Short Let Deregulation (London)

Wednesday 7th January 2015 Westminster Hall

15:59

[Ms Karen Buck (Westminster North) (Lab)]

I am extremely grateful for the opportunity at the 11th hour to explain to the Minister the concerns that I am picking up from constituents, residents, community associations and local authorities about the impact, particularly in inner London, of the proposals to deregulate further the rules on short-term lettings.

Residents in my local communities that are particularly affected—in areas where there is already a substantial proportion of private rented accommodation that is very much at the front of this kind of problem—are already under a number of pressures; I will develop that point later on in my speech. They are very anxious about how much that will be extended with further deregulation. I believe that measures can still be taken that can offset those problems for my local residents.

The Government’s logic in extending deregulation is that home owners should be free to take decisions about what they do with their own homes, within some continuing limitations. Of course, no one wants to put in place petty, bureaucratic restrictions. If a home owner wants, for example, to do a home swap when they go on holiday for two or three weeks, or to take advantage of their absence to let their home out for a week or two, they should not be subject to severe restrictions and enforcement action. However, what local authorities will say—particularly the central London authorities—is that they do not seek to enforce against that kind of casual and holiday use, but they do seek to use the existing law to enforce against the significant and growing problem of abuse of short-term lets. What seems reasonable when viewed as cutting red tape for the individual can feel very different when it is scaled up and applied to the residential economy of central London neighbourhoods. That is certainly the conclusion of the residents and amenity societies in Westminster.

Even before the deregulation, those neighbourhoods have been facing this pressure, and local authorities have been feeling the cost of enforcement, as residential neighbourhoods increasingly resemble an extension of the hospitality industry. That can be confirmed by spending a minute or two on home-letting websites such as Airbnb. The simple fact is that there is a strong economic incentive for inner London property owners in particular to turn over their properties to commercial use. Data collected by Westminster council a few months ago demonstrated that hospitality rents are far higher than those that apply to longer-term residential properties. It found that a one-bedroom flat would earn almost £800 a week in the short-term let industry, compared with £440 on average for a longer tenancy—and prices are rising proportionally.

[Mr Andy Slaughter (Hammersmith) (Lab)]

I am pleased that my hon. Friend has secured this debate. She mentioned Airbnb, one of the more aggressive marketers. Not a day goes by without constituents writing to me having been asked by this organisation to give their flat or house over. They are worried because they feel that residential areas are effectively turning into hotels, and as a consequence, there are fewer properties in an area where there is already great pressure, and there is also a lot of disruption to their lives.

[Ms Buck]

I am grateful to my hon. Friend, because that is exactly the substance of my comments, and I agree with him totally. As I said, a one-bedroom flat could generate £800 a week in the short-term let industry. For a two-bedroom flat, Westminster council estimates that £1,372 a week could be earned, compared with £600 in a residential let. For a three-bedroom flat, £2,660 could be generated, compared with £950 for a longer-term rental, and for a four-bedroom flat, £3,367 could be earned, compared with £1,158. That economic incentive not only reduces the attractiveness of longer-term residential letting, but distorts rents elsewhere and reduces affordability still further.

Central London, and particularly Westminster, has traditionally been the largest private rental market in the country, meeting a growing need for rental homes offering accommodation to different groups of people. That includes people who want to move to London for employment, sometimes on short-term contracts; students and young people who are starting out in life and saving for a home; and people in housing need who are unable to access a declining stock of social housing. We need a healthy private rented sector. Even if that sector is less secure than owner-occupation or social renting, and in many cases, less attractive, it is none the less an important element of the residential mix in central London.

The growth of the unplanned and deregulated hospitality economy is already eroding the ability to provide homes. Indeed, the purpose behind the original legislation that the Government are seeking to change was

“to protect London’s existing housing supply, for the benefit of permanent residents, by giving London boroughs greater and easier means of planning control to prevent the conversion of family homes into short-term lets.”

