"The number of short-term lets in the UK [175,000] is equivalent to an area the size of Dorset and is taking housing stock out of the mainstream rental market."
- Jennet Siebrits - CBRE
Following new research by CBRE, which highlighted that the UK has undelivered between 1.5 and 2.5 million homes over the last twenty years, the real estate advisor has considered several possible solutions that could enable the UK to improve housing supply and the likelihood of success.
1: Introduction of rent controls
CBRE cautions against the introduction of rent controls as the short-term benefits would likely not outweigh the long-term cost of supply shortages and poor-quality stock.
Scott Cabot, Head of UK Residential Research, said: “Implementing rent controls would risk reversing the positive increase in supply of the PRS over recent years, and halt the development of the emerging BtR sector, which has now delivered 267,000 homes in the UK. Imposing rent controls on a market with a severe lack of supply would only exacerbate the problem by deterring private landlords, as we’ve seen in European and other international markets.”
According to CBRE research, following the announcement of a five-year rent freeze in 2020 in Berlin, there was a 35% drop in rental supply within a year. And, as seen in other markets, once controls are introduced, they are difficult to reverse.
2: Tightening regulation of short-term lets
Caution should be taken about introducing measures on short-term and holiday lets, to avoid having a detrimental effect on UK tourism.
However, greater returns and lower fees from short-term lettings are persuading landlords to move away from traditional private renting. Around 250,000 properties were available for short-term let in England in 2022, of which 70% of these lettings were for “entire” properties.
This suggests that 175,000 flats and houses that could be used as permanent homes are being used as short-term holiday lets.
Jennet Siebrits, Head of UK Research at CBRE said: “The number of short-term lets in the UK [175,000] is equivalent to an area the size of Dorset and is taking housing stock out of the mainstream rental market.
"Furthermore, despite the growth in the build-to-rent sector since 2013, which stands at approximately 100,300 completions - BTR hasn’t yet been able to replace this stock.”
“Introducing legislation that allows a differentiation between short and longer-term lets would be beneficial. A clearer and uniform approach to legislation across the UK would better capture the change of use stock and allow decision-makers to better understand how short-term lets are impacting housing supply.”
3: Restricting overseas buyers
CBRE believes that restricting overseas buyers could hinder residential development activity.
Overseas buyers in the mainstream market tend to favour new-build stock and are comfortable buying properties off-plan. Most developers of large-scale urban apartment schemes need off-plan sales to enable construction activity to start, with a certain percentage of off-plan sales required by the debt funders to de-risk the investment in the scheme. In tandem, overseas buyers contribute around 60,000-70,000 rental homes in London alone.
Siebrits concluded: “Many of London’s very large residential development sites have used overseas investment to kick start and speed up development. The funding required for much-needed housing would be in jeopardy if overseas investment was restricted.”
