The short-term rental (STR) industry in the UK, exemplified by platforms like Airbnb, has seen tremendous growth over the past decade. Offering travellers a more flexible and often more affordable alternative to traditional hotels, STRs have become a significant part of the tourism landscape. However, with rapid growth has come increased scrutiny and regulation, as governments, local authorities, and communities grapple with the impact of STRs on housing markets, local economies, and neighbourhoods.

The Rise of the STR Industry in the UK

The UK’s STR market has expanded significantly since platforms like Airbnb gained popularity. As of 2023, there were over 257,000 active STR listings in the UK, with London, Edinburgh, and coastal towns like Brighton being particularly popular. This rise has been driven by several factors:

1. Traveller Preferences: Tourists, especially younger ones, increasingly prefer the flexibility and local experience offered by STRs.
2. Economic Opportunity: Homeowners have found it lucrative to rent out rooms or entire homes, especially during peak tourism seasons.
3. Technological Advancements: The ease of listing and booking properties online has made STRs more accessible to both hosts and guests.

Regulatory Landscape: From Local to National

As the STR industry grew, so did concerns about its impact. This led to a wave of regulatory measures across the UK. The regulatory approach, however, has been varied, with different regions implementing their own rules based on local conditions.

Local Regulations

• London: In London, the "90-day rule" restricts the rental of entire homes for more than 90 days per year without planning permission. This was introduced to prevent homes from being taken off the long-term rental market.
• Edinburgh: Edinburgh has also introduced stringent regulations, requiring STR operators to obtain planning permission in certain areas, particularly in the city centre. This was in response to concerns about the loss of permanent housing and the impact on local communities.

National Developments

• In 2021, the UK government announced a review of the STR sector to consider a nationwide registration scheme for STR properties. The goal is to gather data on STRs, assess their impact, and ensure compliance with health and safety regulations.
• The potential introduction of a "Tourist Accommodation Registration Scheme" has been mooted, which would require all STR operators to register their properties. This could be a significant shift, bringing more transparency and oversight to the industry.

Impact of Regulation on the STR Industry

The introduction of regulations has had a multifaceted impact on the STR industry in the UK:

1. Supply Constraints: Regulations like London’s 90-day rule have reduced the number of STRs available year-round. This limits supply, which can increase prices for tourists during peak periods. For hosts, this has meant balancing their desire to maximise income with the need to comply with local laws.
2. Shift in Market Dynamics: Some hosts have moved from STRs to longer-term rentals or sold their properties, which has had a stabilising effect on housing markets in some areas. This has been particularly noticeable in cities like Edinburgh, where stringent planning requirements have led some to exit the market.
3. Impact on Local Communities: Regulations have been a response to concerns about the impact of STRs on local communities. In many tourist hotspots, the proliferation of STRs has been blamed for driving up rents and reducing the availability of housing for locals. By restricting STRs, regulations have aimed to preserve community integrity and ensure housing availability.
4. Professionalisation of the STR Sector: As regulations have tightened, many STR operators have become more professional. This includes obtaining necessary permissions, adhering to safety regulations, and paying taxes. While this has increased costs for hosts, it has also led to a more stable and reliable industry.
5. Economic Impact: The STR industry contributes significantly to local economies, particularly in tourism-dependent areas. However, over-regulation could stifle this contribution, particularly if it leads to a significant reduction in STR availability. Balancing the economic benefits of STRs with the need for regulation is a key challenge for policymakers. A recent study commissioned by Airbnb estimates that the cost to the local Edinburgh economy from their licensing scheme was over £20m annually.

Future of the STR Industry in the UK

The future of the STR industry in the UK will largely depend on the evolving regulatory landscape. There is a clear need for balance—ensuring that the industry can thrive while addressing legitimate concerns about housing availability, community impact, and safety.

1. Increased Compliance and Costs: As regulations become more stringent, the cost of compliance will likely increase. This could drive some smaller operators out of the market, leading to a consolidation among more professional hosts and companies.
2. Potential for Innovation: The STR industry is likely to innovate in response to regulation. This could include new business models, such as co-living spaces or more flexible rental agreements that comply with local rules while meeting the demands of travellers.
3. Community Engagement: The future success of the STR industry may depend on greater engagement with local communities. Operators who can demonstrate their commitment to being good neighbours and contributing to the local economy may find it easier to operate within regulatory frameworks.

Conclusion

The regulation of the STR industry in the UK is a complex and evolving issue. While it presents challenges for hosts and platforms, it also offers an opportunity to create a more sustainable and community-friendly model for short-term rentals. The key will be finding a balance that allows the industry to continue thriving while addressing the legitimate concerns of local communities and ensuring that housing markets are not unduly affected. As the regulatory landscape continues to develop, both hosts and guests will need to adapt to a more structured and, arguably, more equitable STR market in the UK.

Pass the Keys is very well positioned to support hosts with advice and guidance for localised regulation and compliance. Their membership in the STAA and other relevant industry bodies, along with practical experience of supporting hosts acquire licences in Edinburgh and Spain, makes them an ideal partner to ensure hosts can safely navigate the changing landscape.

Get in contact today to understand more about short letting in your local area on 0208 050 2818.