20
Examination of witnesses
Councillor Matt Noble and Councillor Judy Pearce.
Q25 The Chair: Welcome to the House of Lords Built Environment Committee’s public evidence session, which is part of our short inquiry into short-term lettings and their impact particularly on the housing supply. The aim of this session is to discuss the scale and impact of short-term lettings, as well as potential options for regulation of the sector. The inquiry will result in a letter to the Government, making recommendations for addressing these issues, including the Government’s proposed register.
Our witnesses today are Councillor Matt Noble, cabinet member for climate, regeneration and renters at Westminster City Council. He is accompanied by Simran Kharay, senior public affairs officer, and Sarah Slate, national management trainee. We also have Councillor Judy Pearce, leader of South Hams District Council, who is attending remotely—as are one or two members of the Select Committee, given the state of the transport system this week. She is accompanied by Stephen Walford, the chief executive of Mid Devon District Council, who is also attending remotely.
The session is being broadcast on parliamentlive.tv. A full transcript will be taken and made available to witnesses to make any corrections shortly after the session. I ask members and witnesses to keep their questions and responses brief, because we have a lot to cover. I ask members to introduce themselves by name when they ask their first question, because it is not necessarily possible for those attending remotely to read the name plates in front of the desks.
What is the role of short-term lets in your area? What is the size of the sector relative to the private rented sector, the social housing sector and the owner-occupancy sector?
Councillor Matt Noble: I thank the committee for inviting us. The number of short-term lets has increased significantly since the regulation in 2015, at which point people were no longer required to have planning permission for short-term lets. Just before the pandemic, in the first quarter of 2020, 13,039 Airbnb properties were listed in Westminster, which was the highest number in London. Some 7,047 properties are currently listed on Airbnb in Westminster, which is 10.6% of all Airbnb listings in London. Some 71% are entire homes, and 64.5% of hosts have multiple listings on the site.
I will give the context for the other sectors in Westminster. We have 124,000 properties in total on the council tax register. There are 53,000 properties in the private rented sector, which is the largest in the UK and accounts for 47% of all our properties.
The Chair: To make our numbers add up, are the roughly 7,000 Airbnbs included in the 53,000 figure, or are they numerically in addition to it?
Councillor Matt Noble: They in addition to it.
The Chair: So it is a separate category. That is helpful to know.
Councillor Judy Pearce: Our overarching comment is that the data is extremely hard to source definitively, because there are no mandatory reporting requirements for short-term lets. For Mid Devon, the statistics are as follows: 298 properties are officially registered as holiday lets for business rates, compared to almost 1,000 active rental listings on Airbnb in the second quarter of 2022.
The key statistics for Devon are as follows. There has been an increase of 3,118 active listings on Airbnb, or that type of platform. It has gone from 10,946 in the second quarter of 2019, before the pandemic, to 14,000 in the second quarter of 2022. After an initial dip during the pandemic, the number of Airbnb listings has gradually recovered, with an additional 2,812 active listings added between the second quarter of 2021 and that of 2022. For context, those additional 2,812 active listings are set against a backdrop of 3,726 new dwellings being added to the county’s housing stock in 2021. To put it another way, during this period, approximately 75% of the new additions to the housing stock required to meet local need, as defined by the planning process, were lost to the short-term letting sector straightaway.
Devon’s total housing stock is around 385,000 dwellings, and active short-term rentals on Airbnb-type platforms for the Devon area are around 14,000. For context, as of September 2022, we had approximately 17,000 people on the housing waiting list across Devon. The length of housing waiting lists has increased by 1,000 in the last year, from 16,000 to 17,000, and the latest housing delivery statistics show that we secured or delivered 600 new affordable homes. But we also lost 110 through the right to buy, so the net uplift is 490. We are not able to keep up with demand, let alone clear the backlog.
The Chair: Councillor Noble, you mentioned deregulation in 2015. There was a change in planning regulation at that time. I will put to you what I think that change was, and you can correct me if I am wrong. Then I want to explore with you whether reversing that change would be of assistance to you. My understanding was that, prior to that point, properties were in a use class that was either residential or short-term let, which were separate and distinguished by the length of the lease. If you let properties on leases that were longer than 90 days, that was counted as residential—this is obviously arbitrary—and if you rented properties on leases shorter than 90 days, that would count as a short-term let. Is that your understanding of what the position was?
Councillor Matt Noble: Yes, that is correct.
The Chair: So what changed was that every residential property was allowed to be rented out short term for up to 90 days a year. Is that correct?
Councillor Matt Noble: Yes.
The Chair: I had some experience of this, given my role at the time as a member of a local authority in central west London. It seems to me that the enforceability of the first is relatively straightforward. Obviously not a lot in planning is investigated, unless there is a complaint, which is the normal prompt for initiating an enforcement activity. You do not have the capacity to go around knocking on everyone’s doors to make sure that they are complying with planning law, so if there is a complaint, you could speak to the landlord and ask to see the leases, which would determine whether a breach had occurred, because you could see what the lease said and consider what enforcement action, if any, was expedient and how the situation might be corrected for the future.
Am I correct that, knowing how many days in a year a property has been let, and whether this exceeds 90, is almost impossible for planning enforcement officers? All of what I have said could be wrong, and I want you to engage with that as an argument and tell me whether my understanding is correct. If it is, one might consider what policy implications there are. So have I got this right?
