Property Regulation (Holiday Lettings)

Debate between Andrew Stephenson and Anne Marie Morris

Tuesday 14th June 2011 Westminster Hall

[Andrew Stephenson (Pendle) (Con)]

It is a pleasure to speak under your chairmanship, Mrs Brooke. I am grateful for the opportunity to initiate this debate on the effect of property regulation on holiday lettings. This debate will be of interest to colleagues representing constituencies with beautiful countryside, coastline or other features that lend themselves to tourism. I am glad to say that Pendle is one such constituency, with rolling countryside and picturesque villages. Only last week, plans for a new 76-berth marina were approved.

Properties that are made available to let for holidaymakers are a vital part of tourism in the UK. Typically, these are attractive, domestic properties, owned by a couple or a family, and some are managed by an agency. They are the smallest of small businesses and in great need of protection from fruitless and costly regulation.

I have called this debate because I am concerned that holiday lettings are not getting the protection that they need. I wish to start with a quote from a “Dear colleague” letter that I received only last week from the Minister of State, Department for Business, Innovation and Skills, my hon. Friend the Member for Hertford and Stortford (Mr Prisk). The letter mentions the “one in, one out” system of regulatory control introduced by the Government. Apparently, planned regulations have been cut from 157 to just 46, with only 11 of those adding to the regulatory cost on businesses. I welcome that, and emphasise that it is my intention to help the Government by identifying where they can clearly go further. I believe that we all want small companies to be relieved of pointless, costly and dubious regulations, and I applaud the Government’s record on that so far.

The letter finishes by saying:

“We are continuing to work hard to cap the cost of new regulations. In addition, we are tackling the stock of existing regulations, ending the ‘gold plating’ of EU regulations and have scrapped measures that would have cost SMEs £350 million each.”

However, holiday lettings face two costly challenges in upcoming regulations, one of which is being defended as a European Union requirement when it is not being adopted by any other European country. I refer to the change due to happen at the end of this month, whereby holiday lettings will be required to provide an energy performance certificate, and to the review of the controlled waste regulations that are due to be introduced later this year. Both will force an unnecessary, costly, pointless and, I believe, legally questionable burden on holiday lettings, doing damage to British tourism in my constituency and many others. I hope to present a case that the Government can and should reconsider both regulations.

Let me start by addressing the controlled waste regulations. On 14 January, the consultation closed on proposals to replace or amend the Controlled Waste Regulations 1992. It was a joint consultation carried out by the Department for Environment, Food and Rural Affairs and the Welsh Assembly Government. Will the Government look again at these proposals, which would place an unfair cost on the shoulders of small business owners?

Hoseasons, an agency representing those wanting to let their properties for self-catering holidays, which employs about 500 people in my constituency, produced a submission highlighting its concerns about the proposed changes, stating that they could damage the viability of letting self-catering holiday cottages. Having first been scheduled to come into effect on 6 April, the document has been postponed by DEFRA and will come into force sometime in the near future.

The publication tells us that waste from domestic properties used in the course of a business for the provision of self-catering accommodation will now be classed as commercial waste. This causes a discrepancy between properties that are let for long-term domestic residence and properties that are let for self-catering holidays. The person letting their property for the full calendar year has their tenants’ waste classed as domestic waste, whereas the person letting their property as a holiday cottage for more than 140 days of the year will be charged commercial rates, even though the property may be empty for the majority of the year.

That seems wrong, because the use of both properties is fundamentally the same: both are used for living in as a place of residence, and the owner of the property makes a profit in both cases. The injustice is that the owner of a holiday cottage incurs extra expense without necessarily receiving more income. That may lead owners to decide to let their property full time, to lessen their outgoings and increase their income. This in turn could impact the strength of the rural tourism industry, because the properties may no longer be viable as holiday lets. More than 67 million domestic holiday trips were made in 2009. I am sure that everyone will agree that the regulations are impacting the future not only of agencies such as Hoseasons in my constituency, but of every individual who lets their property to holidaymakers for more than 140 days of the year.

