Holiday lets

Specialist finance market reacts to government's holiday lets review




A new government review probing the knock-on effect of a surge in holiday lets in England is hoping to improve the staycation rental sector and protect those living in areas where tourists flock.

Possible solutions in the open call for evidence include physically checking properties to ascertain laws in areas like health, safety, noise, and anti-social behaviour, are being followed. 

A registration ‘kitemark’ scheme that could involve compliance spot checks, such as for gas safety, and hosts registering with a self-certification system before they can operate, are also being considered. 

Enhanced information or a single source of guidance setting out the legal requirements for providers are also on the list of potentials.

The floated ideas follow government concerns regarding the impact on housing supply and prices in tourist-favoured areas and a recorded rise in anti-social behaviour, including noise, waste, and drunken conduct in local communities. 

Safeguarding guests from landlords who neglect health and safety regulations is another worry. 

The three-month review will also consider putting the provisions into action in London under the Deregulation Act 2015 to help cut anti-social behaviour, while allowing Londoners to rent out their homes.

Similar stipulations are already in place overseas in Portugal and Greece; in the UK, Northern Ireland has made it mandatory to provide a valid certificate by the national tourist board for those offering accommodation to holidaymakers. 

Tourism Minister Nigel Huddleston said the aim was to harness the benefits of the noticeable growth in holiday accommodation and the boom in short-term holiday lets England has witnessed over the past few years.  

Protecting community interests while ensuring the country offers good tourist accommodation are government priorities, too. 

Housing minister Stuart Andrew also commented on the open call for evidence: “This review will give us a better understanding of how short-term lets are affecting housing supply locally to make sure the tourism sector works for both residents and visitors alike.”

Some businesses involved in tourism, like the Bed & Breakfast Association and the Short Term Accommodation Association, have responded positively to the news. 

Meanwhile, Ben Beadle, chief executive at the National Residential Landlords Association, shared his perspective on the company’s website.

He claimed the upsurge in holiday lets was directly related to the government’s “attack” on long-term rented housing.

“Tax policies actively discourage long-term investment in the private rented sector by landlords,” Ben said. 

“It is little wonder many landlords have jumped ship to the holiday lets market.”

Consequently, he believes finding a long-term rent in holiday hot spots has become too difficult and, with demand for this kind of housing at an all-time high, all it is doing is pushing up rents when tenants can least afford it.

“The government needs to end its anti-landlord attitude and develop pro-growth tax plans to help renters access the housing they need,” Ben urged.  

Reactions from the specialist finance market 

James Bloom, director at Alternative Bridging Corporation, said the pandemic, escalating travelling costs, and more eco-conscious trends have resulted in holiday lets skyrocketing over the past couple of years. And for those investors who do it properly, a holiday let is a great way to achieve stronger returns than a traditional BTL. 

“This growth has drawn the attention of government amid fears that investors are driving up prices and pushing out residents of popular holiday locations,” James said. 

“This is clearly an important consideration, but it’s important that any review takes a balanced approach. The availability of high-quality holiday accommodation not only benefits holidaymakers, but it also helps to attract much needed investment to often deprived seaside towns or areas with seasonal economies, and this can provide some benefit to local residents."

Steve Smith, sales director at Roma Finance, said his company welcomed the review. He also confirmed a much larger number of landlords and investors had been buying properties to rent out as short-term lets over the past two years, including in city centres.

“There are both benefits and drawbacks to local communities. Tourism brings in money and creates jobs, especially in the hospitality sector. 

“But of course, there are areas where locals feel both priced out of the market and surrounded by holidaymakers instead of residents, which can bring its own set of issues, including anti-social behaviour.”

Steve added the lender was eager to read the review’s conclusion, to see how to give a helping hand to all of those invested in the areas potentially affected.

“What is clear is that boosting housing supply in popular tourist areas — especially affordable housing — is desperately needed to enable local people to buy a home where they live.”

Paresh Raja, CEO at Market Financial Solutions, believes international travel turmoil and a deepening cost of living crisis means the staycation boom that started during the pandemic will probably live on. 

“As such, the increased interest in holiday lets is also likely to continue. For some property investors, [they] present a compelling case when compared to the traditional BTL market, not least because of the rates that can be charged to holidaymakers for their short-term stays.

“It is right that the government investigates what the growing holiday let market might mean for tourist hotspots, consumers, and the property sector, more generally. Heavy-handed regulation or knee-jerk reactions would be unwise, however; local high streets, holidaymakers and property investors can all benefit from a vibrant holiday let market.”

Paresh said the government should support the staycation boom, rather than quell it, to allow the domestic tourism industry to prosper. He hopes the right balance can be found in any regulatory action they decide. 

Additionally, Almas Uddin, founding director of Revolution Brokers, claimed there wasn’t much evidence that second-home purchases unevenly increased local house prices, so government and local authorities should tread warily in intervening in the property market. “Meddling in free markets often has significant unintended consequences.”

“Furthermore, we have noted that a range of UK tourist/holiday locations have actually been underperforming in terms of house price growth vs the UK average, thus implying that second homes may have less of an impact on the local market than initially perceived,” said Almas. 

Ross Turrell, commercial director at CHL Mortgages, feels the review is the logical thing to do, as short-term holiday lets are a multi-faceted area that can be enhanced with more transparency and understanding. 

“In many areas, the rise in the number of holiday lets has helped to bolster tourism income but, on the flip side, there are also claims from locals that they are being priced out of the market and facing a shortage of longer-term homes,” stated Ross. “This is a delicate balance and it’s vital that local authorities consider both sides of the argument in order to secure the right level of benefits for their local community.” 

Commenting on the quality and condition of holiday lets being on the agenda, Ross is of the opinion that self-policing is possible thanks to the age of Google reviews. “However, anything to raise these standards would certainly be welcomed from a lender perspective,” he added. 

“Another area which will be addressed is the issue surrounding second homeowners claiming to be letting their property as a holiday home but who, in reality, only use this for their own purpose. A move that benefits only one party in an area where the importance of maintaining the local status quo is crucial to the longevity of this recent phenomenon,” Ross highlighted.

Meanwhile, Sundeep Patel, director of sales at Together, thinks the commercial property market is eager to see the review. 

With the large rise in holidaymakers staying in accommodation marketed by the likes of Airbnb, he noted that the review was a wise move.

“It’s vitally important to stimulate the tourism, hospitality, and wider UK economy, particularly considering the potential for a recession this year. The outcome of this review could pave the way for a more professional holiday letting market in the future. However, it’s equally important to support the entrepreneurial spirit of hosts and owners and to make sure this isn’t stifled by too much red tape.

“If anything, we expect to see popularity increase over the next few years, so feel encouraged that there are responsible steps being taken to maintain cost equality and business levels for all those involved in this exciting property space,” Sundeep added.

John Shevlane, director at Pilot Fish, said there had been significant escalation in requests for holiday lets over the past couple of years, as staycations became more popular. He added landlords were drawn to serviced accommodation, especially with the recent rate hikes, which have lowered the rental yields on standard BTLs. 

“Investors looking to achieve higher yields are leaning towards holiday lets as an alternative option,” John stated. “What remains to be seen is if the current level of demand for UK holidays remains stable as international travel opens. This is certainly a factor we will be watching closely over the coming months.”

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