Councillor Matt Noble: You have. I cite the example of the situation in central London boroughs in particular during the Olympic Games in 2012. The advice given then to people who might have been thinking of letting their properties on short lets was that they would require planning permission and that most London authorities would accept that application, but the answer would be no. So you could apply, but you would not get it.
Nowadays, the situation is that if you are not tracking an individual property all the way through to know how many days it has been let out for during a given period, it is impossible to know whether 90 days have been exceeded. Frankly, I do not think there is a local authority anywhere in the country that has the resources to track all those properties all the time.
The Chair: Councillor Pearce, do you have anything to add? I have one more question to come in this connection, and then we will move on to someone else.
Councillor Judy Pearce: The situation with us is slightly different. A huge number of short lets—about 76%—are for whole properties rather than just rooms. A lot of those have been given planning permission as, for instance, granny annexes or ancillary accommodation to the host property, and do not strictly have planning permission to be let out as individual units but nevertheless are. The problem with online advertisements is that the hosts often advertise themselves under a pseudonym—a first name rather than a family name—and no address is given until you have booked, so it is quite hard to know where these properties are unless you actually recognise the property.
The Chair: Coming back to Councillor Noble, now that we have established a common understanding, my question is obviously leading to whether there is any merit in this committee suggesting that we revert to the pre-2015 arrangements. There is the potential that that could annoy an awful lot of people who have properties where they are letting out rooms, and that is something we might want to see happen. Would you find that too restrictive? Would it cause mayhem in Westminster? Would it destroy something that is actually a very useful flexibility in the housing system—I will be asking the same questions of Councillor Pearce—or is there merit in seeing a reversion to the previous system?
Councillor Matt Noble: I do not want to pre-empt the conversation that we will have on the overall benefits and the pros and cons of short-term letting, which we will come to very soon. I do not think we have looked at this question. The prospect of returning to the pre-2015 arrangements has not really been tabled by anyone, so I am not sure whether we have looked into it fully. There is a legitimate place for people to be able to rent out rooms in their properties for short periods. There are also legitimate times when people might choose to rent a property out for a short period. Going back to the pre-2015 arrangements would have a significant impact on people’s businesses in Westminster, to the extent that we would probably have to take a view on that regarding the people who live in Westminster permanently.
The Chair: Councillor Pearce, would you see any merit in reverting to the 2015 arrangements as far as South Hams, or indeed the county of Devon, is concerned?
Councillor Judy Pearce: We have three categories of short-term lets. There are farm complexes and places like that which have applied for planning permission to operate a commercial enterprise, and they might have a communal bar and games room or something like that, so we know they are a business and therefore there is no problem. Then there are the individually owned houses that let themselves out through recognised local agencies and have to go through all the safety checks, and we are reasonably satisfied that they are being run properly and have applied for business rates. However, there is also this huge difficult-to-trace element of online advertisements for properties that at least nine times out of 10 do not have planning permission, and those are the ones that we would be anxious to catch by having a new planning class. If that includes the individually owned houses that are being let out through agencies, then so be it, but we are really keen to catch the ones that at the moment are under the radar.
The Chair: I understand that.
The Earl of Lytton: I am a practising chartered surveyor, among other things, and my wife and I are involved in the holiday accommodation market in Somerset. I would like to be clear: is this a matter of compliance with safety, planning and other things, or a question of social dislocation caused by the displacement of other opportunities in the normal private rented sector—in other words, year-round occupation by people who live and work in the locality? It seems to me that there has to be different analysis for those two.
Councillor Judy Pearce: It is both, but the social aspect is the one that exercises us the most because the housing situation in Devon in general is extremely tight and the increase of internet-advertised lettings is severely impacting the longer-term lets that people who live in Devon would otherwise have been taking. For example, Torbay has seen a 52% increase in Airbnb-type listings but is heavily reliant on the private rented market to house its population, with 26% of its stock from the private rented sector. That is above the national average lettings of 19%. Also, its social housing stock is only 8%, significantly below the national average of 17%. That is an extreme example, but we have other extremes showing up in north Devon along the coast, while we in the South Hams have had similar problems. So there is the social side, but it is about how you tackle that problem. We see the planning system as one solution among many—licensing would probably be another—to some of these problems.
Q26 Lord Berkeley: I live in Cornwall and the Isles of Scilly, and I know the South Hams pretty well. Following up Lord Lytton’s question, as Councillor Pearce said, a large number of people can probably never afford to buy their own house and will need social housing if local authorities, buses and other facilities in the locality are going to continue to operate and people are going to live there. I saw similar statistics to those that Councillor Pearce has just given us, from Plymouth, and they were pretty frightening: the increase in Airbnb lettings there was kicking a lot of people out who were normally letting long term. It is the same in many places in Cornwall. I want to ask both of you: what is the solution? There has been a dramatic change, as you have both outlined, in the number of long-term lets that have been lost to the community. How are we going to get them back so that there is a proper amount of social housing for people who need it in order to keep life going, so to speak?
Councillor Judy Pearce: First, we have nothing inherently against second homes and short-term lettings. It is more a question of redressing the balance and having some control over where that balance lies. That is the first important point.
A number of things could be done to achieve this. A licensing system, rather than a regulation system, would give us some control over the type of property and the facilities offered. It would also, for instance, give the fire service an intro to the property so that they also have some regulation over it.
