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News has been going around that Barcelona is planning to stop renewing short-term rental licenses for more than 10,000 properties once they expire in November 2028. When 2029 rolls in, visitors will only have hotels as their accommodation option.
According to Mayor Collboni, this is the only solution they could think of to solve the growing housing problem in the city. It seems that the increasing number of shortlets is aggravating the situation to the point that house prices and rents have increased by 38% and 68% respectively in the past 10 years. It has made homeownership difficult for the locals and young people.
Despite the obvious benefit of short-term rentals to property owners and the tourism industry, the city has chosen to prioritise long-term housing for the locals.
Barcelona is just one of the many cities that imposed restrictions on the short-term letting market - although this seems to be the most drastic compared to other European cities. Amsterdam, Dublin and Paris have imposed limits to the number of nights a property can be used as a shortlet. In London, the government imposed a 90-day limit and planning permission.
As a property owner, how should you react to this type of news?
In this article, you’ll understand why local governments are targeting short-term rentals and what you can do to protect your property’s portfolio and revenue against these restrictions.
Is a Short-Term Rental Ban the Real Solution?
The Barcelona short-term rental ban was met with mixed reactions. The housing minister of Spain supported this initiative while hotel associations kept mum about it.
As for the rest of the Barcelona rental market, they’ve pointed out issues that deserve attention.
Airbnb didn’t comment on it directly but they did highlight a comment made by the European Holiday Homes Association that said this ban will most likely benefit hotels and won’t fix the housing issues in the city. The statement went on to say that short-term rentals only accounted for 1% of the housing stock.
This raises the question as to whether the short-term rental ban is the right solution to the housing problem in Barcelona.
To answer this question, take a look at the short-term rental ban in New York. Apparently, the city passed a law in 2022 (Chapter 31) that prohibits the use of properties as short-term rentals unless the owner permanently lives in the same dwelling place. In September 2023, the law started to take effect and it’s proven to be challenging for everyone.
Harvard Business Review observed the market as everything unfolded and they’ve come to the conclusion that short-term rentals shouldn’t be blamed for the high rents in NY. It’s not the biggest contributor so banning it won’t solve the housing affordability issues in the city. Their research also revealed that the main benefactor of the ban is hotels because room rates have increased to $300 per night.
Of course, the situation in Barcelona and other European cities may vary with the specific circumstances in NY. However, it’s worth comparing the results.
What does this mean for the London short-term rental market in particular?
Are Short-Term Rentals Under Fire in London?
Right now, the short-term rental market is thriving in London. The strong tourism industry fuels the demand for temporary accommodations.
In 2021, there was a 2.3 million demand for Airbnbs in London. The London immigration granted more than 2 million visitor visas (March 2023 to March 2024) and accommodated 6.4 million business travellers in 2023.
Overall, the gross revenue of shortlets in London was £277,176,292.13 in 2021.
This is happening despite the multiple restrictions imposed by the city - like the 90-day annual limit for shortlets that can only be extended if the property owner gets planning permission approval.
What does this mean?
Despite the housing issues, short-term rentals are not likely to be banned in London. The strong tourism industry and even the rising student population will keep the demand high.
However, property owners shouldn’t feel complacent. It’s important to stay vigilant to stay ahead of future restrictions so it doesn't affect the revenue potential of short-term rental properties.
The Key to Protect Your Shortlet’s Revenue Potential
Even if London feels like a haven for the short-term letting market, property owners should continue to monitor what’s happening in other cities. As an investor, you have to be vigilant in protecting your properties to ensure their growth will never be compromised.
The best way to do this is through compliance. Every time there’s a new law or regulation imposed on the rental market, you have to be proactive in implementing it.
Short-term regulations in London
In London, there are 3 short-term rental regulations that property owners should comply with.
The first is the 90-day limit. This states that property owners can only short-let their property for a maximum of 90 days each year. This is an accumulated number over 12 months. Once the limit is reached, the property can only switch to longer letting strategies or wait for the next year to advertise their property as a temporary accommodation.
The second is the planning permission. In case property owners want to short-let for longer than 90 days, they have to get planning permission approval. This allows the local government to monitor the short-term rentals in London.
The third is the new “Use Class” registration changes published in February 2024. This is for all second homes used as short-term rentals. The idea is to register the property under the planning “use class” so it identifies as a short-term rental. This is for the government’s effort to control the number of shortlets so it doesn’t affect the housing supply and affordability. If your property is already registered as a short-term rental, you don’t have to register again.
Other regulations to consider
Apart from these three regulations, you should also consider other compliance requirements so your property is fit for letting.
- The Homes (Fitness for Human Habitation) Act 2018. Landlords are legally responsible for ensuring their rental units meet the minimum standards that make them fit for human habitation (e.g. structurally sound, free from moulds, etc).
- Regular Landlord Gas Safe Record. This is a certificate issued by a Gas Safe Registered engineer and should be carried out within 12 months after a new installation and every year after.
- Electrical Installation Condition Report (EICR). This report ensures that electrical installations in a property have been inspected by a qualified professional. This check should be done every 5 years.
- Portable Appliance Test (PAT). This is for semi or fully-furnished units like short-term rentals. You have to check that any electrical appliances are safe and in good working condition.
- Energy Performance Certificate (EPC). This provides information about the energy costs of a property. It rates the energy consumption of a property from A to G with A being the highest as it means the property is energy-efficient. The minimum used to be E but by 2025, it should be at least a C.
There are also compliance checks necessary for long-term rental properties like the Tenancy Deposit Protection (TDP), Right to Rent and “How to Rent” checklist. In case your property switches from short-term to long-term letting, make sure you are aware of these compliance requirements.
Keep Short-Term Rentals Compliant
The news about the looming Barcelona short-term rental ban feels daunting. However, it doesn’t mean your property portfolio will be compromised. The London short-term rental market is safe for now because the demand is too high for it to be completely banned.
Also, if you continue to work on compliance and you’re vigilant about monitoring the changes in the market, you can pivot your letting strategy to keep it from affecting your rental income.
Of course, this requires property expertise and a keen eye on the rental market changes. If you want to stay updated to maintain compliance, work with an experienced property management company like Opago.
We offer 4 major services: Housekeeping, Maintenance, Guest Services and Compliance. We’ll ensure that guest satisfaction levels are high and we’ll use technology to create innovative solutions to increase the rental revenue of your properties.
If you’d like to know more about our services and how you can benefit, give us a call. We’d love to sit with you to discuss how we can improve the performance of your rental properties and keep them compliant with local regulations.
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