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Tax break to help the housing crisis is making things worse

New figures released today by leading flat and house share site SpareRoom, reveal that the Rent a Room Scheme tax threshold increase, introduced in 2016 to encourage more people to let out their spare rooms to lodgers, has actually done more to boost the short term lets market.

The Rent a Room Scheme tax threshold was increased from £4,250 to £7,500 per year on 6th April 2016, following a six-year campaign by SpareRoom, backed by Shelter, Generation Rent and the National Landlords Association. There are around 19 million empty bedrooms in owner-occupied properties in England alone – if just 3% of these (570,000) were let out on a residential basis, it would unlock housing equivalent to a city the size of Liverpool.

Yet the failure to restrict the scheme to residential lets has meant a boost in short term lets rather than residential. According to SpareRoom data, there were 68,604 new lodger adverts in 2017 – 8% lower than the number in 2016 (74,684). This decline, which came on the back of seven years’ consecutive growth, continued into 2018, as demonstrated in the table below.

At the same time short term lets via holiday sites like Airbnb have seen a huge spike, rising 200% in ten UK cities between 2015 and 2017[1]. In London particularly, there has been a fourfold increase in Airbnb listings since 2015, this reduces residential housing supply and pushes up rents for people looking for long-term homes[2].

Matt Hutchison, SpareRoom Communications Director, comments: “These figures clearly show that the benefits we hoped to see from the government’s Rent a Room Scheme have been undermined by a new surge in short-term rentals. Given the fact we’re not building new homes in anywhere near the numbers we should, we have to do more to better use existing stock. The UK has a housing crisis, not a hotel room crisis.”

A chart showing the changes in the number of listings on SpareRoom from homeowners looking for a lodger

[1] According to the Residential Landlords Association, Airbnb listings in ten UK cities increased by almost 200 per cent between 2015 and 2017 https://www.citymetric.com/business/regional-english-cities-are-suffering-rise-short-term-rental-services-airbnb-4177

[2] https://www.theguardian.com/technology/2019/may/05/airbnb-homelessness-renting-housing-accommodation-social-policy-cities-travel-leisure

Source: Property118