Planning regulation is a way of ultimately limiting the number of short lets that could occur. A maximum number of nights would probably be part of that and would also be useful. However, as part of the overall package, there must be changes in the tax regime so that local people can see that the system is fair. Why should you get mortgage interest relief on a second home when you cannot get it on a home that you are trying to buy? There is also all the business expenses relief that second-home owners can claim if they are letting their property.
It is a question of social justice and of the whole social system starting to collapse around the coast. Businesses trying to service the tourist industry cannot get enough people to work in their businesses because those people cannot find anywhere to live, let alone anywhere that they can afford. The business owners are making their own private arrangements, some suitable, some less suitable, to house their workers.
Finally, there is also the question of a tourist tax. This has not been mentioned but could be looked at. It would have to be imposed everywhere, because some regions would suffer otherwise.
Those are the sorts of solutions that we hope that you can explore.
Lord Berkeley: Thank you very much, that is very interesting.
Councillor Matt Noble: I echo some of the things that Councillor Pearce was saying, particularly around seeking to redress the balance. There is an uneven playing field at the moment for our more traditionally established hospitality businesses in Westminster.
For example, the issue of tax was talked about. The Ritz hotel pays £2.27 million in business rates annually, providing a major contribution to the Exchequer. Yet the combined council tax bill for one apartment building in Westminster which just pre-pandemic had 98 short-term lettings is about £93,000.
People talk about different businesses being disruptive to the market. That tends to be a way of side-stepping or circumventing contributions to the country made by other businesses. We must redress the balance. We must look at the impact that this is having on inflating rents in the private rented sector in Westminster. As I said, we have a huge number of properties in the private rented sector. We have 4,000 households on the waiting list for social housing. Lots of these properties are in areas where people could not be in social housing because of the affordability. However, when your first and pretty much your only option is the private rented sector, it makes it very difficult for most of our residents.
The Earl of Lytton: I am not sure that I see from my experience a direct substitution between short-term letting and the private rented sector, as opposed to owner-occupation. Do any of you have market analysis and data on this? If not, what can be done about that?
Also, if there was a substantial reduction in the short-term-let properties in your areas and that was somehow redeployed to other sectors, what would be the implications for the profile of your local population, in terms of their occupation, age, family, work/life balances, that sort of thing, and how would that feed into dealing with housing need and augmenting the local economy? I know that the answer will be different in South Hams compared with Westminster.
Councillor Matt Noble: Most of the Airbnb properties in Westminster have come directly from the private rented sector. That is where a tenant is renting a flat on a long-term basis and then sublets on Airbnb.
It is possible to say with a degree of certainty that if Airbnb went away, those properties would return to being long-term PRS properties. The resulting increase in supply and reduction in demand would cause a downward trend on rental rates in Westminster, which have never been higher.
The Chair: Why, do you think, did they move from being private rented to Airbnb?
Councillor Matt Noble: You can get the same income from a two-bedroom property on a short-term let in just 115 nights as on a long-term rent in a year. There is a profit margin there.
The Chair: That is very helpful.
Councillor Judy Pearce: I agree with what Councillor Noble has said. We have considerable evidence over the last two years that the number of long-term lets has decreased dramatically as the number of short-term lets has increased. The two figures directly correlate. I also agree that in a very few nights you can rack up on a short-term let what you would get all year on a long-term let.
Also, because long-term lets are in such short supply, the amount being charged is going up exponentially. Our local housing allowance in no way meets what is required to rent, for instance, a three-bedroom house. At the moment, around us, the average monthly price for a three-bedroom house long let is about £1,650. That represents 63% of the average wage for someone living in Salcombe. By contrast, the local housing allowance is only £693.12 per calendar month, which is barely 40% of the charge. Frankly, this makes living in the area unaffordable.
Families have to move out. There are long commutes. It is putting in peril services such as the voluntary fire service and the lifeboat in some of our coastal resorts. They are extremely difficult to get personnel for because nobody can afford to live in the area.
Q27 Lord Stunell: You have painted a very clear picture in both cases of the connection between the private rented sector short-term and long-term, and you have sketched in some of the solutions as you see them, some perhaps more realistic than others in terms of national policy.
Can you pick a winner for us? You mentioned tourist tax, for instance, which would be levied very unevenly; I could imagine Westminster, under any system of tourist tax, finishing up with more money than anybody else. Can you comment on the options that you have presented to the committee, and perhaps venture a bit further on what you would like a recommendation from this committee to contain?
Councillor Matt Noble: Picking a winner is difficult. I do not think there is any one thing that would solve the problem, so I am going to sidestep that question slightly. We agree with the proposals to have a compulsory registration scheme for the flats; that works well in many areas of continental Europe. We also need increased powers for local authorities to prosecute the people who are actually running the Airbnb, be they the tenants who have the property on a long let and are then subletting them or the people who actually own them. At the moment, the issue is that if there is anti-social behaviour and we need to levy a fixed penalty notice against someone, by the time we find out about the case the people who were occupying the property have gone. We have also been looking at things like increased taxation to redress the balance against what other, more established people in the sector are having to pay.
Lord Stunell: A nice sidestep.
Councillor Judy Pearce: I also might do a bit of sidestepping. One of the basic tenets is that we feel everyone should be paying council tax and not be able to move over to business rates, or should be paying business rates in addition to council tax. The reason for that is a basic tenet of fairness. At the moment our resident population is subsidising the visitor population for things like street cleaning and emptying of litter bins, which the visitors, particularly the visitor landlords, are not paying anything towards. That would be the first point.
