Is the short-term lets market to blame for the housing crisis?

We all hear about the rise in short-term lets, and how it might be to blame for the housing crisis – but is it really true?

With growing regulation around short-term rentals such as Airbnbs, many holiday-let owners are being forced out of the market.

This Property118 investigation looks at the data behind short-term rentals and why they might not be to blame for the situtation.

One estimate could be 257,000 short-term and holiday lettings in England

One estimate from Alma Economics suggests the total number of short-term and holiday lettings in England in 2022 could only be 257,000.

However, with nearly five million properties in the private rented sector, this means that only 6% are short-term and holiday lets.

The report commissioned by the Department for Culture, Media and Sport gathered information from both owners and organisations such as Airbnb.

Data provided by these organisations indicate that between 69-76% of total listings are for entire premises that are furnished.

Nearly two-thirds of all short-term and holiday lets in England are in the South-West, South-East or London.

However, whilst Alma Economic says the number could be an underestimate, as the same property could be listed on multiple platforms, data from one firm shows active short-term lets in London have never returned to pre-Covid levels.

Number of active rentals is down across the capital

In a study by Your AirHost, the number of active rentals, which includes properties that had at least one day reserved or available each month, is down across the capital by 27% compared with the beginning of 2020.

The data, which uses figures from AirDNA, identify only seven neighbourhoods where the number of active rentals has risen, with the average growth in these areas being just 23%.

While some of the neighbourhoods with the highest decline are in central London, supply issues are affecting other places in London, too.

The 10 neighbourhoods with the highest decline compared to pre-Covid levels are:

A shrinking holiday let market does not translate to more properties available on the market

Airhost says: “The decline in available listings is therefore likely not a representation of demand but of shrinking availability in both long-term and short-term rental properties.”

Owner of Your AirHost, Stefan Hoffelner, says that studies like this show that short-term rentals are not the reason for the housing crisis.

He said the political climate was harsh and that short-term rental owners had become “the new villain of the housing crisis”.

“Recent discussions might lead people to believe that the short-term rental market is growing out of control” he added.

Mr Hoffelner told Property118: “While there may be some communities that have a limited amount of housing where availability is being exacerbated by short-term rentals, the perception is more significant than the actual problem.

“The availability of London properties on short-term rental sites like Airbnb has been fluctuating since the beginning of the pandemic but, in almost all cases, availability has never reached pre-Covid levels.”

He said that a shrinking holiday-let market does not translate to more properties available on the market and added: “Often, the argument against homes being used for holiday lets is combined with the issue of second homes which can result in a reduction of housing stock for renters and first-time buyers.

“However, these are two issues which need to be addressed separately to help solve the problem of housing availability.

“As evidenced by the market in London, it’s also clear that a shrinking crop of holiday lets does not necessarily translate to more properties available on the market.”

More landlords moving out of the holiday letting sector

AirBnb owners are leaving the market for long-term lettings following changes to the regulations in Scotland, according to property firm DJ Alexander Ltd.

Since October last year, licensing is mandatory for all short-term let accommodation across Scotland. New hosts must apply to their local authority for a licence before accepting bookings or receiving guests.

Existing hosts must apply for a licence before 1 October 2023.

Also, since last year, landlords in Scotland are required to apply for planning permission to operate a holiday let.

DJ Alexander said that it had been approached by holiday lettings landlords wanting to shift to long-term residential letting because of costs and uncertainty over the introduction of more stringent regulations.

One Glasgow landlord, who wished to remain anonymous, told the firm: “My feeling is that I am being forced out of the market by these new regulations. We are being asked to pay thousands of pounds to submit an application for planning permission when there is no guarantee that this will be approved.”

David Alexander, chief executive of DJ Alexander, said: “We are seeing many landlords moving out of the holiday letting sector simply because of the uncertainty of the new regulations and the costs of implementing the rules.”

Your AirHost’s Mr Hoffelner said if Scotland’s regulations come into force in England this could lead to a drop in the number of available holiday lets.

1.5% of all landlords are also holiday let owners

A Freedom of Information request from Hamptons reveals that 63,000 individuals (rather than a company) received income from 65,000 furnished holiday let properties in the UK.

When compared to nearly five million properties in the PRS, is small in comparison. The research also reveals that whilst some longer-term landlords have moved across to the short-let market, it is only a very small number.

Just 1.5% of all landlords are also holiday let owners, up from about 1.3%.

Research by Capital Economics in 2020 shows that the majority of landlords are unlikely to consider switching from long-term to short-term lets.

The firm’s research reveals 60% of landlords are very unlikely to switch to short-term lets. A further 23% said that they were ‘fairly unlikely’ to do so.

The reason that was most commonly cited for not wanting to offer short-term lets was the extra work involved.

The report said: “When offering short-term lets, the landlord has to take responsibility for tasks that would usually be the tenants’ responsibility such as paying bills, furnishing the property and cleaning the property.”

The report said 50% of landlords were concerned about the uncertainty in income from short-term lets.

It states: “One of the potential problems for landlords in offering short-term lets is that there are usually longer periods where the property is vacant, and the income stream is less predictable.

“Given a large market for short-term lets is tourists, the demand for properties tends to be seasonal.”

Short-term lets market is not the main reason for the UK’s housing crisis

Whilst there may not be a definitive figure for the number of short-term lets, a growing number of landlords are leaving the short-term lets market due to more regulation – and this will probably grow.

As Mr Hoffelener said, the short-term lets market is not the main reason for the UK’s housing crisis and a shrinking holiday let market does not necessarily mean more properties becoming available to rent.

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