The UK Has a Housing Problem. Restricting Rentals Won't Fix it

The UK Short-Term Accommodation Association (UKSTAA) conducted new research that identified nearly 2 million homes that local authorities consider "deliverable," with as many as 1.5 million of them in the next five years. 

Its methodology involved analyzing 294 Strategic Housing Land Availability Assessments, a study which every local authority is required to undertake to give an overview of the potential development sites within its boundary, as well as the government's Housing and Economic Land Availability Assessments.

These city councils are required to regularly demonstrate how they plan to meet local housing needs over the coming five years and beyond.

The research suggests that the 2 million homes would represent a 6% increase in the current housing stock. 

The association identified 10 city councils including Birmingham, Leeds, Manchester, Cornwall among others with the largest pipeline of homes, which could deliver over 200,000 homes. The London councils have identified an additional 330,000 new homes. 

Permitted Housing Supply In City Councils

The association is championing the benefits of tourism (and to get the regulators off its back) arguing that restricting rentals won’t help the local economy. While short-term rentals do have a part to play in rising rents, the association claims that the housing shortage issue isn't a rental issue.

“We're in a situation where the planning system in the UK is under massive strain,” Andy Fenner, CEO of UKSTAA told Skift. “But the blame for this lack of housing is being placed on us. Yes, we do use houses, our industry is about home sharing, and we are contributing slightly to the housing crisis, we know that. But every single building in the built environment could be a house, every closed down shop, every factory, every office could be a house.”

Housing shortages are a global issue today. And different governments are tackling it in different ways: Canada is taking away tax benefits from short-term rental platforms, Airbnb hosts in Western Australia are getting paid AUD $10,000 ($6600) to rent long term to ease housing shortage. 

But for the UK, the problem has persisted for decades.

London-based think tank Centre for Cities released a study earlier this year titled “The UK’s 4 million missing homes,” highlighting that Britain’s lack of housing construction is an historical problem. The research pointed out that Britain has built fewer homes than any other western European nation in the six decades through 2015. 

But the issue it’s a bit more complex, let’s unpack it. 

There’s the issue of mortgages. New mortgage rates have increased from 1.5% at the beginning of 2022 to 5.25% in August this year. According to official government estimates, approximately 200,000 households were behind payments by mid-2022, and an additional 570,000 are at risk of default in the next two years due to housing costs surpassing 30% of their incomes.

And then there are obsolete laws that stand in the way. 

The decision to approve new housing rests in the hands of local councils, thanks to the enactment of the Town and Country Planning Act 1947. It grants local councils decision-making authority on planning applications. So while these cities have the potential to build more housing, one reason for the lack of it is perhaps because locals resist new housing developments in their cities. 

For instance, In 1955, the UK had a dwelling-to-person ratio that exceeded the European average by 5.5 percent. That fell to 1.8 percent below the average by 1979. By 2015, the ratio had further declined to at least 7.8 percent below the contemporary average. 

And in order to catch up, England needs to build 442,000 new homes per year. And the government has committed to a number far less — 300,000 homes per year — requiring more than half a century to make up for the deficit. 

“It's inevitable that everybody wants to have a cheaper house for their son to live in or their daughter to move into. But nobody wants it to get on the field at the bottom of the garden,” Fenner said. “It is human nature. That is the whole problem of tourism today is that everybody wants to go on holiday, but nobody wants to be a tourist.”

Fenner argued it's impractical for the association to believe it can change people's attitudes overnight, but a good use of its time would be to emphasize its contribution to local economies. 

“I don't know if you could know how to change human nature, but I think what we have to do as an industry is focus on explaining to people that actually the problem is not really coming from us,” Fenner said. “Because if they do pass a legislation tomorrow that bans every short term rental, it still wouldn’t solve the housing crisis. It will just put hundreds of thousands of people out of work.”