Hope for renters in holiday hotspots

Holiday lets have been making life a misery for renters in the UK’s most popular tourist destinations. Since 2019, more than 35,000 homes in England have become second homes or holiday lets. This leaves fewer homes to live in, pushing rents up, and pushing locals further away from their workplaces and families.

But thanks to campaigning by Generation Rent and our supporters, the government has taken notice. Already it has promised a register of holiday lets and new planning powers for councils, and on Sunday there were reports that the Chancellor is going to use the Budget to scrap a tax break that has helped fuel the housing crisis in rural and coastal parts of Britain.

Right now a landlord can evict their tenants and start renting to holidaymakers via Airbnb or similar platforms, and they get tax breaks to do so, including the ability to deduct mortgage interest payments from their taxable income.

This tax perk was taken off residential landlords in order to help first time buyers, but in places like Cornwall, Pembrokeshire, the Scottish Highlands and the Lake District, it meant first time buyers found themselves outbid not by landlords but by holiday let operators. Similarly, tenants in these areas lost out to tourists.

Now, according to the Sunday Times, the Chancellor has decided to abolish the “furnished holiday let regime”. Any announcement will happen in the Budget tomorrow. We think this will help nudge landlords back into the residential sector and make their homes available to live in again, which would bring rents down. We remain concerned that the government isn’t going far enough to regulate holiday lets, which should need a licence to operate. In fact, the proposed planning changes could backfire if it becomes harder to bring properties that switched only in recent years back into the residential market.

Generation Rent has been keeping track of the loss of homes to the holiday market by looking at the number of homes registered as second homes for council tax, and the number of homes registered as commercial holiday lets for business rates. The latter must meet a minimum criteria to qualify, but get yet another tax break, Small Business Rate Relief, if the rental income is lower than a certain amount.

There are 263,000 second homes in England, up from 245,000 in 2015 and 253,000 in 2019, and 77,000 commercial holiday lets, up from 39,000 in 2015 and 53,000 in 2019. In total, the increase has been 57,000 since 2015 and 36,000 since 2019.

The biggest growth in holiday homes since 2015 has taken place in rural and coastal areas. Scarborough and North Norfolk lost 2.5% of their housing stock to second homes and holiday lets. Since 2022, cities have seen some of the biggest changes.

You can see our full data for 2015, 2022 and 2023 here