As for a system of registration, we feel that a licensing system would be better for several reasons. First, a licensing system could be self-financing, like the rest of the licensing system. Secondly, it would enable the council to have much more direct control over the properties by whatever the licensing system allowed them to do, for safety reasons in particular. Grenfell was a wake-up call. We are just waiting for a fire, although we hope that is not going to happen. Should there be a fire in an unregistered letting on one of the online platforms, the immediate response will be, “It's the council’s fault”, but at the moment the council has absolutely no jurisdiction over any of those properties, nor does the fire service, so we cannot check them for safety, nor can the fire service.
Licensing would provide a way in to make sure that these properties are safe and the right size to be let. I visited an Airbnb property recently and found that two of the bedrooms had no windows in them. In fact, there were only two bedrooms and neither of them had a window in. These had been carved out, against planning permission, in a property that we had discovered. That is being put right now, but it is a for-instance. We do not know how many of those there are, and it is impossible for us to catch up with them all.
Q28 Lord Grocott: You have touched on my specific question from different angles, including the most recent answer from Councillor Pearce. This question is about data. You have given us a lot but that was on a general question. I will follow up with a specific one: has a lack of data on short-term lets been an issue for you, and what could be done to address that?
Councillor Judy Pearce: The overarching issue is that we do not have enough information on these properties, and a licensing system rather than a registration system would go a long way towards helping us on that. It would also give us a way of preventing the anti-social properties being relicensed, whereas a registration system may not achieve that.
Councillor Matt Noble: I agree with Councillor Pearce. If we were to have a data-sharing agreement with the platforms, that would be incredibly useful so that we could access and identify those issues of non-compliance with the hosts. As I said before, we are just relying on fixed penalty notices, so it is impossible to identify who it is, and we want the power to prosecute the host. In a registration scheme, having a registration number linked to the property would make that much easier. As I said, over 50 cities in continental Europe have introduced such systems and that works quite well.
The Chair: May I distinguish between licensing and registration? Councillor Pearce has made that distinction and she would like a licensing scheme, not merely a registration scheme. Do you have a view on that? I am sorry for interrupting, but I thought that while we were on the topic, we could pin this down. You do not have to have a view, but do you?
Councillor Matt Noble: I do not, particularly. There are varying degrees: what could start off as a registration scheme, if you then apply more conditions to it, starts to look like a licence. In my opinion, it is a difference of degree.
The Chair: It might be a question of needing a different legal basis, essentially. We would need to know that at the start if we were to set it up. Legally, you cannot osmose a registration scheme into a licensing scheme.
Councillor Matt Noble: No. A compulsory registration scheme with enough information provided could potentially provide the same impact as a licensing scheme.
Lord Grocott: I have a more specific question. We found early on in our inquiry that short-term lettings can mean an awful lot of different things, ranging from one room in a house to a whole property, and various other ramifications. It is fair to say that the main area of concern for the committee is when a house that was previously clearly a residential rental for long-term let ceases to be part of the housing stock and becomes part of the holiday stock, or whatever stock you want to describe it as. Would you be able to get the precise statistics on the number of short-term lettings that were previously long-term lettings? How would you identify that? I am sure that that is the focus we are most interested in.
Councillor Matt Noble: As I say, having data sharing with the platforms would allow us to drill down into that level of detail, whereas at the moment we are just looking at what it says on the platform and then trying to work out the rest of the picture from the limited information that is provided to us. I absolutely agree that the main impact is where you have whole properties and, in some cases, whole blocks that become short-term lettings. There is one on Edgware Road in Westminster where we are pretty certain, from the last time we checked, that 90% of the properties in that block are short-term lets, but the way that we have got to that figure is by going and talking to people who work in the building, such as the concierge, to try to work it out. It becomes more difficult for us to gather firm evidence when we are picking it out.
Lord Grocott: This is probably a naive question, but if somewhere is a house or a flat that is used by the owner/renter, that is not a business, is it? We are distinguishing between houses and businesses. Surely that ought to be possible to identify.
Councillor Matt Noble: It should be, yes.
Lord Grocott: Can we hear from Councillor Pearce, please? I think you have almost answered the question about the reasonably precise numbers of short-term lettings that have come from long-term lettings in your patch.
Councillor Judy Pearce: We have evidence of that, but we also have a huge number of granny annexe-type ones, as I mentioned. We also have ones with a lower ground floor, because we have a lot of hillside properties. They have plenty of windows, but they may not be directly attached to the main house and are being let out as short-term lets. They could equally well be long-term lets because they are independent of the main dwelling. Those are the ones that it is really difficult to catch up with. The hosts are not paying separate council tax and are clever enough not to apply for business rates either, because it is in a separate dwelling on the listings.
Lord Grocott: You describe that very well. It is a complexity that we would not necessarily have been aware of without your evidence.
Finally, could you provide the committee with the specific number of dwellings, as far as you can estimate it, that have been lost from being dwellings to being holiday accommodation, and business enterprises in effect, certainly in the case of Councillor Pearce’s area?
The Chair: I think Lord Grocott means in writing after the meeting.
Councillor Matt Noble: Yes. We will be able to provide you with our best idea of those numbers.
