The significant drop-off in demand for and supply of short-term lets caused by the global coronavirus pandemic represents an opportunity to consider how the sector could be regulated when it recovers, according to No Letting Go.
The UK’s largest provider of inventory services says that up until now, more landlords and letting agents have been looking to take advantage of short-term lets.
It says that the huge growth of the sector combined with a lack of regulation has left thousands of landlords at a higher risk of experiencing damage to their properties.
Significant drop-off follows period of huge growth
In recent weeks there have been several reports indicating a massive drop-off in short-term lets due to the impact of Covid-19.
A report from the UK Short Term Accommodation Association suggests that some 70% of short-term rental bookings have been cancelled since the outbreak of coronavirus, rising to as high as 90% for some companies.
Before this, the sector had experienced incredible growth over a short period of time. A recent ARLA Propertymark report found that the number of UK Airbnb listings reached 223,000 in 2018, up from 168,000 in 2017 – a rise of 33%.
Meanwhile, in London, the number of active listings multiplied by more than four times between 2015 (18,000) and 2019 (77,000).
“It’s not surprising that the short-term lets sector has been one of the industry’s hardest hit markets. People are being urged to stay at home and so a huge amount of bookings will have been cancelled by both renters and landlords,” says Nick Lyons, CEO and Founder of No Letting Go.
“Up until now, the rise of short-term lets had been down to a combination of factors – increased demand for short stays and flexible accommodation, as well as tax changes affecting buy-to-let investors, forcing them to look for alternatives to the traditional market.”
Time to consider regulation during a period of turmoil
One of the biggest issues associated with the growth of the short-term lets market and its subsequent impact on landlords and letting agents is a lack of regulation and enforcement, according to No Letting Go.
In London, homes are only permitted to be let on a short-term basis for 90 nights per year. However, it is thought that this rule is widely flouted, with Camden Council reporting that 3,400 (48%) of available short-let properties in the borough had exceeded the 90-night allowance.
What’s more, there is little or no regulation around property upkeep, tenant vetting or contracts when it comes to landlords letting properties on a short-term basis.
“As the short-term lets industry faces its first major hurdle due to the current global situation, now could be a good time for the sector to consider how it could be better regulated in the future when normal service resumes,” Lyons suggests.
“The regulation that is in place – such as the 90-day per year rule – needs to be properly enforced, while there needs to be serious thought given to introducing laws similar to those that traditional landlords must comply with.”
“The formation of the sector’s trade body, the UK Short Term Accommodation Association, is a positive step but more needs to be done if the sector is to be brought in line with the rest of the market,” he says.
Property damage is a real risk for landlords and agents
A lack of regulation and formal tenancy procedures means properties being let on a short-term basis are at an increased risk of damage.
Short-term lets properties also have a reputation for being used as party venues – another scenario in which the chances of damage or theft are significantly higher.
“Our advice for landlords looking to move into the short-lets market is to be careful. Yes, the returns can be impressive but without putting in place necessary measures, you could be putting your long-term investment at risk,” adds Lyons.
“Meanwhile, for agents looking to manage more short-lets and take advantage of a booming market, it’s vital their management packages offer some protection to landlords.”
“This could include a professionally compiled inventory, thorough vetting process, taking deposits and providing access to comprehensive insurance or rent guarantee policies,” he says.
“We expect the short-term lets market to continue to grow once the coronavirus pandemic abates. However, landlords’ properties could be at risk if there is no commitment to further regulation in the sector, so it would be good to see a concerted effort to see more protective measures introduced,” Lyons concludes.