Around 3,000 properties are estimated to be in use as short-term accommodation in Westminster alone. That figure is almost half as much again as the total number of Westminster’s homeless households who are in temporary accommodation, who are of course in many cases increasingly being forced out of the borough in which they live. In some cases, they have lived in the borough for decades, even their whole lives. I am not suggesting that there is a neat match between the two kinds of accommodation, but the figures are striking.

Westminster council’s estimates show a loss of housing stock equivalent to seven years’ worth of housing supply. That figure is simply extrapolated from the 7,300 enforcement actions taken with regard to the alleged unauthorised use of property for short lets since the millennium. Further deregulation can only add to the loss of homes to commercial use, as it becomes easier and less risky to change to commercial use, and harder for the local council to detect abuse. It cannot be a coincidence that Camden council found 923 flats being offered on Airbnb in October last year. That figure is up 37% on the previous three months, so over the months that followed the Government’s introduction of that clause in the Deregulation Bill, the amount of property advertised as lets of this kind has soared.

What an irony it is that at the very moment when the Government are seeking further deregulation, other cities such as Paris are looking into tightening regulation to protect their city. We are going in the opposite direction. The Parisian authorities are so worried about the drain on residential property that they are enacting measures to bring the situation under further control.

It is not only the loss of accommodation in the longer-term residential sector that is a concern; even without short-term lets, the private rental market has a downside, which is the massive turnover of population, with a one-in-three churn in the electoral register in Westminster annually. A short-term-lets economy exacerbates that trend dramatically. As Westminster council has said, there is a

“proven negative impact…arising from short-term letting, as longer-term...residents are forced out, the consequences of which include an increase in anti-social behaviour, reduced security and a higher fear of crime for permanent residents in the vicinity of properties used for short-term let purposes.”

The 18 Westminster amenity societies, in a joint representation, added:

“Short-term letting is causing a major problem for some permanent residents in a number of these amenity societies, particularly in cases where short-term lets are regularly made. There can be real problems of anti-social behaviour (and even intimidation), noise, refuse collection problems and similar issues. The Council’s dedicated ward budget, which reflects the wishes of a particular ward community, has in three cases set aside funds to tackle the problem.”

To that can be added further concerns, including inconsistent standards within the hospitality sector, potentially leading to undercutting on health and safety standards; the lack of security checks on guests; and the potential for fraud, including housing benefit fraud.

The findings of the London Councils survey of local authorities are therefore unsurprising: 92% of responding boroughs said that short-term lets caused problems with noise and nuisance; 92% said that the issue led to a loss of permanent accommodation; 75% said that it caused a loss of community identity; 58% said that it caused a heightened fear of crime; and 25% said that it increased crime and fire safety risks. All the findings were confirmed by local residents replying to a survey that I undertook in selected blocks of flats in high-risk areas. With only a few exceptions—there were some people who felt strongly that home owners should be able to do as they wished with their property—residents reported concerns. One Lancaster Gate resident described her experience in a mansion block of flats:

“People are turning up and buzzing the doorbells for keys to various flats”

all the time. She said that there are three, four, five or six people to a flat and they stay for only three or four days. She said:

“I think I am now living in a hotel because of the groups of people coming in and out the whole time...It is harder for us to know our neighbours and there is no community cohesion.”

A Maida Vale resident, also from a block of mansion flats, talked of the

“constant stream of strangers in my block, leading to an increased risk of burglary, noise and more.”

Another lady from Lancaster Gate described all-night parties and

“damaged communal areas with walls scratched and rubbish left everywhere”,

and a resident of Queensway said:

“Long-term leaseholders in blocks of flats find that short-term residents do not respect the communal areas of the building”

and

“the majority of flats are sub-let...it needs constant vigilance to keep civilised standards in a block I have lived in for forty years.”

