Landlords driven to fast-track holiday let plans

A former Conservative MP has raised a concern that slow-moving changes for the holiday lets industry could cause a surge in short term rental properties, as landlords rush to get plans in place before being hit by a need to secure planning permission.

In an ever-evolving rental sector, landlords have been increasingly drawn towards holiday lets as an attractive investment opportunity. This has been driven by long-term private rentals facing ongoing changes in regulations and tax policies, leading to property owners looking to capitalize on the advantages offered by holiday rentals.

The concerns surrounding this shift have fueled pre-existing issues with housing, whereby popular tourist locations had already seen rising property prices push local people out. This is as a result of locations in the likes of Devon and Cornwall being popular for holiday homes and holiday lets.

By making holiday lets more attractive than long term rentals for many landlords, the problem has been exacerbated.

Addressing the issues around holiday properties

To try and stem the flow of holiday lets, the government has recently unveiled a set of updated regulations regarding planning permission for holiday lets, aiming to address concerns surrounding the growth of this sector.

Under the new rules, local authorities will have more power to enforce planning permission regulations on properties being used as holiday lets. This move comes in response to concerns that the rapid expansion of holiday rentals was causing a strain on local housing markets and communities.

Previously, many property owners could convert their residential properties into holiday lets without seeking planning permission. However, these new regulations will require owners to obtain official consent from their local council before engaging in this type of activity. The aim is to strike a balance between the economic benefits of tourism and the need to preserve residential housing stock for local residents.

The updated regulations also include provisions to address the issue of "second homes," which can contribute to rising property prices and a lack of available housing for permanent residents. Under the new rules, local authorities will have the ability to restrict the number of second homes in an area, or even ban them outright in certain circumstances.

Moreover, the government has acknowledged the impact of short-term lets on the availability of long-term rental properties, and has taken steps to address this concern. The regulations will allow local authorities to impose restrictions on the length of time a property can be rented out as a holiday let, ensuring that a fair balance is struck between the needs of the tourism industry and the local rental market.

These changes have been met with mixed reactions. While some argue that the regulations will help alleviate the strain on housing markets and protect local communities, others express concerns about potential negative effects on tourism and property owners' financial prospects.

Who will the legislation impact?

If put in place, the changes are only going to apply in England, according to The Department for Levelling Up, Housing and Communities.

A consultation has been launched to assess imposing a permitted development right when changing the use of a property from a C3 dwelling house to a new category, C5 short-term let. The definition of a short-term holiday let has not been confirmed as yet, but may extend beyond holiday rentals to properties used for overnight stays that aren’t the person’s main home.

An option being considered is a split between full time holiday lets that require planning permission and a capped number of nights per year where owners can let their home without the need for planning permission.

The legislation is also planned to be at the discretion of local councils.

When will the legislation change?

A register of holiday lets is due to be introduced under the Levelling Up and Regeneration Bill, which at the time of writing is at the reporting stage in the House of Lords.

Within the Levelling Up and Regeneration Bill, a short-term rental property is defined as:

“a dwelling, or part of a dwelling, which is provided by a person (“the host”) to another person (“the guest”)—
(i) for use by the guest as accommodation other than the guest’s only or principal residence,
(ii) in return for payment (whether or not by the guest), and
(iii) in the course of a trade or business carried on by the host, and
(b) any dwelling or premises, or part of a dwelling or premises, not falling within paragraph (a) which is specified for the purposes of this paragraph.”

Any change to planning permission will come later on, post-consultation and likely not to be until later in 2023.

What will the planning application process look like?

Planning permission is sought from the local planning authority (LPA), you can look up your LPA here. A standard fee is £452 and the process typically takes up to eight weeks, although if your case is more complex can take up to 13 weeks.

What are the implications for landlords?

With another pressure potentially on the horizon for the rental sector, former Conservative MP for Torbay, Mr Kevin Foster, could well be right in thinking landlords who have yet to complete plans to set up holiday lets will rush to do so to avoid costs and red tape.

However, albeit in another part of England, recent data suggests that the growth of the AirBnB market may be overstated. Your AirHost which manages AirBnB’s in London has said that the number of short term lets has dropped 27% in the city in the first quarter of 2023 versus the first quarter of 2020, before the Covid pandemic.

Holiday lets are not the only avenue for landlords to explore for stronger rental yields, which could mean that HMO mortgages and limited company buy to let grow in popularity. As the commercial sector sees signs of picking up, there may also be opportunities to segue into that niche either with mixed-use properties using a semi-commercial mortgage, or pure commercial mortgage properties.

Whether you are looking for a holiday let mortgage, or other investment solution, the advisors at Commercial Trust can help you, get in touch today.