UK: Deregulation Bill: Short-Term Lets For Long-Term Prosperity

Last Updated: 18 July 2014
Article by Tim Stansfeld

Summary and implications

As part of its Red Tape Challenge, the Government is introducing new legislative measures to remove regulation and bureaucratic burdens, and repeal or amend over 180 pieces of legislation through the Deregulation Bill (the Bill).

Existing law

Under the Greater London Council (General Powers) Act 1973, the use of residential premises in Greater London as temporary sleeping accommodation involves a material change of use. This means that short-term lets of residential units for less than 90 nights would require planning permission from the local planning authority.

This requirement has been inconsistently enforced by the different London Borough Councils, but the law has prevented residential owners in London from renting out their property on a short-term basis.

Proposed reforms

The latest version of the Bill, currently under review by the House of Lords, provides for the Secretary of State to make regulations disapplying the restriction to allow for the use of residential premises in Greater London as temporary sleeping accommodation without this involving a material change of use.

Therefore, a separate order is required from the Secretary of State before the law will change, and the full details of the proposed reforms are still awaited. The draft Bill provides for the Secretary of State to elect that particular residential premises are not covered by the reforms.

Changes of use from residential to hotels or hostels will still require planning permission, and the Government has stated that measures will be put in place to prevent abuse of such reforms or the permanent loss of residential accommodation.

The Department for Communities and Local Government (DCLG) has, however, issued a press release expressing the intention to give Londoners the freedom to rent out their homes on a temporary basis.

The proposed changes also form part of a wider reform of permitted development rights designed to free up the planning system and encourage the conversion of existing buildings. The recent new permitted development rights include changing offices to homes to bring underused offices back into effective use and provide new homes, and change of use from shops to banks and building societies. The Government also claims that the number of empty homes in England has fallen to a 10-year low, and the number of long-term vacant properties has fallen by around a third since 2009.

Potential impact

A number of councils have already expressed concern about the proposals. There is a fear that allowing short-term lets may result in a loss of permanent housing, exacerbating London's already rising housing shortage. Developers and investors may buy up blocks and rent them out as short-term lets at a considerably higher rate than could be achieved from a longer-term let.

These types of lettings are also reported to attract antisocial behaviour, resulting in many existing residents having to complain to their council about tenants of short-term lets. It is, therefore, anticipated that many councils will attempt to resist the reforms applying to their borough, and request that the Secretary of State exercise his discretion in terms of which residential properties are covered. The full extent of the areas to benefit from the reforms remains to be confirmed.

For those properties that are able to be used for short-term lets, removing the deemed change of use could free up restrictions on use of that residential property, and pave the way for some valuable planning consents if the right strategy is followed.

Timing of reforms

The first reading of the Bill took place in the House of Lords on 24 June 2014, with the second reading not yet scheduled at the time of writing.

The DCLG have, however, stated that they aim to have the short-term let changes in place by April 2015.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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