AirBnB and the Threat to Private Landlords and Communities

As we all know, in London, the housing shortage is worse than other places.

And in the capital there is also a huge demand for holiday accommodation too.

In the old days, all visitors to London could choose from would be hotels or “formal” Bed and Breakfast accommodation. But AirBnB has changed all that.

AirBnB and the Threat to Private Landlords and Communities

People can now use the internet to easily advertise their properties for a few days at a time, often at a premium rate. And if you achieve a decent occupancy, the returns will be far better than one would get from letting out to tenants for a longer term under a standard assured shorthold tenancy.

And would-be AirBnBers won’t need to worry about all the pesky regulations that come with being a private landlord – the repair obligations, the deposit rules, the need to show an EPC, the need to prove that the smoke alarms work, the need to prove that the gas is safe, the need to give them to “How to Rent” booklet or check their Right to Rent….and all the rest.

So you may think that this AirBnB thing has a lot going for it. And you’d be right.

Lots of people would agree and we are now seeing lots more folk doing it. Increasing numbers of homes – both owned and ones that were previously on long lets – are being taken off the market for the more lucrative and less hassle world of holiday lets.

So why the sudden changes? Why were people not doing this before? After all, the internet has been around for a while now, so it’s always been possible to market your place as a crash pad to folks around the world.

Deregulation Act 2015

Well, thanks for all this is really due to the Deregulation Act of 2015, of which the key part came in back in February last year and which amended section 25 of the Greater London (General Powers) Act 1973.

This new Act said that as long as a letting did not exceed 90 days, planning permission for “Change of use” is no longer needed.

Before this Act came in, one first needed to get council permission for short lets. This was because the council were worried about the impact on communities and the effects on neighbours of “party properties” and people coming and going at all times of the day or night, with no concern for neighbours and the local community. (If you don’t know who your neighbours are, crime tends to increase – and how would you know if the people in the flat next door came for a holiday stay. How would you know they were not being entertained by a prostitute?).

AirBnB claims around 25,000 London properties on their books. That is a lot of properties that are taken straight out of being potential accommodation for Londoners and handed over to short term holiday lets.

AirBnB do not have to share information on their properties with the local council and, even if they did, the local authorities don’t have the resources to keep on top of all the properties renting out in this way.

Interestingly, one group of people will not be able to take advantage. In 2013, the government made sub-letting of social housing a separate criminal offence under a new category. (It already was a criminal offence under the Fraud Act, but why not make extra sure the government, must have thought!).

Shared ownership properties, on social tenancies, however, are excluded, so anybody who can get enough cash to get a shared ownership home could join the AirBnB crowd! Property expert, Ben Reeve Lewis calls these, “Publicly Subsidised Landlords”.

The growth of this unregulated-cheap-hotel-cottage industry is not just confined to London. Other cities with lots of tourists have also lost lots of accommodation to AirBnB, especially Oxford, Cambridge, Manchester, Edinburgh, Liverpool and Cardiff. Even smaller historic centres like Salisbury, Stratford and Lincoln are affected.

Threat to Private Landlords

Of course, private landlords must be alive to the increased risk that their tenants decide to sublet as holiday lets on AirBnB – and without seeking permission from the landlord.

This is a real risk and it will only increase as AirBnB and others like them get bigger and get more publicity.

Landlords should have a general prohibition in their tenancy agreement against subletting, “without first seeking the permission of the landlord (which will not be unreasonably withheld)”. When asked, you would then normally withhold permission, of course, unless there was a good reason for giving it. And you should never give permission for short term sublets. It will be a breach of your mortgage terms and it will certainly invalidate your insurance (just as it will for any home owner), leaving you unable to claim if there is an insurable event.

Of course, it is hard to police what your tenants do day to day. They may be doing this already and it will be hard to spot, though we suggest you might like to run a check on AirBnB itself if you have suspicions.

An Unregulated Sector

In summary, it seems to us to be completely mad that the government has allowed a wholly unregulated sector to spring up.

There are myriad laws and regulations effecting both hotels and private landlords, so why allow a sector that is wholly uncontrolled to flourish, especially when there are clear dangers to local communities and the cohesion of those communities?

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We advise a range of organisations including banks, building societies, local authorities, social housing providers, institutional investors and insurers. We help them develop and improve their services and products for private landlords. David Lawrenson, founder of LettingFocus, also writes for property portals, speaks at property events and is regularly quoted by the media.

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