AirBnB and the 90 Day Rule

January 26, 2017

Since 1st January 2017, Airbnb has begun limiting “entire home” listings on its platform to a maximum of 90 days occupancy in a calendar year. As a host of an “entire home” listing, after accepting 90 days of bookings, we understand that your calendar will be automatically blocked – though this is not currently the case –  for the remainder of the year.  Airbnb has now implemented a counter on its host dashboard showing the total number of days your listing has been booked, alongside the number of days still available for booking.

Crucially this 90-day rule only impacts “entire home” listings (for reasons explained below).  Hosts of “shared rooms” or “private rooms” are unaffected.

WHY HAS AIRBNB DONE THIS?

The move to actively enforce regulations is a response to increasing pressure from both the Greater London council and the global hotel lobby – the latter motivated by combatting the existential threat posed to the sector by Airbnb’s explosive growth and imminent IPO. It is important to note that this is categorically not in response to any tightening in regulation by the UK government, quite the contrary (see below), but rather a concession by Airbnb to work more closely with London as a community to support and inform local policy whilst complying with relevant restrictions.

WHY DO THESE RESTRICTIONS EXIST IN LONDON SPECIFICALLY?

Actually, they exist in varying forms in a number of cities including San Francisco and Amsterdam, but the London case is specific. London faces a housing crisis. House prices are at their most expensive ever and are increasingly unaffordable for the city’s residents. The majority of young workers and families, dubbed “generation rent”, are now unable to afford that all important first step onto the property ladder. This is in stark contrast to their parents’ generation who could afford to buy at a younger age, and as a result have profited hugely from soaring house prices over the last 30 years. The bottom line is that demand for affordable housing in the capital dramatically outstrips supply.

This trend is further compounded by the fact that buy-to-let investors, understandably looking to maximise yield on their portfolio of property assets, are increasingly seduced by higher yielding short-term lets over more traditional long-term assured shorthold tenancies (ASTs).  This has resulted in diverting affordable rental stock away from housing the city’s permanent residents, to instead servicing its temporary residents – tourists and business travellers – a trend that is largely facilitated by homesharing platforms like Airbnb, HomeAway, Booking.com and a handful of others.  Landlords have been flocking to these sites, renting out their properties as “entire homes” to paying “guests” and in many cases generating uplifts in yield of 100%+ versus a comparable long-term let.

There are deep and growing social issues underpinning these restrictions and, as Londoners, we must all be aware and understanding of them.

AS A LONDON AIRBNB HOST WHAT RESTRICTIONS AND PITFALLS MUST I BE AWARE OF?

  • Planning restrictions. Since the 1970s, any London property let for less than a period of 90 days (the definition of a “short-term” let) has required specific planning consent (class “C1″) from the relevant local council.  In the last decade, the advent of unregulated homesharing platforms like Airbnb has made it easy for homeowners and tenants to flout this restriction largely undetected by the authorities, proving rapidly growing public demand for a service that was technically in breach of local planning restrictions. So in May 2015 the Deregulation Act was brought in by David Cameron’s government to embrace homesharing, allowing all London residential property owners to rent their property out on a short-term basis for up to 90 days in a calendar year without any change in planning permission – provided it is permitted within their lease. Given the context of the social issues faced by the city (outlined above), this was a progressive milestone in supporting the evolution of the sharing economy and removing any doubt about its future here in the city.  People now wishing to rent their property out for more than 90-days must apply for the required planning consent.  The reality is, however, that it is highly unlikely to be granted to a residential property in central London due to the precedent it sets.
  • Lease restrictions. Airbnb hosts need be aware of likely restrictions within the lease that governs their property.  If you are a tenant or leasehold owner then it is highly likely that subletting is precluded within your lease, except with the prior consent of the freeholder. All hosts are advised to check the terms of their lease prior to engaging in any subletting.
  • Invalid insurance. Most “off the shelf” building and contents insurance policies are immediately invalidated should damage be caused by subletting.  Whilst Airbnb offers all hosts its generous “Host Guarantee”, it is important to understand that this is absolutely not an insurance policy.  Furthermore, most other platforms (HomeAway, Booking.com, etc.) do not offer any such guarantee or insurance.  Having an appropriate policy in place will provide peace of mind and remove any fear or doubt around monetising your home.
  • Mortgage restrictions. Equally most standard mortgage products preclude subletting.  You must check the terms and conditions of your mortgage to be sure that you are not in breach.  If your current mortgage provider is inflexible then there’s no need to worry as there are now increasing numbers of mortgage products available on the market which actively support subletting.

I’M AN AFFECTED AIRBNB HOST – WHAT ARE MY OPTIONS?

  1. Apply for the relevant planning permission from your local council.  If granted this will enable you to rent your property out for more than 90-days in calendar year, though it will almost certainly incur a higher form of taxation as it will be classified as a commercial property.
  2. Target bookings of >90 days within Airbnb. Individual bookings of >90 days are not classified as “short-term” lets and are therefore not counted by Airbnb towards your annual allowance. These longer-term tenants do expect discounts, however, so you can expect this to be lower-yielding activity versus shorter-term bookings.
  3. Market your property on additional platforms.  Airbnb is currently the only platform to restrict the number of bookings you can take within the platform. You can of course take bookings via other platforms, though you must be aware that should you exceed 90 days in total in a calendar year (cumulatively across all platforms), then this will likely place you in breach of your planning permission.
  4. Place your property on a long-term AST.  Assured shorthold tenancies (ASTs) are great in that they provide you with a guaranteed income at an agreed rate.  The flip side is that as a landlord you typically have less flexibility and more restricted access to your property once a tenant is in place.

ASK LAVANDA FOR HELP AND ADVICE

At Lavanda we’re committed to playing an active role in the positive development of the sharing economy and helping London to flourish as a community.  Our team of trusted asset managers are on hand to offer independent and objective advice on how property owners can realise the full potential of their portfolio whilst navigating the regulatory landscape.

We’ve built upon our own extensive hosting experience to craft a unique, fully compliant lettings and residential asset management service that capitalises on the sharing economy, unlocking enhanced yields for landlords of up to 10% versus conventional long-term lets.  Our professional asset managers are on call to answer any questions you have.