With the impending passage of the Renters’ Rights Bill (RRB) in the UK, landlords must prepare for significant changes that will redefine the private rental sector. While the bill aims to strengthen tenant rights, it also introduces constraints that may make long-term renting less attractive for landlords. As a result, short-term letting is emerging as a compelling alternative that remains outside the scope of these new regulations. Here’s why making the switch to short-term lets could be a more flexible and profitable strategy.
Key Considerations from the Renters’ Rights Bill
The RRB is expected to come into effect in 2025, bringing in sweeping reforms such as:
- Assured Short hold Tenancies (ASTs) will be replaced by periodic agreements, allowing tenants to give just two months’ notice at any time.
- This uncertainty makes it difficult for landlords to plan rental income and property availability.
- Landlords will only be able to evict tenants using Section 8, which requires specific grounds and an extended notice period.
- Even if a landlord wishes to sell or reclaim their property for personal use, eviction will not be possible for at least 12 months into the tenancy.
- Rent can only be increased once per year and must align with market rates through a formal Section 13 notice.
- This removes the ability for landlords to adapt rental prices based on demand or inflationary pressures.
- Evictions for rent arrears will only be possible after three months of non-payment, rather than the current two months.
- Additionally, the notice period to remove tenants for arrears will double from two to four weeks.
- Landlords will no longer be able to refuse tenants with pets unless there is a valid legal reason.
- While pet insurance can now be required, there remains a risk of property damage and potential disputes.
- A new ‘Decent Homes Standard’ will set stricter minimum property conditions.
- ‘Awaab’s Law’ will require landlords to address health hazards within strict timeframes, increasing compliance costs.
- Landlords must register with a new PRS portal and join an ombudsman scheme.
- Non-compliance could lead to penalties up to £7,000 for first offences and £40,000 for serious violations.
Why Short-Term Letting is an Attractive Alternative
Given these impending constraints, landlords may find short-term letting (e.g., holiday lets, serviced apartments, Airbnb rentals) a more lucrative and flexible option. Here’s why:
- The Renters’ Rights Bill applies to long-term tenancies, not short-term lets.
- This means landlords can retain control over their properties without restrictive eviction rules or indefinite tenant stays.
- Unlike long-term rentals, short-term lets allow landlords to set availability periods based on personal or market needs.
- Seasonal pricing strategies enable landlords to capitalise on peak travel periods.
- Short-term rentals typically generate higher per-night rental rates than long-term leases.
- This can lead to increased overall revenue, particularly in high-demand areas.
- Short-term guests stay for days or weeks rather than months or years, reducing the risk of problematic long-term tenants.
- Landlords can avoid prolonged legal battles over unpaid rent or property damage.
- While short-term letting has its own local regulations, these are generally less stringent than those imposed by the RRB.
- No obligation to register with a PRS portal or join an ombudsman scheme.
- Many short-term guests treat rentals like hotel stays, leading to less property damage than long-term tenants.
- Regular cleaning and maintenance between guests help maintain property condition.
- Landlords can block out personal time for property use, which is impossible under long-term rental agreements.
- This is ideal for landlords who wish to retain some access to their properties throughout the year.
Key Considerations for Transitioning to Short-Term Letting
If you’re considering moving from long-term rentals to short-term letting, keep these factors in mind:
- Local Regulations & Licensing: Some councils have restrictions on short-term lets, including limits on the number of days per year a property can be rented out.
- Furnishing & Maintenance: Short-term lets require full furnishings and regular cleaning services.
- Marketing & Booking Management: Listings on platforms like Airbnb or Booking.com require ongoing management to maximise occupancy and pricing.
- Tax Implications: Short-term lets may qualify for different tax treatments, such as furnished holiday let (FHL) status, which offers tax advantages.
Conclusion
With the Renters’ Rights Bill introducing new challenges for landlords, short-term letting presents an opportunity to bypass restrictive regulations while maintaining property control and maximising income potential. By making a strategic shift now, landlords can adapt to the changing rental landscape and ensure their investments remain profitable and hassle-free in the years to come.
Pass the Keys are experts in unlocking the value of your property, contact Adam in The Chilterns for more information.
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