If we look at the proposals of the controlled waste regulations, we will see that the amount and type of waste in question is the same. Do we really need to charge different rates for the same collection, based on whether a property is being rented for a week or a year? Section 75 of the Environmental Protection Act 1990 defines household waste as from a domestic property that is solely for the purposes of living accommodation. Defining this waste as commercial would presumably require a separate collection service. Would this mean heavy-duty refuse trucks pounding down rural roads just to get to what are often small cottages, or are holiday lettings being asked to pay more for the same service, in which case, why increase the cost of waste collection?

My final point in relation to the regulations is on recycling, an issue important to us all. Most local authorities offer a free collection service of recyclable materials from all domestic properties. Classing waste from holiday properties as commercial would make them ineligible for this free service, thus providing a disincentive to recycle. The last time I stayed in a holiday let was a few years ago, when I decided to spend the new year with a group of friends. Needless to say, while, naturally, we are all very responsible drinkers, our stay resulted in several empty wine and beer bottles, which were dutifully placed in a recycling box for disposal when we left. I fail to see how making such properties ineligible for domestic recycling services—meaning that I would have had to put those bottles in a commercial waste bin—will do anything to help the environment. Will the Government look at the regulations, so that owners and guests alike are encouraged to recycle and can assist local authorities in meeting recycling targets?

I now turn to energy performance certificates, which were first introduced in England and Wales on 1 August 2007. They are required only for newly purchased or rented accommodation. The question is whether a holiday letting should fall into that category. I would like to run through a few of the reasons given for why they should, and why those reasons are not persuasive.

[Anne Marie Morris (Newton Abbot) (Con)]

I commend my hon. Friend for calling this debate, because holiday lettings are key to our local tourism industries. I am glad that he has raised that point. Does he agree that the EPC certificate will, effectively, become a tax on tourism? It will also be extremely hard to enforce, because a lot of the lettings are not done through agencies. That, combined with the Finance Bill changes, which change the categorisation for relief, will give holiday lettings, which are small businesses, a real problem.

[Andrew Stephenson]

I thank my hon. Friend for that point. I know that this is an issue close to her heart. The certificate will be hard to enforce, because it applies only to holiday cottages that are being let for more than 140 days a year. How an owner of a holiday let will decide whether it will be let for more than 140 days over the coming year is up in the air. How can anyone predict how good, bad or indifferent the coming season will be? My hon. Friend has made a good point about how the provision will be enforced. I was not going to address that issue, but it is critical.

EPCs would not serve holidaymakers, because those who stay in a holiday letting do not pay the energy bills. They have no need to see an EPC, unlike a prospective buyer or tenant, who needs to see one when looking at the energy performance of a property. When someone rents a property long term, they become liable for the energy bills, which is something that a holidaymaker in a holiday let never becomes.

The argument could be made that a holidaymaker would prefer to stay in an energy-efficient property, purely for environmental reasons. If so, we already have ways for customers to identify not just environmentally friendly holiday lettings, but those that have gone the extra mile through schemes such as the green tourism awards. Malkin Tower farm in Blacko in my constituency is an example of an excellent holiday letting that has been awarded a green tourism award and was the 2008 winner of the Pendle environmental business award.

One could argue that all properties ought to have an EPC, since all properties consume energy and we need to tackle climate change. Therefore, according to that argument, holiday lettings should have an EPC. I think that the fact that that is not Government policy—as I found out when I asked my hon. Friend the Minister, in a written question, what the policy was—means that it cannot be the reason why the Government want to push ahead with introducing EPCs for holiday lettings. The only reason that can be given for this additional cost and red tape on small business is the idea that this change will bring us in line with Europe, specifically the energy performance of buildings directive. That is the justification the Minister gave me on 7 June in response to a written question on the subject asking how the new rules could be brought in, given the moratorium on new regulations from April 2011 for businesses with fewer than 10 people.