[Mr Slaughter]

I am most grateful to my hon. Friend for giving way again; she is very generous. She has identified clearly the problem. It is with mansion flat blocks, and her constituency has even more of those than mine does. Many long-term residents, a lot of whom are now elderly, simply want the quiet enjoyment of their own home, but find themselves living in a highly disruptive atmosphere, often with groups of young people who do not take care of the property because they are there for days or weeks at a time and who are making their lives a misery.

[Ms Buck]

My hon. Friend is absolutely right. This is a common theme. This often, but not exclusively, affects older residents, who describe their experience as one of being completely stranded in what used to be a neighbourly block, where they knew people, felt a sense of security and had the quiet enjoyment of their homes. Now, they find the constant movement of people in and out very bewildering and alienating, and find that it causes or is linked to a number of practical problems.

Another resident wrote to me to say that

“this will increase problems related to noise and nuisance for Westminster residents from the short-let tenants. It’s already happening within my own apartment block, and I’ve had to complain to Westminster Council 24-hour noise hotline due to loud parties and excessive noise every week from short-let tenants in my block. This is making me want to sell my home and move to a safer, quieter neighbourhood outside of Westminster.”

Of course, none of this means that all visitors cause problems or that all landlords, whether professional or casual, are careless of the consequences of their letting. That is far from the case. It is the cumulative impact and the nature of the high turnover in the visitor and tourist economy that is often the problem; it is not the behaviour of any single person or group of people. These blocks of flats—the properties are largely flats—were not designed to be part of the hospitality economy; they were designed to be part of a residential community, and they have changed.

In addition to the impact on residents and neighbours, Westminster council—I am sure that this is also true of other local authorities—is investigating some 1,600 properties for violations of the short-term-let rules with a staff of four, at a time of massive reductions in funding and staffing. Some councillors are having to use ward budgets for this purpose—I do not think that is what ward budgets were intended for—as complaints have risen. There have been 360 complaints in the last 12 months.

If resources were going on enforcement action against the home owners renting out their home for a few weeks while they are away—against the very people whom the Government claim the deregulation is aimed at helping and relieving the pressure on—money could be saved, but of course that is not the case. Enforcement action is aimed at the de facto commercial landlord, and the new deregulated environment will make that harder and costlier to pursue, with a requirement to meet a higher burden of proof. The reality is that a bigger burden will fall on councils that are increasingly ill equipped to deal with it.

The Government seem to accept the need to limit the extent to which professional landlords can take advantage of the opportunities offered by higher incomes from inner-London lettings; otherwise, presumably, they would abandon all restrictions, rather than simply change the limit to permit 90-day letting under the Deregulation Bill. Unfortunately, that is likely to work better in theory than in practice. As the Covent Garden Community Association explained to me:

“Some amateur landlords are causing just as many problems. Not only will it be very difficult to prove who is a genuine resident but short lets even by genuine residents can be very disruptive and insecure...we are hearing complaints about this sort of thing all the time now, with an estimated 200 flats in Covent Garden alone available to rent by the night on Airbnb at any one time.”

I say to the Minister that there is still an opportunity to use the Deregulation Bill to meet the legitimate and indeed cross-party concerns raised by civic and amenity societies and local authorities in central London. By amending it to give individual London boroughs the right to override any relaxation of planning requirements for short lets that the Secretary of State might introduce, and by making it clear that local authorities could restrict lettings in respect of residential properties that were not the sole or main residence of the lessor, many of the risks could be offset. The Minister should take that opportunity.

We think that it would also be useful to consider the findings of the review of property conditions in the private rented sector before proceeding. It would be useful if the Minister could provide further information on that. Finally, we expect regulations to be tabled, and they offer greater scope for local flexibility in response to what are obviously varying pressures.

