Our land-use planning system is the key problem here. It limits development, rationing both housing and hotels, thereby creating unnecessarily fierce competition for scarce stock. Without sufficient capacity growth, more Airbnbs means less housing left for longer-term renters and buyers. Hence Gove’s promise that the policy will protect local residents “from being pushed out of their communities by excessive short-term lets”.
We need not accept this trade-off, of course. In the Georgian era, places such as Brighton, Harrogate and Bath became popular holiday destinations, and tens of thousands of homes were built to accommodate inflows. Similarly, in the Victorian age, the democratisation of holidays led to the grand hotels that line the beaches of Blackpool, Hastings and Eastbourne. This rapid growth mirrored the 1,000 per cent expansion of Cardiff over five decades, as economic centres such as Glasgow, Manchester and Birmingham boomed, too.
By contrast, UK tourist destinations today see little capacity growth, due to our restrictive, discretionary planning laws. The number of UK hotels hasn’t really changed since 2008. Overall, Britain has just 30 million dwellings compared with France’s 37 million, despite similar populations. That’s why across the Channel, almost one in ten properties are second or holiday homes, while England’s 2 per cent figure sets off panic whenever Londoners buy dwellings in Cornwall, Cumbria and Devon for short-term lets.
Sites such as Airbnb can increase demand for visiting our coasts, cities and lakes by providing families with children the prospect of accessible houses, rather than small hotel rooms. In a functioning market, this extra demand encourages new housing supply. US research finds that a 1 per cent increase in Airbnb listings encourages a 0.8 per cent increase in building permit applications. America’s formidable coastlines — the Hamptons, Florida Keys, and southern California — are packed with houses and hotels.
Yet Britain’s planning system prevents that happening here. Communities in seaside towns and tourist hotspots therefore suffer from fewer long-term rentals or home sales when short-term letting increases. As sites like Airbnb have boomed — VisitBritain estimates more than 432,000 short-term rentals now exist — the calls to sacrifice property rights and use state power to quash these rentals has grown louder and louder.
Yes, the government’s crackdown on private landlords has boosted the short-term letting sector. Policies that make long-term rentals less appealing — the removal of mortgage cost deductions, increased stamp duty, and heightened risks from proposals to end easy evictions after fixed-term contracts — have incentivised Airbnb use, despite the volatile income for landlords and the hassle of managing bookings.
Yet short-term letting is only a “problem” for housing because our planning laws prevent supply adjusting flexibly to demand. Empowering councils is another example of the government mitigating the symptoms of our planning woes, to the detriment of economic activity.