Government regulation is pushing landlords into short-term lettings

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Holiday Lets:

Calls for more and more regulation of buy-to-lets: increasing taxation, longer-term tenancies and rent controls are beginning to grab the average landlords’ attention. Under these circumstances landlords will inevitably start look to alternative business models, or in the worst case scenario, to abandon the private rented sector altogether.

All this is putting extreme pressure on the private rented sector (PRS), it is compounded by some landlords opting to switch to the less regulated holiday let market. It will inevitably lead to an even greater shortage of suitable rental accommodation for the traditional rental market, and as everyone knows, shortages lead to increased prices – rents will climb for the average private tenant.

At a time when private landlords are urgently needed to provide accommodation for a generation struggling to buy, government policy, perhaps influenced by public opinion and political imperatives, it would seem, provides only discouragement to the buy-to-let investor.

It would seem a perverse way of managing a housing market economy when renting is the only option for many, and when social housing provision has fallen away, by making landlords jump through more and more regulatory hoops, to just stay still, or even fall back in terms of income.

John Blackwood, chief executive of the Scottish Association of Landlords (SAL), writing for the Edinburgh based CityLets’ Quarterly Report Q2 2018, says:

“Without a doubt what we need is more supply of private housing to meet the needs of our increasing population. With a lack of social housing and difficulty for many in getting on the home ownership ladder, people have no option other than to look to private landlords for their next home.

“This pressure on the sector, coupled with landlords opting to let to the holiday market may be contributing to increased rents and difficulties for many in finding a home.

“Whilst it is easy to listen to the lobby for rent controls we must understand that rising rents are a symptom of the problem and not the problem in itself.�

The Scottish government introduced new tenancy rules through its long awaited Private Housing (Tenancies) (Scotland) Act 2016, which commenced on 1 December 2017. It puts the country ahead of England and Wales if the direction of travel is now to increase tenant’s rights and security of tenure, at the expense of landlords’ control of their businesses.

It does appear that the UK as a whole is planning to travel in that direction, with the already introduced new regulations and proposed tenancy laws. So who can blame landlords for looking at alternative ways to make better returns with far less hassle?

Why would any investor put their hard earned cash into investments which effectively remove their ability to control their own business, impose an onerous administrative regime, and at the same time make it more difficult to make a reasonable return on their investment?

With increasing demand for short term holiday lets and Airbnb type lets from the public, particularly in the big cities and tourist locations, there is the potential to improve profitability for many landlords. But there is also the fear that this trend could lead to disruption to local communities, and for landlords, that this loophole could also be closed.

Mr Blackwood says:

“With the holiday let market practically unregulated and offering tax advantages to landlords, it is no surprise that many landlords are moving from the highly regulated long term housing market to offering only short term lets to tourists.

“The answer must be to get our priorities right, providing homes for people should be key. Both the Scottish and UK governments need to recognise that a well-functioning and well balanced private rented sector is what we want to achieve, rather than rushing to regulate – which seldom works.â€�

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