Short-term Lets: Regulation

Rushanara Ali Excerpts

Thursday 12th September 2024 Westminster Hall

[The Parliamentary Under-Secretary of State for Housing, Communities and Local Government (Rushanara Ali)]

It is a pleasure to serve under your chairmanship, Mrs Harris. I start off by congratulating my hon. Friend the Member for Cities of London and Westminster (Rachel Blake) on securing today’s important debate and highlighting the concerns of her constituency. I have an interest to declare: she is one of my oldest friends. I am proud to see her in her place, making her first speech in Westminster Hall.

I am grateful to Members from across the House for their contributions. They have raised extremely important issues and concerns about the impact of short-term lets on their constituencies. They have highlighted the serious challenges that such lets pose in a diverse range of constituencies, in cities such as London and in rural and coastal communities. They have also highlighted the need for action, but in a way that is appropriate for the different kinds of areas and challenges they face.

Contributions have also highlighted a wider point about housing and housing affordability, a major issue for our country. I hope this debate provides an opportunity for us as a new Government to take on board the many ideas, thoughts and insights that colleagues have shared. If we want to get this agenda right, it is important for us to have an ongoing dialogue.

The key concerns highlighted are around safety, waste management, antisocial behaviour, cost of housing and communities being displaced. That should not take away from the fact that we all recognise the important contribution that short-term lets can make to local economies, but they have to be done in a way that is appropriate and does not cause harm in local communities. The pressures cannot be properly understood without taking into account the impacts of such issues.

I recognise the frustrations that many communities feel, where there is an excessive concentration of the properties under focus and particularly in places where there is an acute lack of affordable housing for local people. I also recognise that short-term lets can cause other concerns for local people, including the hollowing out of communities and antisocial behaviour.

[Andrew George]

The Minister mentioned the contribution that self-catering short-term lets make to local economies. Hotels, purpose-built short-term chalets and so on also make an important contribution to local economies and often operate at a disadvantage relative to the many individual short-term lets that are operating below the VAT threshold and that in other respects are avoiding making their contribution to the local community or, indeed, national taxation.

[Rushanara Ali]

I thank the hon. Gentleman for his point. This is why this debate is so important: we must make sure that we address the issues and challenges being raised. The new Government are taking stock and considering a full suite of options for the regulation of short-term lets before we make policy decisions, but I have heard clearly from hon. Members about the issues and challenges they face in their constituencies. We need to ensure that the response is proportionate and appropriate, reflects the different kinds of issues affecting different constituencies, and avoids unintended consequences. The actions we take must properly address those issues.

In England, the average house price is more than eight times annual earnings, and affordability issues are even more acute in the constituency of my hon. Friend the Member for Cities of London and Westminster. The average monthly private rent in London increased by 9.7% last year, and is more than one and a half times higher than the average monthly rent in England. Although it is true that London remains one of the country’s least affordable areas, we are in the middle of a housing crisis right across the country. Years of low house building across all tenures, combined with rising interest rates, have resulted in too few genuinely affordable homes. The issue has been exacerbated in London, coastal towns in places such as Cornwall and areas such as the Lake district by the proliferation of short-term lets and second homes, as hon. Members have highlighted. That is why we want to go further by giving local authorities tools to tackle short-term lets where they are an issue.

The lack of robust data about short-term lets, which my hon. Friend the Member for Cities of London and Westminster mentioned, means that local areas often struggle to define the true extent of the problem and are unable to effectively manage the impacts. Although this data is not perfect, in 2022 a call for evidence suggested that there are about 257,000 short-term lets in England, about 43,400 of which are in London. I know my hon. Friend is keen to have better data about short-term lets in her constituency, and I am happy to hear that she and a number of other hon. Members support the short-term lets regulation scheme. We are committed to introducing the register, which will be an essential tool in enabling local authorities and central Government to access relevant data on short-term lets.

[Markus Campbell-Savours]

Does my hon. Friend recognise the issues with the registration scheme, which the previous Government described in their consultation as “light touch”? It will not meet the needs of areas such as mine, where we do not have the additional legal powers available in places such as London.

[Rushanara Ali]

I am grateful to my hon. Friend for his intervention. It is important that we look at what can be done as part of that exercise. He will appreciate the point I made about the new Government needing to take stock of what is working, where the good examples are and what we can draw on. The register is part of that, and I look forward to ensuring that colleagues’ insights and contributions are taken into account.

[Rachael Maskell]

Will my hon. Friend take a look at my Bill, which proposes a licensing scheme but allows local authorities to determine some of the parameters necessary to control the number of short-term lets in their local area, including control zones, so that we do not see a real expansion of such lets in precious places such as York?

[Rushanara Ali]

I thank my hon. Friend for the offer on the Bill that she prepared earlier, and I know that officials listening to this debate will consider the range of suggestions and proposals that colleagues are making today.