However, local authorities and the communities that make up their areas need to be listened to. In the spirit of localism, to which we all pay tribute, the Government need to understand that it is local authorities that understand their communities, and this is a particularly excellent example of where decisions need to be taken closer to the ground, balancing a wish to reduce unnecessary bureaucracy against the pressing need to sustain healthy, safe and vibrant neighbourhoods, even and perhaps especially when these are on the fringes of the hospitality heart of the world’s greatest city.

16:16

[The Minister of State, Department for Communities and Local Government (Brandon Lewis)]

The Government, through the legislation we are considering, are taking forward proposals that will tackle out-of-date legislation from the 1970s. Section 25 of the Greater London Council (General Powers) Act 1973 makes it illegal for London residents to rent out their homes to visitors on a short-term basis. Londoners who want to rent out their homes for less than three months are required to apply for planning permission from the council. That burden does not apply anywhere else in the country. We want just to update that legislation, to give London residents the freedom to let their homes on a short-term, temporary basis without the unnecessary cost and bureaucracy of applying for planning permission. We also want to ensure that we maintain the important provisions for the protection of London’s housing supply and residential amenity. That goes directly to the point raised by the hon. Member for Westminster North (Ms Buck), and I will come back to that in a few moments.

Section 25 provides that the use of a

“building, or any part of a building”

for “temporary sleeping accommodation” for less than 90 consecutive nights is a change of use, for which planning permission is required. London local authorities can take enforcement action against an unauthorised change of use. As a result, London residents failing to secure planning permission face a possible fine of up to £20,000 for each offence.

Clause 33 of the Deregulation Bill grants a power for the Secretary of State to make regulations in respect of short-term letting. Our intention is that regulations will set out the circumstances in which temporary sleeping accommodation in London would not require planning permission. It will also allow for the exclusion of particular residential premises, and residential premises in particular areas, from any relaxation of section 25.

We all know that the internet is creating a new world in which to live and do business. It has made it much easier for people to rent out their property; references have been made to Airbnb, for example. It allows residents to supplement their incomes and offer new experiences for consumers. Last summer, nearly 5 million overseas visitors came to the capital. Some of those visitors, as well as British residents, want to experience London as a local. That means staying with Londoners who live in London permanently, or in their homes while the resident is away on holiday. We know that thousands of London properties and rooms are currently advertised on such websites. However, each of them is potentially in breach of section 25 as it stands. There is uncertainty for householders as to whether their local authority will take planning enforcement action against them for unauthorised short-term letting.

[Ms Buck]

Does the Minister have evidence of local authorities taking enforcement action and fining home owners who simply let out their home for two weeks here and there, perhaps for a home swap or something similar?

[Brandon Lewis]

That is the point I was making. There is an uncertainty for residents if they do not know whether any given local authority would take action. If the local authority is not using that power, however, it will not miss it after the change in the legislation.

Planning legislation for the capital needs to catch up with our 21st-century way of living. Every year, thousands of visitors enjoy their holidays in Londoners’ homes. Such short-term letting already supports major events, such as tennis at Wimbledon. Our proposals will not only benefit London’s strong tourism industry by expanding the competitively priced accommodation offer; it will allow families to earn some extra income by making their home or spare room available to visitors. It offers an alternative to hotels and guest houses, so it can support the wider tourism industry. In addition, such accommodation helps those who are temporarily working in the capital or searching for a place to live by expanding the pool of competitively priced accommodation.

Residential homes provide a type of accommodation that is different from the average hotel or guest house. Renting a room in a person’s home, or renting their home while they are away, provides an opportunity to travel and live like a local, and it caters for a different type of client. Websites advertising householders’ rooms and homes indicate that a wide variety of accommodation is available in different locations, many of which are outside the central hotel zones.

[Mr Slaughter]

I do not think anybody objects to people renting out rooms in their homes. In any event, such people will not be caught at the moment. I do not think anybody objects to people renting out their property for Wimbledon or when they are away on holiday. The problem is the commercial, organised letting of large numbers of flats in single blocks, which effectively turns residential blocks into hotels or “aparthotels”. That is what we want local discretion to prevent.

