There’s something of a crackdown on short-term lets happening at the moment, leading to speculation that landlords could be driven from running Airbnbs to traditional buy-to-lets.
Airbnb UK has already agreed to pay a tax bill of £1.8 million, in addition to the £1.1 million it already paid to HM Revenue & Customs last year.
What is more Airbnb has handed over the details of hosts’ incomes in the tax years 2017-18 and 2018-19, which could impact those who haven’t declared their income and made a sizable amount.
The Rent a Room Scheme lets people earn £7,500 per year tax-free from letting out furnished accommodation in their home – but those who’ve earned more than that could face a significant tax bill.
Clearly the signs are that the short-term lettings market is going to be subject to more scrutiny in the years ahead – and it’s perhaps unsurprising given that the market has developed leaps and bounds in recent years.
The pandemic has already resulted in landlords taking a step back from short-term lets over the summer.
Landlords in cities like London and Edinburgh in particular have made the switch, as the pandemic has resulted in a serious reduction of tourists visiting cities.
Some of the headlines around Airbnb may also be contributing to shifting behaviours.
Previously there were fears that too many landlords could switch from regular buy-to-let to short-term lets, as in January ARLA Propertymark found that 10% of landlords were thinking of switching to an Airbnb model.
Now however, the HMRC has made it clear that professional landlords using the platform will have to pay their share.
Airbnb is still attractive
The short-term lettings market is still likely to be a good source of income, regardless of the taxes being paid.
They can offer higher yields depending on the area you’re in, though they take more maintenance than a regular buy-to-let.
It should be noted that you technically need permission from your mortgage lender to “consent to let” – if you’re looking to buy with a mortgage with a view to using Airbnb you should discuss the idea with your broker or lender.
Some regulation is starting to come in, depending on where you live in the UK.
In Scotland the government is looking to give local authorities powers to license short-term lets and introduce control areas, which will put limits on how many Airbnbs are allowed in the area.
It remains to be seen whether short-term let's end up being regulated more heavily in the years ahead, but it certainly seems likely, given how high profile the market has become.
If areas contain too many Airbnb listings you could see the government intervening, given that it could reduce the number of long-term lets, driving up the cost of renting in the process.
Things are moving fast. It’s easy to forget that Airbnb is only 12 years old, despite having such an impact on the rental market worldwide.
This is a developing market, and landlords need to keep an eye on how the picture shifts when deciding whether to focus on short-term lets or traditional buy-to-let.