Q29 Baroness Thornhill: Thank you. You have answered many of the questions already. You both seem to be saying that the real issue is that you have genuinely lost long-term tenancies for local people, which is definitely impacting on your communities and the ability to fulfil your responsibilities to them, and we absolutely need to nail that.
I am hearing lots of ideas about how this might be redressed, but can you be candid with us and say whether, if you want landlords with existing properties to revert back to longer-term lettings, the measures that have been suggested are strong enough to—let us be positive—incentivise them to do so; or will they deter them—whichever way you want to take it? You cannot fatten a pig just by weighing it. Okay, I know how many there are, but does that solve Judy’s problem of people not getting staff in care homes because there is nowhere for them to live, or whatever.
I was particularly interested to hear comments about social housing. I know it is an emotive issue, but, from your point of view, what are the barriers to more social housing and trying to get accommodation for the people who are doing these jobs?
The Chair: That is slightly broader than this subject.
Baroness Thornhill: It is, but it is important.
The Chair: It is important, but it is still slightly broader than the subject we are discussing.
Councillor Matt Noble: Thank you, Baroness Thornhill. I am perfectly happy to answer questions on social housing as well. Our challenge with social housing in Westminster is the shortage and the cost of land. That is basically it. The slightly newer factor is the inflation in construction costs that prevents us from building more and impacts on the viability of schemes overall.
A certain number of properties on Airbnb are openly flouting the law at the moment, so having more data on where the properties are overall and potentially having a scheme of registration with a cost that could be passed on to local authorities so that we could enforce more would also have an impact. Again, I go back to being able to trace the actual operators of the Airbnbs, because there is an impact not just on the PRS but on residential amenity because of the ASB issues that come up—for example, a certain number of properties came on to Airbnb in the first six months of lockdown that were there purely for organising illegal parties. So it is more than just the impact on the PRS.
As for the options that have been presented to us, we would go not quite for a laundry list but for a combination of the different means that have been suggested. In Westminster, the problem is acute. We think that 22% of all the properties in one of our wards in Westminster, Lancaster Gate, are on short lets. That is huge; in the West End, it is 20%. Those are estimates, but that is coming from the information that we can glean from Airbnb itself. So, yes, we would like to have a few different options.
I have spoken to a Select Committee before and have asked for the same thing: for there to be more money and more power for local authorities so that we can manage things locally, because we understand the problems perhaps better than central government does, and the difficulties we face will be slightly different from the ones in South Hams that Councillor Pearce is facing.
Baroness Thornhill: More local autonomy to choose your weapon, in effect.
Councillor Matt Noble: Yes, please.
Councillor Judy Pearce: Thank you. That is a very good way of looking at it. As far as we are concerned, as I have already said, it is a question of redressing the balance so that local people have some chance of finding somewhere to live that they can afford. Obviously, increasing the amount of social housing provided would be a great asset, but we in Devon are largely reliant on the major housing developers developing out the allocated sites in our local plans. We are doing that all over Devon. We have got largely approved local plans that are in date, and we are delivering our housing. However, we are not delivering housing that local people need.
There is this eternal tension between what the developers want to develop and what the local district actually needs. We have a degree of control over that, and we are trying to increase it, but it is still not a perfect system. We are not delivering the right number of small units, and we are delivering far too many large units, some of which, in the coastal areas in particular, become second homes from new or appear immediately on Airbnb.
What can we do about it? We need holistic action. We have already had the business rate regulations, which are coming into force on 1 April, but, unfortunately, these are neither strong enough nor part of a package to solve the problem. In fact, it will be very easy for a lot more people to flip over on to business rates than previously, particularly if the regulation on being able to charge 200% council tax comes in the following year. We were disappointed that the business rate threshold was only 140 nights’ advertising and 70 nights’ occupancy. We were told that that was because that was what Wales had, but I see that, in the meantime, Wales has almost doubled its quotas to a probably unachievable level, which will be difficult. We feel that a much higher level than 140 nights’ advertising and 70 nights’ letting would have been better.
The Chair: Could we now come to Lord Haselhurst on a question which we have explored a little already in the course of our discussion?
Q30 Lord Haselhurst: Could you give us your views, please, on the Government’s proposals for a register for holiday accommodation? Would it be overly bureaucratic to bring in some national system, or even, because it may be tailored more to your differing needs, to be given local powers so that you could balance the need for new houses to meet the legitimate aspirations of young people growing into adulthood, while at the same time maintaining commercial benefit to people who are genuinely in the business of offering holiday accommodation and a pleasant change from where they might otherwise be living for the rest of the year?
Is there a formula that you think would work? What worries me more than anything is a report that I read in the press about an 18 year-old—this is not in either of the areas for which you have responsibility—who was quoted as saying, “There is no way when I move out of my parents’ place that I will be able to afford to stay in the village.” It seems to me that unless something is done then the social structure of many different places will be undermined. Would you agree?
Councillor Matt Noble: I would. It is not just a problem for 18 year-olds; it is a problem for people who are well into adulthood who have good jobs. I rent in the private rented sector, and I am 41 years old. The reason for that is that I cannot afford to buy a place to live in Westminster. I do not want to get into the nuts and bolts of the affordability issue, but the issue we are seeing is that families are separated. When young people grow up, form a relationship and want to have a family, they have to leave Westminster because there is no way they will be able to afford a two-bedroom property, either to buy or in the private rental sector. As I said before, we have 4,030 households on the waiting list for a social rented home. The waiting time for a two-bedroom social housing property in Westminster is 10 years; for a three-bedroom property it is 16 years and for four bedrooms it is 34 years.
