Westminster Council is pressing ministers to close loophole within short-term lets reform

A loophole in the Government’s proposed changes to housing legislation could result in thousands of private-rented homes being converted to short-term lets, say senior officers at Westminster Council.

Although the legislation is designed to control the spread of, and the nuisance from, the more profitable short-term letting, the government is simultaneously introducing a registration scheme for short-term lets and also a new planning use class along with a new “permitted development right” to allow long-term private rented homes to become short-term lets.

The “permitted development right” will allow properties to be converted into holiday homes without planning permission, overturning current controls which state landlords seeking to let homes to tourists for more than 90 days must first ask borough planners.

However, Westminster Council could issue an “Article 4 Directive” to prevent the permitted development right being used by landlords in areas where the changes would undermine the supply of private-rented accommodation.

But since the Directive would take 12 months to implement, property owners could take advantage of the 12-month delay and convert permanent homes into short-term accommodation without the need for planning permission.

In a report to the Planning and City Development Committee, officers have said: “The regulations that are proposed by Government are split across the planning and licensing regimes, with a new planning use class proposed for short term lets, which will enable their control via local Article 4 Directions, and a new mandatory registration scheme that sits outside the planning regime also proposed.” 

Officers are currently drafting an Article 4 Direction pre-emptively so that it can be introduced without delay following introduction of the new regime by Government. 

The legislation is also spread across two government departments.

“Planning related proposals are being brought forward by the Department for Levelling UP, Housing and Communities (DLUHC), whilst the introduction of the registration scheme is being led by the Department for Culture, Media and Sport (DCMS),” states the report.

During the Planning and City Development Committee meeting, Conservative councillor, Jim Glen, asked planning officers if the council’s concerns about the loophole that allows homes to be changed to short-term lets under proposed permitted development rights were “falling on receptive ears” at DLUHC.

He said that if the legislation “happens to have a disastrous short-term impact, it needs to be pointed out”. 

Officers said the council’s director of policy was at a meeting with DLUC recently and had raised the matter, and stated that “this loophole needs to be closed down”.

In answer to a question about enforcement, officers said that this could be difficult as the permitted development aspects and the registration scheme for short-lets as they currently stand in the proposed legislation “are not well formed” and do not provide clarity for enforcement against breaches. 

Short-term letting was one of the most complained about issues to candidates for Westminster Council on the doorstep in Fitzrovia West during the run-up to the May 2022 elections, which was won by Labour.

Labour leader of Westminster Council, Adam Hug, told the Guardian the loophole could lead to the loss of more than 10,000 rentable homes in Westminster.

“Our fear is these changes will override existing controls in London and make a bad situation even worse.

“The real losers in this will be people looking to rent properties who now have even less chance of finding a home,” he said.

The Department for Levelling Up said the government was eliminating tax advantages for holiday lets and giving communities more control over future rises in the number of short-term lets.

“Short-term lets can play an important role in the UK’s flourishing tourism economy, but in some areas, local families and young people feel they are being shut out of the housing market and denied the opportunity to rent or buy in their own community,” the spokesperson added.

Full details of the changes in legislation are yet to be published and are due to follow in the Government’s response to the 2023 consultation.

“The details to be announced will include the timeline for implementation of the new regulations. It is currently expected that the changes will be introduced in summer 2024,” states the council report.

Westminster City Council: Planning & City Development Committee – Wednesday 27 March 2024.