Property help

27 Jan 2025

Is the Short-Term Accommodation Boom Ending?

Posted by Mary McKenny

Amid the waves of change set to reshape the housing market landscape in 2025, legislative reforms in the short-stay sector may signal a turning tide back towards longer-term lets, as many landlords find the benefits that once drew them to this space disappearing with the current.

Landlord Testimonial: Transitioning Back to Long-Term Lets

“I recently moved my Airbnb portfolio over to Comfort Lettings to transition back to the buy to let market. Due to regulation change, increasing utility bills and higher mortgage rates for this type of property it made sense to change them over. The team there have dealt with the challenges of getting them up to regulation standard and have managed this very smoothly. All have been rented well and quickly. Highly commendable team!” – Ravi Tomar

The Challenges Facing the STA Sector

Locally, we are observing a growing trend of landlords preparing for a shift back to long-term lets. Tighter regulations and the search for more predictable income streams are driving this change. In Nottingham, many short-term accommodation (STA) and furnished holiday lets (FHL) landlords are already seeing:

Falling Occupancy Rates

Rising Running Costs: Including services, energy bills, and platform fees

Higher Mortgage Rates

The STA market has thrived in recent years, offering property owners lucrative income streams and holidaymakers a wide range of options. However, economic and social changes in behaviour in addition to significant legislative changes coming into force on the 6th April 2025 may herald the end of what many consider a golden era for this sector.

Let’s explore the rise of STAs, the challenges they’ve presented, and the potential impact of these upcoming reforms.

Short-term accommodation

Furnished Holiday Let Eligibility Criteria:

To qualify as an FHL, a property must:

Be available for short-term letting to the public for 210 days per tax year.

Be let for at least 105 days.

Not be used as a long-term let (over 31 days) for significant periods.

The Rise of Short-Term Lets and Its Challenges

The STA market boomed due to changing travel habits, the popularity of platforms like Airbnb, and the allure of unique stays that cater to tourists, remote workers, and those bridging gaps between long-term housing arrangements. According to The Times, the number of holiday lets in England rose from 8,800 in 2017 to over 89,000 in 2023, with 10% of second homes now operating as FHLs. This surge has been driven by:

Home Tourist demand: Seeking flexible, unique stays beyond traditional hotels and more people choosing to have “staycations” during the pandemic.

Remote working: The post-pandemic shift to flexible work arrangements made STAs attractive for workers wanting temporary escapes without relocating permanently.
Housing market barriers: Some tenants have turned to short-term lets as a bridge when long-term rental options are scarce or require lengthy commitments, such as minimum 12 month terms

Legislative Changes: What’s Coming in April 2025?

From the 6th of April 2025, HMRC will abolish several tax advantages currently enjoyed by landlords of furnished holiday lets. These changes include:

Income Tax and Corporation Tax: The beneficial tax treatment for FHLs will end, impacting income and gains derived from these properties.
Capital Gains Tax (CGT): FHLs will no longer benefit from reduced CGT rates, making the sale of these properties less tax efficient.

In addition to tax reforms, two key pieces of legislation are currently progressing through Parliament:

Renters' Rights Bill: A landmark proposal introducing numerous reforms, including the abolition of “fixed-term” tenancies. By removing this barrier, it reduces the factors driving renters towards the short-stay market. It is scheduled for its second reading in the House of Lords on 4th February 2025.
Short-Term Let Accommodation Bill: This bill calls for further regulation of the sector by way of licensing schemes and planning measures. It is due for its second reading in the House of Commons on 20th June 2025.

These reforms are already deterring new entrants to the STA market and prompting existing landlords to reevaluate their strategies.

Airbnb's recent announcement of plans to expand into long-term rental stays underscores the shifting market conditions. This trend is not limited to the UK but reflects a global response to tightening regulations in many countries.

How Comfort Estates Can Help

If you're considering transitioning your property to long-term lets, Comfort Estates is a leading estate agent in Nottingham and has the expertise to help you navigate this shift. Our ARLA Qualified experts are on hand to guide you every step of the way. Contact us today to explore how we can help you adapt to the changing market.