We cannot fix all these problems by making it more difficult to let out a property on a short-term lease, but we need to get rid of the people who were abusing the system and to have those properties returned to their original intended purpose, which was to be used as homes, not as businesses. Personally, I think there is enough commoditisation of housing in this country as it is. The private rented sector is the largest sector of accommodation in Westminster, far larger than social housing or owner-occupancy.
We would like to have the measures being proposed at the moment because we think they would enable us to gather the data we need to push out those bad apples. We can see some benefits economically of having a limited short-term letting sector, but the parts of the economy that benefit from that are the ones that traditionally benefit from hospitality in hotels—restaurants and other bits of the tourism industry apart from the hotels themselves.
Lord Haselhurst: Would Councillor Pearce agree with that or see different aspects of the problem in South Hams?
Councillor Judy Pearce: I see it slightly differently. I maintain that we would be looking for a licensing system, just as that works well for houses in multiple occupation. All bars and hotels have to be licensed and are inspected by our environmental health departments regularly. The advantage of licensing over registration, as we see it, is that it would be a self-financing system. If it were merely a registration system and we were responsible for it, the question would be: would burdens funding come down from central government to run a registration system? In the present circumstances the answer would probably be no, so that is another reason for moving to a licensing system; it would finance itself, so we could employ people to do it and run it successfully.
With regard to the balance between short-term and long-term lets, it is a question of supply and demand. If you restrict the supply of long-term lets then inevitably the price goes up, and the result is that young people cannot afford to rent properties. Maybe they can share, and I think young professionals do that, but the problem is that even professional people in our area are excluded. We have people who get consultant jobs at Derriford Hospital in Plymouth and think, “Life in the South Hams would be great because it’s much nicer than living in the city”, but they then do not take up the job because they cannot find or afford anywhere to rent for the period of the contract they are undertaking. It is a question of supply and demand and finding the right balance. We do not want to end short-term lets completely, but we want to redress the balance and make our housing supply more fit for purpose for people who live locally.
Lord Grocott: What is the right balance?
Councillor Judy Pearce: To me, the right balance would be an adequate supply of long-term lets at a price that local people could reasonably afford, with or without a local housing allowance. Otherwise, there needs to be a change in the local housing allowance because at the moment the two are completely out of kilter. It has always seemed iniquitous to me that the Government should be paying private landlords to house local people. Again, that is a structural problem that needs looking at.
Q31 The Chair: I have a question that I was going to ask later, but it backs on to Lord Grocott’s question, so perhaps I could throw it in now. It applies to both of you but particularly to Councillor Pearce. Obviously, this problem is acute in holiday destinations but much less so in other parts of the country, and both of you had been invited because in both cases your areas are major tourist attractors. On the question of balance, you—Councillor Pearce in particular—have talked about the difficulty of having staff to support the tourism industry and other activities, such as lifeboats, which are ancillary to an effective and safe tourism industry. You are not mentioning the balance of attracting tourists and visitors and whether the advantages for the economy that arise from being able to do that should not have some weight in your consideration as well. You have not really mentioned that side. A tourism industry with no tourists is as unattractive as a tourist industry with no workers.
Councillor Judy Pearce: I do not think I have ever suggested that we should abandon the tourism industry. I am saying that we need to redress the balance. I agree that it is difficult to find exactly where the sweet spot is, but I think that we are aware that, both here and in Westminster, it has swung too far in favour of the tourists. In other words, we could have a lot fewer tourists and still run a very successful tourism trade. In fact, it might be a lot more enjoyable for the tourists because there would not be so many of them packed together. I will give you an example.
The Chair: No, that is fine. I was just interloping on that question. That is a very helpful answer.
Q32 Baroness Cohen of Pimlico: I find myself, listening to this discussion, coming at it from a different angle. I started out rather disapproving of the social consequences for desperate people looking for anywhere to lay their head and being frustrated by properties being let out on a short-term basis. However, I have come to think that it cannot be in anyone’s interest—employers of any sort, at any level—for people to be unable to get to work in their areas, or to have to go so far that they cannot be bothered. It occurs to me to wonder whether one of the reasons why there is such a tight labour market is that people are having to travel a great deal further than they would wish. Do we think that one of the reasons why we would be glad to have a strongly enforceable, self-financing legal registration system is that people might be able to get labour? I am not just thinking of consultancies; I am thinking of simpler things like people in the hospitality business. I come from Cambridge, and everywhere there are advertisements for labour in whatever field. Pubs and restaurants are opening two days a week—
The Chair: I think we have got it, Janet. I think the answer might be different as between London and South Hams because of the different levels of public transport provision.
Baroness Cohen of Pimlico: Indeed.
Councillor Matt Noble: The answer is that there are hiring difficulties for lots of our core services in Westminster; I am thinking about primary and secondary schools and local hospitals. There are schools and hospitals everywhere, so if you are looking for a job in one, why not look closer where you live? If you have to move far outside Westminster to afford a place, there may be better options for you.
