Homeowners in England could soon need planning permission to convert their properties into holiday lets.
The Department for Levelling Up, Housing and Communities (DLUHC) is holding a consultation on the issue, with legislation to follow later this year.
Existing holiday lets would not be affected. As part of the consultation, the government is also looking into whether homeowners should be allowed to rent out their properties as short term lets for part of the year – potentially up to 90 days.
The new rules could end the holiday lets boom of the last few years. Last year, the BBC found that the number of UK holiday lets grew by 40% between 2019 and 2022.
The actual number of holiday lets in the UK is still tiny compared to buy-to-lets or owner-occupied properties. According to research by estate agency Hamptons, just 1.8% of all properties sold in 2020 were bought as second homes or holiday lets.
But the demand is extremely regional. Half of all second home purchases in the last five years were in just 13 local authority areas, most of them popular holiday destinations like Torbay and North Norfolk. Locals complain that they are being priced out as second home owners outbid them on homes for sale and landlords convert their long-term rentals to holiday lets. According to DLUHC, the new policy is designed to correct that.
What impact would planning permission requirements have?
Similar rules already exist in Scotland. Holiday let conversions need planning permission, short-term let owners have to get a licence and pay a yearly fee, and local authorities can create “control areas” with tougher restrictions. According to analysts, the rules could result in a £133 million hit to Scotland’s tourism industry. However, the planning permission requirement has only been in place for eight months, so assessing the impact isn’t easy.
Hammering holiday lets won’t necessarily end the shortage of longer-term rentals in tourist areas either. Existing holiday let owners could see their returns rise as competitors are kept out of the market, and are unlikely to convert back if that happens.
New rules set out in the Renters’ (Reform) Act could also stop holiday let landlords from offering longer-term lets during the off-season. The eviction ground that allows landlords to evict tenants when the property was used as a holiday let within the past 12 months (Section 8 Ground 3) will be removed.
Meanwhile, many landlords have converted their homes to holiday lets for the more generous tax treatment (unlike buy-to-let investors, holiday let owners can deduct their mortgage interest from their taxable income), and to escape the heavy and growing regulation in the private rented sector. Some may decide to switch their properties to short-term lets while they still can – and if they can’t, they may just sell instead.
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