The Future of Airbnb: Changes UK Hosts Can Expect in the Coming Years
by Property Investments UKThe Property Investments UK editorial team have been researching and writing about the UK's property market for more than a decade.
Since it was founded in 2008, Airbnb has transformed the business of letting and renting accommodation on a short-term basis or for holidays. But what does the future look like for Airbnb? What can hosts in the UK expect from Airbnb over the next few years?
- What are the Advantages of Airbnb for Hosts?
- What Problems Can Hosts Have with Airbnb?
- Hosts Should be Able to Enjoy Good Demand
- Hosts Should be Able to Expect Good Yields
- The Renters (Reform) Bill
- A Registration Scheme for Short-Term Lets
- Planning Permission for Short-Term Lets
- The Decent Homes Standard in the PRS
- Scotland, Northern Ireland and Wales
- Possible Tax Changes on Short-Let Accommodation
- Possible Changes to Airbnb Policy
- So, Where Will Airbnb Be, 5 Years From Now?
What are the Advantages of Airbnb for Hosts?
Airbnb was initially created as a way for householders to make extra money by renting out space in their spare room – or even on an air bed – for occasional guests. More lately, landlords have come to see the opportunities for letting their properties this way.
It’s fair to say that Airbnb offers an easy way to run and manage a short-term lettings or accommodation business. Airbnb can promote your property on its platform and provide handy online tools to accept and manage bookings.
What Problems Can Hosts Have with Airbnb?
In some ways, Airbnb has been a victim of its own success. Airbnb says they have over 7 million active listings worldwide. Some local areas have a high density of Airbnb accommodation. This has led to objections and complaints from neighbours and calls from local councils and politicians that Airbnb lettings should be restricted.
Airbnb also has something of an image problem. The media likes to cover those rare cases when Airbnbs encounter problems, focusing on landlord or guests from hell-type horror stories.
With all that in mind let’s take a closer look at the positives of Airbnb hosting in the UK:
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Hosts Should Be Able To Enjoy Good Demand
The popularity of staycations has been increasing in recent years. The number of visitors from abroad is also recovering fast after the pandemic. That’s in addition to the demand for Airbnbs for business or work trips and so on. So hosts of good Airbnb accommodation should have plenty of demand in the future.
Hosts Should be Able to Expect Good Yields
Letting yields from short-term lets and holiday lets are generally much higher than long-term lets.
Many forecasts say property prices will fall over the next year or so but rents will rise. That could mean Airbnb landlords who buy short term lets could make even better letting yields.
Next, let’s look at some of the issues Airbnb hosts in the UK might have to contend with in the future.
The UK’s Airbnb hosts can almost certainly expect to have to contend with more rules and regulations:
The Renters (Reform) Bill
The Renters (Reform) Bill is a move by the current government to reform landlord-tenant law in England and provide a better deal for renters. The planned new law (which is not in force yet) is said to be the biggest change to the private rented sector (or PRS) in a generation. Key changes being proposed by the Bill include introducing a new type of tenancy and new rules for evictions.
The Renters (Reform) Bill mainly focuses on long-term lets rather than short-term lets so it may not affect most Airbnb hosts. However, it’s not entirely clear as yet what implications it might have for the short-term lets market.
Here, we wrote an article which looks at empowering tenants with the Renters Reform Bill which we recommend you take a look at.
A Registration Scheme for Short-Term Lets
The government has recently conducted a consultation regarding introducing a registration scheme for short-term lets in England. This is not the law at the time of writing. This would require anyone offering short-term lets to register their property with their respective local authority.
The stated aims of the register of short-term lets would be to provide data, which would help to provide local authorities with information about which premises are being let out in their area. It could help them with monitoring standards and compliance with other rules and regulations too.
Airbnb themselves have said that they support the introduction of a Tourism Accommodation Registration System (TARS).
It is said the registration scheme would not apply to hotels, B&Bs and professional providers of self-catering accommodation. It likely wouldn’t apply to Airbnb hosts who take guests into their own homes. Therefore it might only apply to individual hosts who let their entire property on a short-term basis.
Planning Permission for Short-Term Lets
The government has recently conducted a consultation on controlling short-term lets in England by changing the planning permission rules. If these proposals are adopted accommodation used for short-term lets would move into a new planning permission use class known as C5. Alongside this, a new permitted development right would be introduced allowing property owners to turn their property into a short-term let without planning permission.
Here, however, is how this proposal could affect some Airbnb hosts: Local councils would at their discretion be able to withdraw the permitted development right. It would mean that planning permission would be needed to create a new Airbnb in some areas.
In London, you can already only let a property on a short-term basis for up to 90 days a year without planning permission. More details here.
The Decent Homes Standard in the PRS
The Decent Homes Standard is a system of regulation which sets down minimum standards for social housing. It does not apply to owner-occupier homes or to homes in the private rented sector. However, the current government has said in the Renters (Reform) Bill it is committed to introducing
the Decent Homes Standard in the PRS in England. Ultimately this could affect Airbnb hosts as well as other landlords.
Scotland, Northern Ireland and Wales
The information in this article principally applies to Airbnb hosts in England. There are differences in the other countries of the UK:
- In Scotland, you are already likely to need a licence to let a property short term.
- In Northern Ireland, tourist accommodation must have a certificate from Tourism NI.
- Wales is planning to introduce a licensing scheme for short-term accommodation.
Possible Tax Changes on Short-Let Accommodation
How attractive Airbnb is to UK hosts might also depend on how future tax laws impact short-term lettings. Some issues hosts should consider include:
Property allowance. Currently, Airbnb hosts can claim the property allowance. The property allowance is a tax exemption of up to £1,000 a year for those with income from land or property. This could be changed or removed in future.
Furnished holiday lets. Currently, some Airbnb hosts can claim favourable tax allowances if their property qualifies as a furnished holiday let. An Airbnb which qualifies as a furnished holiday let or FHL can usually claim mortgage interest as a tax expense. A furnished holiday let must be available to rent for at least 210 days in a tax year and actually let for at least 105 of those days. This could be changed or removed in future.
Business rates. Some Airbnbs may be rated as a self-catering property and valued for business rates rather than Council Tax. This may result in valuable tax savings for owners. These rules have been tightened in the last tax year and could potentially be further tightened, or the concession removed, in future.
This is only intended to be a general description of the tax situation for Airbnb hosts. It is essential to take expert tax and financial advice on property tax matters.
Possible Changes to Airbnb Policy
Airbnb hosts in the UK should also consider if the company might change its listing policy in the future. For example, Airbnb started as an accommodation-sharing platform, but in recent years there has been a trend towards more entire-home lets. It’s always possible that Airbnb could change the type of properties it wants to list in future, which might in turn affect how hosts can make use of the platform.
So, Where Will Airbnb Be, 5 Years From Now?
In summary, the prospects for UK Airbnb hosts look favourable in future. There should still be good demand for short-term accommodation, and the possibility of earning a good letting income.
However, it’s likely that UK Airbnb hosts will have more red tape to deal with in the future. This could make letting accommodation using Airbnb more difficult. In some areas, it may be heavily restricted or not even possible at all.
How Airbnb fares in future does however depend on if and what new letting laws are brought in. This may depend on who wins the next UK general election.
The future of Airbnb for UK hosts also depends on the future policies Airbnb itself might introduce.
Lastly, Airbnb hosts will need to keep abreast of wider demand and trends in the short-term accommodation market to get a real handle on what they can expect.