We know that many local authorities are eager for the registration scheme to be operational as soon as possible. We share this view and officials are currently working at pace to operationalise the scheme. The Department for Culture, Media and Sport is now in the initial phase of a digital development process for the register, which will allow us to test and refine the possible options for design and delivery of the scheme. We will factor into that process the points made today and will update the House in due course.

As hon. Members have highlighted, London is unique in England in having certain powers regarding short-term lets. Since 2015, primary legislation has provided that homes in London that are liable for council tax may be let for temporary sleeping accommodation for up to 90 nights in a calendar year. Planning permission is required to let for more than that. However, as has already been pointed out today, in practice local authorities in London report that this limit is difficult to apply and enforce, due to a lack of data on addresses, ownership and the number of nights that properties are let for, and because of limited enforcement capacity. Points were well made in this debate about other parts of the country that do not have the London scheme.

We recognise that more needs to be done to ensure that authorities in London have the tools they need to enforce the limit. As we design the short-term lets register and consider future policy, we will keep in mind the uniqueness of each area of our country and in particular the interactions with the existing legislation that applies to London.

I recognise that the current taxation of short-term lets can be seen to incentivise such use. The Government have confirmed that we will abolish the furnished holiday lettings tax regime from April 2025, which will remove the tax advantages that landlords offering short-term holiday lets have over those providing standard residential properties.

At the end of July, the Government took concrete steps to abolish the regime by publishing draft legislation, which includes transitional arrangements to help landlords to adjust to the change. Councils will also be able to charge a council tax premium of up to 100% on second homes from April 2025. It is for councils themselves to decide whether to charge such a premium in their area.

[Jayne Kirkham]

I have just one small point to make about the furnished holiday letting scheme. There are some properties in Cornwall for which there are planning restrictions that say they can only be holiday lets and nothing else can be done with the property, because it may be on the same premises as the first property. I just want the Government to be aware of that when the regulations are developed.

[Rushanara Ali]

I thank my hon. Friend for her contribution.

Where a short-term let does not meet the relevant lettings criteria, it will usually be considered a second home and will be liable for council tax, including the council tax premium where councils have introduced it. However, we recognise that this may not go far enough towards ensuring that all short-term lets are properly contributing to the local tax system, as the premium will not impact those short-term lets that are eligible for business rates. We will continue to keep the tax treatment of short-term lets under review and will consider what more is needed to achieve our aims.

Short-term lets are just a part of the housing challenge in our country, which is why we are determined to address the issue of affordability and to do what is necessary to get Britain building again.

[Andrew George]

I thank the Minister for giving way one more time. On the point that the hon. Member for Truro and Falmouth (Jayne Kirkham) made earlier about small business rate relief, could the Minister please make sure that some very strong representations are made by her Department to the Treasury with regard to this issue, because the system is being abused at present? When it was first introduced, it was intended to protect village shops and similar businesses; it was not intended to feather-bed property investors.

[Rushanara Ali]

Again, those are really important points that will need to be factored in as we develop these policies. The hon. Member will appreciate that I cannot make commitments today, but we are at the beginning of this Government. We are very keen to make sure we get the policies right. I thank him for the intervention.

[Richard Foord]

The Minister makes a good point about how she and the Government are setting out on a new term and looking at these things for the first time. But the furnished holiday letting regime is set to change in April 2025, so will she consider a pause and looking at that again, given that there has not been any assessment by the Office for Budget Responsibility of what effect it might have?

[Rushanara Ali]

I am going to make some progress, but perhaps I can write to the hon. Gentleman on his specific point.

I return to the point about short-term lets and the wider housing challenge. Through decisive action, this Government will reform the planning system, because we need to increase the building supply. We have our commitment to building 1.5 million homes over the next five years. We will deliver the biggest boost to affordable and social housing in a generation and establishing a generation of new towns. By doing that, we are improving security for millions of people and unlocking essential economic growth—the growth the country needs. The chronic shortage that the country is facing means that owning a home is a distant reality for many. We are committed to achieving a more balanced distribution of homes by directing them to where they are most required, in areas where they are not affordable. Increased supply will help to moderate house prices over the long term, provide for population growth, and improve quality and choice.

We have introduced the Renters Rights’ Bill, which will end no-fault evictions, and we will lay legislation to further reform the leasehold system. We will open up the dream of home ownership to more people by introducing a permanent, comprehensive mortgage guarantee, and give first-time buyers their first chance to buy new homes. We will publish a long-term housing strategy, which will set out our vision for a housing market that works for all and provides long-term certainty for the market.

In closing, I thank my hon. Friend the Member for Cities of London and Westminster for securing this important debate and for her excellent contribution. I thank hon. Members for their contributions on this issue and assure them that we are very much aware of their concerns. We cannot let short-term lets undermine the availability of affordable housing for people to buy and rent. What is more, we are committed to rebuilding our country by taking the steps needed to fix the foundations of the economy and to ensure that everyone has a place to call home. This agenda is really important. It is vital that we respond appropriately, taking into account the insights that many Members have shared today, and I look forward to working with colleagues across parties. I again congratulate my hon. Friend the Member on securing this very important debate.