On the overall employment picture, short lets do not require staff, whereas hotels do. It provides fewer opportunities. There is a shortage of staff. We are trying to think of ways to increase the amount of keyworker housing that we deliver, through the London living rent intermediate band of rented properties, but we are under an incredible pressure, as I have said, with the waiting lists and the number of households that we have, to concentrate on delivery of social rent homes. Many people working in schools, hospitals et cetera will never qualify for social rented housing because they find themselves stuck in the middle.
Councillor Judy Pearce: Our problem is that a lot of our local communities are being destroyed because normal families with children cannot afford to live in them. The result is that the schools are gradually crumbling, local shops are crumbling, and normal life and society are being destroyed by having an oversupply of short-term lets in certain places. We have other parts of the district—and, indeed, in Devon—that are quite normal because there are very few second homes. We are not complaining about those, but the coastal resorts really are a problem.
Q33 Baroness Eaton: The more that I hear from both our very able contributors, the more I realise that it is a very variable feast. We have heard a very Westminster, very London perspective. Devon is very different from other parts of the country as well. Whatever we suggest, we must aim for flexibility for local circumstances. Councillor Pearce, would you be happy with a system that was not universal for the whole of Devon but which solved the issues in South Hams, since you mentioned that there are places where there is no issue?
Councillor Judy Pearce: The system would need to be national, because it is not just South Hams in Devon that has a problem; north Devon does too. It is the coastal areas really, but there are other hotspots around the country, such as north Norfolk, North Yorkshire and Cumbria. We know who we are because we talk to each other from time to time about this. For a handle to be kept on it, it must be a national system. You know how things work. If we start clamping down, the problem might move to an area that no one thought of and start there.
Baroness Eaton: Chair, I apologise; I should have said sooner that I own two holiday properties in North Yorkshire.
Q34 Lord Carrington of Fulham: Your comments boil down to some form of licensing or registration, or registration drifting towards licensing in some way, in that grey area between voluntary registration and a compulsory licence, the intention being clearly to reduce the number of short-term Airbnb-type lets in the area. That seems to be one of the principal reasons. There are obviously others, to do with safety, regulation of quality, and all the rest of it.
Are there other ways of achieving the same thing? You mentioned that the difference between business rates and council tax is a motivation for people to use Airbnb as opposed to other types of letting. There are also, one suspects, questions for HMRC on avoidance of tax in this, given that people who are using Airbnb as a lessor are quite likely not to report their income quite correctly in their tax return.
Are there other ways of tackling this through the tax system, for example? We heard evidence from Airbnb in terms of what they can do in terms of assisting regulation of this. Are there other ways of doing it that would be equally effective or that would make regulation or licensing more effective if they were combined?
Councillor Matt Noble: I agree with you on the overall tax question of whether people who are doing this are paying tax properly. Yes, some of them are if they have a proper business. I would be very surprised if the ones that are renting from a landlord and then subletting are declaring any tax on that.
I do not think that we could have a tax regime that removed the necessity for registration or licensing altogether. These would best be viewed as part of a suite of options available to get us to the end result that we need.
Councillor Judy Pearce: The tax regime is something that we as local councillors do not really get involved in, but a holistic approach to this problem must be applied. You know what it is like: if you put in place one regulation, some clever accountant will find a way around it. You must approach it from all sides to get the situation under some sort of control.
Again, I am not saying that we need to eliminate the system, but we must have a handle on how it is working, a handle that we can shape and have some part in regulating.
Lord Carrington of Fulham: What about control of the platforms, such as Airbnb, because they are the problem? If Airbnb did not exist, we would not be talking about this. If one regulated Airbnb more effectively, perhaps that would form part of the solution as well.
Councillor Judy Pearce: My experience is that Airbnb is fairly responsible. If you ask it to do something, it will do it. However, we also know that when, for whatever reason, Airbnb will not accommodate certain properties any more, there are a number of other platforms that can be gone to. Again, you will have the problem that if you try to regulate Airbnb, everyone will leave Airbnb and go to the alternative platforms. Trying to keep up with them is like playing “slap a rat”, I am afraid.
Lord Best: I have one or two supplementaries. Would both of you agree that we do not want to do anything that affects the use of spare rooms by people who simply want to get a bit of extra income or perhaps with a bit of companionship or babysitting thrown in? Do we all agree that we want to ensure that this kind of short-term letting is fine and exclude anything that would harm it? It is a thoroughly good thing to ensure that every home has as many people in it as it can fit.
Councillor Matt Noble: Provided that it is not exploitative, yes, I agree with you.
Councillor Judy Pearce: Yes, I would agree with you on that basis as well.
Lord Best: So we ought to make sure we do not destroy that along the way by accident.
My second question is about EPC bands and the requirement for energy performance certificates before any lettings are made, which is now universal. As I understand it, short-term lettings are outside the scope of the EPC requirement that you must be in band E or above, which means that landlords with a property that is very hard to heat and would not be allowed to be let as a private rented property can let it as a short-term letting, thereby bypassing the requirements to try to decarbonise the housing stock and all the good things that come from raising energy performance standards. Is that correct in your understanding too—that short-term letting is a way to let a property that otherwise it would be illegal to let?
Councillor Matt Noble: I do not know whether that is true, but the notional statutory limit of 90 days means that it would be possible to let out a property as a short let all the time only if you were flouting the 90-day rule by listing it on multiple sites.
Lord Best: I see, so it is quite complicated.
