people live there.

This isn’t anti-North, just a statement of fact. London is the biggest area of housing demand in the UK and London is also the tourist hotspot of the UK and this is where things start to break down.

There is a massive demand in the capital for holiday accommodation.

The Rise of Holiday Lets in London

Years ago all the would-be tourist had on offer were hotels for the well heeled or hostels for the backpackers but this was before the online holiday accommodation boom ushered in by AirBnb.

Homeowners can advertise their properties for a few days at a time at a premium rate that when added up over a month knocks even London rental income into a cocked hat.

Why bother being a landlord when you can let out your property without any of the hassle of deposit regulations, eviction times, chippy councils or repairing obligations?

This is exactly what many property owners are now doing and in the doing of it, huge amounts of homes are being leached off the market for a more lucrative income stream of holiday lets.

So what caused this turnaround?

Do you remember back at the time of the 2012 Olympics? It was predicted that there would be a mass letting-out of properties for the month, in breach of planning regulations which would levy a huge fine on anyone renting out short lets without permission of the council.

Some councils claimed to have a team in readiness to jump on the unwary and cop a £20,000 penalty that would swell council coffers.

It never happened.

But in the past year something happened which fuelled this growing market. The changes ushered in by section 44 of the Deregulation Act 2015. This particular part came in back in February last year and which amended section 25 of the Greater London (General Powers) Act 1973 which deemed that as long as a letting did not exceed 90 days, planning permission for ‘Change of use’ is no longer needed.

Prior to this you had to get council permission for these short lets and before you talk about red tape and bureaucracy bear in mind that council concerns about them has always centred around the destruction of communities and the effects on neighbours of party properties and people occupying with no regard for local needs and the building and sustainment of communities with all that entails.

The latter of which increasingly make tabloid reading these days.

Westminster council enforcement officers asked for an amendment to the new legislation whereby landlords would have to at least notify the local authority of the lettings so some form of tab could be kept on them but their request was refused as being “Too bureaucratic’

Fancy figures

AirBnBs own figures reveal a hosting database of 24,100 properties in the capital. That’s 24,100 properties which could be let out as homes if their owners weren’t being attracted by the more lucrative holiday let market.

The £17 billion pound behemoth AirBnB certainly aren’t going to share that information with councils and local authorities don’t have the resources to keep on top of 24,100 properties renting out in a shadow land

So the Olympic threats of the London councils were effectively kicked into touch by the Deregulation Act and when this legislative change was paired up with the growing popularity of AirBnB it was like a marriage made in heaven for those of a speculative bent.

And it gets worse

Back in October 2013 the government made sub-letting of social housing a separate criminal offence. It already was a criminal offence under the Fraud Act but government decided it needed its own category.

This huge problem is estimated to cost the country £1.8 billion and also reckoned to deal with 98,000 projected sub-let social homes in the capital alone.

It is now a criminal offence to sub let a social housing property, punishable by a fine, imprisonment and an unlawful profit order for the income accrued over the rent due.

The problem with this legislation is further compounded in that it doesn’t apply to shared ownership properties, on social tenancies, which are specifically excluded from the Act.

So anybody who could whistle up the minimal income to get on the shared ownership ladder, where they are part owner part social housing tenant, could take on the property and rent out as they see fit, with no criminal sanctions at all.

Publicly subsidised landlords if you will.

Profit before people

So back to AirBnB again as many of the holiday lets are actually homes bought on shared ownership deals, therefore outside the 90 day ruling on planning permission for change of use and outside the Prevention of Social Housing Fraud Act.

An article in social housing magazine 24 Dash last year told us of shared ownership properties in parts of London with good rail links were being let out for a premium http://www.24dash.com/news/housing/2015-04-24-Housing-associations-failing-to-stop-subletting-shared-owners-exclusive regularly netting the tenant/owner £1,000 a month over the rent.

This will be a conservative estimate I would think. All you have to do is trawl around and look at the prices of the holiday accommodation and knock of the difference of the cost of the shared ownership deal and you can see maybe double that and probably more depending on where the property is located.

So there you have it. 24,100 homes in London lost to families in favour of tourists. This will be echoed in Manchester, Edinburgh, Cardiff etc and a proportion of these homes will be social homes but outside the Prevention of Social Housing Fraud Act 2013.

Yet another example of profit before people.