It will therefore surprise hon. Members to learn that England and Wales are the only EU countries currently choosing to force EPCs on holiday lets. We should remember that that change is due to come into force on 30 June this year, which is a matter of days’ time. To be fair, France previously required EPCs for holiday lets but, after consideration and consultation, it revoked the law requiring them. I believe that, since 12 July 2010, no other EU country has forced EPCs on to holiday lettings and that England and Wales will be the only countries doing so.

I know that because I have, again, consulted Hoseasons, which has sister companies operating in the holiday letting market in more than 20 countries around Europe. It tells me that none of those companies reports any requirement for EPCs for holiday lets and it is therefore confused that the Government believe we are being brought into line with Europe. This is a classic case of the UK gold-plating an EU regulation—something that Ministers had promised to stop.

For the avoidance of any confusion, I understand that the EPBD states that all buildings are subject to the regulations unless specifically excluded. As holiday lets are not specifically excluded, it has been construed that the regulations must apply to them. However, the regulations also state that EPCs should apply only where a building is to be sold or rented. The question comes back to whether, when a customer makes a booking for a holiday let, that creates a tenancy, with the legal ramifications that go with it. I have received a copy of a document from Local Government Regulation that clearly suggests that it does not. I know that it has been in contact with the Department for Communities and Local Government to express its views on the matter and to make similar points to those I am raising today; for example, the fact that the holidaymaker simply has no benefit from having access to an EPC for the property where they are staying. It is fair to say that I agree with Local Government Regulation in its considered and sensible opinion:

“To apply ‘rent’ in the usual sense to holiday accommodation is absurd and inconsistent with the generally accepted understanding of the term ‘to rent’”.

Given that no country in Europe takes such a view, why does the DCLG, even when it has received advice to the contrary from Local Government Regulation? I hope that the DCLG will reconsider its position as a result of today’s debate.

I come back to what I said at the beginning: it is my intention today to help the Government here. There is a real need to cut regulation, to free up small business and to kick-start growth. Overall, the Government have done exceptionally well so far on that score. The Government’s red tape challenge aims to reduce the amount of unnecessary regulation on business, but introducing unnecessary EPCs and waste regulations on holiday lettings is surely going in the wrong direction.

With an estimated 62,500 holiday lettings in Britain, the introduction of EPCs will create a bill of around £10.4 million. That is a serious burden to impose on genuinely small businesses. By abandoning these proposals, the Government would be acting in support of domestic tourism and helping to keep the cost of a holiday in the UK within the reach of those on lower incomes. The Government would be acting in support of small businesses and in support of reducing red tape and pointless regulations. The Government have done a lot right, but they are in danger of getting it wrong on holiday lettings. By introducing EPCs and treating the waste from a holiday let as commercial, the Government would be upping the costs on an important but vulnerable sector of the British tourism industry.

I would like to leave hon. Members thinking about a holiday let in my constituency—Bobbin cottage in Earby. Bobbin cottage is a small, beautiful cottage with only two bedrooms which is ideally situated for the nearby walking trails. What will the impact of these changes be on Bobbin cottage? What benefit will there be from additional refuse trucks pounding their way through the rural roads of Earby to dispose of the latest holidaymakers’ week’s worth of banana skins and used teabags? Will the holidaymakers read the EPC for Bobbin cottage and think, “Well, it would be a nice place to stay, but will the landlord be paying too much for the steamy hot bath that I’ll need to take after walking across Kelbrook moor?”

The reality is that these changes will not have a positive impact. They will make Bobbin cottage more expensive to run, which will be reflected in the cost of staying there and will make it harder for Britons to experience one of the most scenic parts of my constituency. For Bobbin cottage, domestic tourism and the tens of thousands of small business owners out there affected by these new regulations, I urge the Minister to reconsider.