I come to my last question. We have not said much, although the Chair raised the issue, about use classes and the way in which the Welsh are going to require people to get planning consent if they are changing the use of a property to short-term letting. This chimes with Baroness Eaton’s point that local circumstances are so different that one wants to introduce something so that at the local level people can pick and choose as to how much they take advantage of it, use it or do not use it. If one had a system where it was required locally to get planning consent because it was a change of use but you could give planning consent very freely in places where this was not an issue but be very tough about it in places where it was, that seems to play into the locality and devolution point and would give greater powers at the local level, as well as being quite a powerful instrument for good. You may have discounted it a bit—
The Chair: This is the pre-2015 system that I was discussing, isn’t it?
Lord Best: If anyone can remember the exact situation as well as you.
The Chair: I can. Councillor Noble does too. He mentioned it.
Lord Best: That system, in which you can withhold or give planning consent for a change of use because a short-term letting is a use class, empowers you at the local level to do or not do what needs to be done. You may not have pursued it because you did not think it was going to be acceptable, but if it were, would you pursue it?
Councillor Matt Noble: You are correct that that is not an option that is currently on the table. In addition to that, some of the problems that we have in Westminster are not about Westminster generally but are hyperlocal, ward by ward. We would need to make sure that any changes to the planning system gave us the discretion to apply planning rules differently in different parts of Westminster. To some extent, you can do that now with planning legislation, but it is not all that easy, and potentially what we are looking at now in terms of registration or licensing or registration-cum-licensing is an easier way of doing it if it forms part of a national programme, as Councillor Pearce is saying.
The Chair: We have come to the end of our pre-planned questions. I am going to give members of the committee an opportunity, if they are absolutely bursting, to ask any supplementary questions that they want to. Bear in mind that there are some questions that we could ask in writing afterwards, because we still have some time before we reach our final conclusions. I have had notice that Earl Lytton, Lord Berkeley and Lord Grocott would like to ask questions. While they are doing so, perhaps other members might think of a question they would like to ask.
The Earl of Lytton: You have both referred to the profitability of short-term lettings compared to the private rented sector. I am involved in both. Would you accept from me that there is a somewhat different economic model between a fully serviced and provisioned short-term letting unit against a relatively unserviced private rented sector unit?
Secondly, you both mentioned the council tax and business rate position, a matter on which I have some professional knowledge. Is the question of what Councillor Pearce referred to, flipping on business rates, an issue of council tax retention by the billing authority—namely, your local authority—as opposed to business rate non-retention, where you collect it and pass it on for national redistributive purposes?
Councillor Judy Pearce: I accept that there is a difference between short-term and long-term lets. Nevertheless, we have a seen a number of long-term lets that we know have been converted to short-term lets. For whatever reason, the owners see short-term lets as far more profitable than long-term lets, which is why they do it.
As for flipping to business rates or not, we know from looking at the list of properties on business rates that if those rates go over £10,000 a year, then the owners prefer to flip back to council tax and only advertise their properties for under 140 nights a year. The great advantage for most people is that if your business rates are under £10,000 a year, as I am sure you know, you do not pay anything at all because you get small business rate relief, which was never intended for second homes; it was intended to keep local shops and post offices alive in villages.
Councillor Matt Noble: On the issue of council tax and business rates, we have the lowest council tax in the country, and it does not form a major part of the income that we receive. We also pass over 96% of the business rates that we collect back to the Exchequer, so again that is not a major part of our thinking around this topic.
Lord Berkeley: Councillor Pearce, you mentioned the importance for small communities, particularly coastal ones with lots of tourism, of having a good availability of families with children, and presumably adults who are capable of doing things. There is also the question of the voluntary sector, which includes the fire service and lifeboats, as someone has mentioned. How can that be dealt with? I find in Cornwall that there is a serious problem in finding people who can get to the lifeboat in time to go out. I am sure all these lovely tourists who are going to come will not be happy if they find that people have drowned or their house has caught fire because there is no one to service it. What is the solution?
Councillor Judy Pearce: It is extremely difficult. Fortunately, outside Salcombe we have a village that is only about four minutes away, so by pushing the regulations they can just about manage to man the lifeboat and the voluntary fire crews. I have to say that it is not just pleasure craft; we operate a working port in Salcombe, and it is not unknown for one of the working boats to call on the lifeboat as well.
The Chair: I will not ask Councillor Noble to respond on lifeboats. Lord Grocott has possibly dropped out, but I think Lord Carrington has a question.
Lord Carrington of Fulham: This is a brief question about enforcing the 90-day rule or the 180-day rule. If you had licensing or registration, would that automatically mean you could monitor how long premises were advertised or rented out for?
Councillor Matt Noble: Yes, it should do. An issue that we have at the moment is that people can either alter the listing slightly so it looks to be a different property or go to different platforms. If you had a unique identifier for each dwelling that was let out, rather than property in the sense of a building, then it would be much easier to track those listings.
Lord Carrington of Fulham: But that would still be quite labour-intensive because someone would have to monitor it.
Councillor Matt Noble: That is true. However, if the registration/licensing scheme came in addition to data sharing with the platforms, we would not have to do that.
The Chair: Unless there are any other irrepressible questions—and bear in mind that if we are prompt, we can still submit further questions in writing after the meeting—I am going to draw the public evidence session to a close. In doing so, I thank both Councillor Noble and Councillor Pearce and the officers who attended with them for the time that they have given us and their great insight into conditions in their local areas. With that, we will be switching the cameras off and ending the public evidence session.
