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Rent-a-room blamed for housing crisis

But is a tax break really forcing tourists and tenants to fight it out for the same space?

Kate Hughes
Money Editor
Friday 02 August 2019 17:41 BST
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Close-up of a smartphone with the Airbnb app login screen
Close-up of a smartphone with the Airbnb app login screen (Getty)

We’ve all heard the accusations that the boom in short-term holiday property rentals is causing chaos.

Blamed for everything from an increase in dodgy surveillance to the death of entire towns, the growing popularity of forums that help owners of couches to castles rent them out to the rest of us for a night or two has long attracted a backlash.

But some property lobbyists are now claiming that a combination of tax breaks and sites like these are contributing to the UK’s housing crisis.

Flat and house share site SpareRoom this week argued that the Rent a Room Scheme tax threshold increase to £7,500 a year, designed to encourage more people to let out their spare rooms to lodgers in a bid to make more efficient use of property and ease the pressure on long term accommodation, has done more to boost the short-term lets market instead.

Despite being a platform for short-term lettings itself, the business suggests that if just 3 per cent of the 19 million bedrooms it says stand empty in owner-occupied properties in England alone where let out on a residential basis, it would “unlock” housing equivalent to a city the size of Liverpool.

Instead, based largely on its own listings figures, SpareRoom claims a failure to restrict the scheme to residential lets has meant a boost in short term lets instead. There were 68,604 new lodger adverts placed with SpareRoom in 2017 – 8 per cent lower than the number in 2016. This decline, which came on the back of seven years’ consecutive growth, continued into 2018, the firm said this week.

Meanwhile, it points to short-term lets via sites such as Airbnb, which have seen a huge spike, rising 200 per cent in 10 UK cities between 2015 and 2017. In London particularly, there has been a fourfold increase in Airbnb listings since 2015.

Matt Hutchison, a director at SpareRoom, suggests this proves a link between a reduction in residential housing supply and greater problems for people looking for long-term homes.

“These figures clearly show that the benefits we hoped to see from the government’s Rent a Room Scheme have been undermined by a new surge in short-term rentals,” he says.

“Given the fact we’re not building new homes in anywhere near the numbers we should, we have to do more to better use existing stock. The UK has a housing crisis, not a hotel room crisis.”

But the claim has been dismissed by representatives of the short-term lettings industry who argue that these are “dangerous and spurious” conclusions based only on one business’s performance compared with another.

“Just because a short term let isn’t for six months or a year doesn’t mean it isn’t real housing for real people,” notes Merilee Karr, CEO of UnderTheDoormat and chair of the Short-Term Accommodation Association.

“It’s disappointing that SpareRoom’s declining growth as a platform has been translated into criticism of another industry which provides genuine options for people needing a place to live for shorter periods.

“Brands like Airbnb offer flexible options to people that didn’t exist before and increasingly in our industry we see people looking for shorter-term housing solutions because of lifestyle and need for shorter-term options.”

Nor should we assume that all short-term renters are tourists. They could be interns looking for housing for shorter periods or professionals working on specific projects in another location, especially from the booming tech industry – all of whom need housing for short periods.

Short-term accommodation also provides a base for people who have moved and need a place to live until they find a permanent home, as well as property owners whose own homes are undergoing renovations or who have had to leave their property due to emergency situations such as flooding or other damage, Karr argues.

“I haven’t seen anything in this data that suggests people are suddenly renting rooms to tourists instead of people who need a place to live, especially as holiday lets have less predictability in income and many more costs and time required,” says Karr. “It may just be that more flat owners are finding people looking for a flexible place to live on different platforms.”

And while true holiday letting may work well for a little while in the summer, long-term residents are almost always going to be a better source of guaranteed income.

“The tourist market is very seasonal, there’s no guarantee of income and they require more effort to deliver the services guests expect including cleaning, meeting and servicing guests and other requirements that cost more of your time and money as an owner,” Karr adds.

“Short-term accommodation platforms even encourage homeowners to provide discounts to encourage these longer-term stays for people who need a place to live for shorter periods.”

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