[Brandon Lewis]

I suspect, therefore, that the hon. Gentleman will be pleased to support the Government’s proposals. If he looks back at my opening remarks, I think that that will deal with some of his concerns. I will go a bit further in a second.

London is a great city, as the hon. Member for Westminster North has outlined. Our proposed step forward gives Londoners the opportunity to be part of a huge industry and supplement their income. We want to be leaders, not followers, and we want to open up our great global city even further. Where other cities and countries may wish to shut down, we want to move forward.

I want to make it clear that through our reforms we want only to give London residents the freedom that is enjoyed in the rest of the country: to let out their homes on a short-term, temporary basis without the unnecessary cost and bureaucracy of applying for planning permission. We do not seek to provide new opportunities for short-term letting on a permanent or commercial basis. We fully recognise that London’s homes should not be lost to investors who will use them exclusively for short-term lets, and our reforms will not enable that. Through regulations, we want to provide certainty and consistency for residents in all London local authority areas. We want them to know when householders will be permitted temporarily to short-term let their property without the need for planning permission. The regulations we will introduce will clarify for London residents what is permissible, so they can be confident they are within the law. We will look to strike an appropriate balance between allowing freedom for occasional short-term letting by residents, as well as—this goes directly to the point made by the hon. Member for Hammersmith (Mr Slaughter)—maintaining the important provisions of the existing legislation to protect London’s housing stock.

I know there are concerns that our deregulation of section 25 could lead to a loss of permanent housing stock for Londoners at a time when London needs more new homes. However, as we seek only to allow residents to let out their homes while they are away, those properties will not be lost to the short-term rental market from London’s permanent housing stock. We will not be providing new opportunities for short-term letting on a permanent or commercial basis.

[Ms Buck]

This is the heart of the worry. If it is difficult now for local authorities to enforce against properties they believe are part of the short-term letting sector when one merely has to prove that that is the case, will it not be far more difficult to enforce when the local authority has to demonstrate that the property has not been let for more than 90 days?

[Brandon Lewis]

Our proposals are designed to ensure that we bring things up to date, which is why I have said that we want to make sure that we get the regulations right. It is important that we move forward and allow people to have the right flexibility. We must not be scared away from doing the right thing because something has been done incorrectly in the past. We want to move this forward and get it right for the future. We must recognise the world in which we now live, rather than harking back to something from the past that did not work.

As at present, it will still be open to property owners to seek planning permission from their local authority if they want to change the use of their premises. It will also, therefore, remain for local planning authorities to determine whether an unauthorised change of use has taken place and whether they should take planning enforcement action in the public interest, so that protection remains.

It has been suggested that our proposals might lead to an increased loss of amenity for London residents as a result of people’s behaviour. Reference was made earlier to antisocial behaviour in neighbouring accommodation on a short-term basis. Our proposed reforms will do nothing to weaken the duty on a local authority to investigate such complaints of statutory nuisance from people who live in its area, or to take action against those responsible.

I know there are concerns that people who currently short-term let property through internet sites are somehow permitted to circumvent not only section 25 but other vital measures, such as health and safety regulations and fire orders. That is not the case. I can confirm that our proposed change to the legislation will not provide a short-cut to important protections, beyond allowing householders temporarily to short-term let their property without applying for planning permission. Clause 33 of the Deregulation Bill provides a regulation-making power. The regulations will be subject to the affirmative process for statutory instruments following Royal Assent, which will enable Parliament to scrutinise the detail of the proposed deregulation. We recognise that there is considerable interest in ensuring that we get the changes right. We will continue to work closely with the London local authorities to ensure that the measures brought forward meet householders’ aspirations of temporarily letting out their homes or spare rooms but that, importantly, they retain the key purpose of section 25, which is to keep London’s homes for those who live and work permanently in London.

16:26

Sitting suspended.