Introduction
The Department for Levelling Up, Housing and Communities (DLUHC) has published a consultation on the creation of an additional use class "C5 – short term lets" together with permitted development (PD) rights to provide flexibility, where there are no local issues with these uses. The new use class "C5" will be distinct from the existing use class relating to dwelling houses ("C3"). The consultation's proposed changes will not apply to hotels, hostels or bed & breakfasts.
Proposals
The changes would apply to short term lets including flats or dwelling houses (wholly or in part) in England. The properties would not be for use as a main home.
Holiday rentals and short terms lets play a crucial part of England's visitor economy. They offer greater flexibility for tourists, families and business travellers. Without them, regional, seasonal and local economies would not thrive.
However, the consultation's proposed changes would provide local residents and councils with greater powers to control the increase of new short term lets within the local property market. The proposals are designed to protect local communities, many of whom require long term lets and affordable family housing within their area.
The consultation proposes the addition of a new use class "C5 – short term lets" and associated PD rights for properties to change from use class "C3 – dwelling house" to use class "C5".
The consultation also proposes enabling councils to undertake steps to disapply the "C5 – short term lets" PD rights by making an Article 4 direction. Article 4 directions can be used where necessary to protect local amenity or the well-being of the area. The effect would be to remove this right and require the owner to apply for planning permission to change the property's primary use. A similar arrangement was made when use class C4 was created for small houses in multiple occupation (HMOs).
Ultimately, these changes will put an additional layer of planning control, uncertainty and restriction on new properties.
Effects
A new use class and regulatory regime has the potential to affect new Airbnb rentals, business lettings, specialised holiday home developments, serviced apartments, second homes and rental cottages.
The proposed changes would prevent new purchasers being able to let their properties, if a council removed their PD and refused to grant planning permission. This is likely to increase the cost basis of letting and administration of such properties. Business rates may be applied as opposed to council tax. The proposals and questions in the initial consultation do not provide high level detail and leave doubt as to the consequences for an owner or investor.
The interactions with the small HMO use class C4 are not clear, especially when Airbnbs are often used by unrelated groups of people and those with such properties should certainly make representations. It could also leave homeowners outside London (where short lets are already somewhat controlled, but a 90 day annual allowance exists) uncertain as to the effects of one-off short lettings.
Locations
Since the pandemic, the British appetite for local UK holidays has grown exponentially. The purpose of these changes is to try to prevent already popular tourist areas changing into seasonal villages and winter 'ghost towns' due to the infrastructure strain and exclusion of local residents in that area.
We predict that the proposals may well affect new development of popular holiday spots, particularly Salcombe, Woolacombe and Padstowe. They may also affect most of Cornwall, Devon, Dorset and the National Parks.
DLUHC is seeking responses to its online survey to inform policy and legislation making and to allow those interested parties to have a say as to how they will be affected.
The relevant consultation can be found here. The closing date for replies is 7 June 2023.
Parallel consultation
The Department for Culture, Media and Sport has also launched a parallel consultation for the registration scheme for short term lets.
The proposals would assist local authorities to monitor this type of use. However, it would not directly address the need for affordable housing (rented or purchased) of the right tenure for local families in these locations.