Cllr Phil King is the former leader of Harborough District Council
In recent years, the growth of short-term holiday lets has ignited passionate debates across the UK. Some pressure groups and politicians have pointed the finger at short-term rentals for fuelling the country’s housing shortage and as a result, government at all levels have sought to propose measures to curb holiday lets. However, this is all being done in silos without any thought as to the unintended consequences. These overzealous restrictions could have severe economic consequences for areas heavily reliant on tourism and those that are seeking to boost growth via the tourism pound. Local authorities should be acting cautiously in their efforts to manage holiday lets and critically avoid hurting our vibrant but fragile visitor economy.
In Harborough district, whilst under Conservative control, we delivered well above the national average in new homes and affordable homes, yet many more homes are required to be built, in the places where people need them. Trying to force the sale of holiday lets, which represent a tiny percentage of the UK’s housing stock, is not going to solve the long-term housing crisis.
The theory that these properties would otherwise be used by local families does not play out in reality. Holiday lets are mostly in areas that are not suitable for long-term residential use or are in remote areas that may not attract local renters or buyers. The idea of selling is particularly stressful for those farmers who have diversified, given their accommodation often sits on a working farm. Even if some properties re-entered the housing market, they would represent only a tiny fraction of the total housing need.
Those arguing for curbs on traditional holiday lets also forget the critical role they play in the local economies of our rural and coastal communities. The new Labour Government has moved quickly to say it will abolish the Furnished Holiday Lettings (FHL) tax regime, in place since 1984, which has incentivised property owners to invest in converting underused buildings into desirable holiday accommodations. These investments attract visitors, which in turn supports local businesses—from restaurants and pubs to shops and tour operators—that depends on a steady stream of tourists to thrive. The economic impact of holiday lets cannot be underestimated. The sector generates approximately £9.3 billion in economic activity annually and supports around 230,000 jobs across the UK, and for every £100 spent on a holiday let accommodation, a further £78 is spent in the local visitor economy.
Restricting holiday lets too harshly could undermine these economic benefits. If local authorities force more holiday let owners out of the market, the knock-on effect could be disastrous for rural and coastal areas, areas that were hit hard by the COVID-19 pandemic and are still recovering today. The compound effect of local authorities implementing Council Tax premiums, using Article 4 to force planning applications, with Whitehall’s abolition of the FHL tax regime, on top of Wales’s 182-day policy and Scotland’s devastating licensing scheme, is all pushing the sector to the edge. In a survey of holiday let owners by the Professional Association of Self-Caterers (PASC UK), 94% of businesses are already planning to reduce future investment and many are planning to sell. This only hurts local businesses that rely on tourist footfall and will further erode the economic resilience of these communities. This needs to be a much more profound consideration by policymakers.
While some concerns about holiday lets are legitimate, the answer lies in smarter regulation, not more draconian restrictions. The idea of a national registration scheme for holiday lets, for instance, would help local authorities keep track of the sector and ensure that properties are being used responsibly. Such a scheme could also provide valuable data to inform future housing and tourism policies, enabling authorities to strike the right balance between meeting housing needs and supporting the visitor economy. Importantly, many holiday let owners have shown a willingness to embrace smart regulation, recognising that better oversight could help address issues such as illegal subletting or poor property management.
Restricting holiday lets without considering the broader economic context will cause more harm than good. The tourism industry is a vital part of the UK visitor economy, especially in rural and coastal areas that have limited alternative sources of economic activity. Holiday lets, when effectively regulated, contribute significantly to the vitality of rural and coastal areas. Those cheering policies designed to put a holiday let out of business should think about the jobs that are lost, the local investment that disappears, and the pubs, cafés and attractions that lose vital footfall. The key is not to shut the door on holiday lets but to manage them responsibly.