Beware the new property ‘sharing economy’!

publication date: Jul 28, 2016
 | 
author/source: Kate Faulkner, Property Expert and Author of Which? Property Books

Beware the new property ‘sharing economy’!

 

Everyone loves a bargain and the idea of staying in someones home rather than a hotel or serviced apartment for a few quid may well appeal to many.

However, having chaired a panel on behalf of the Residential Landlord Association on the impact of sites such as Airbnb on the private rented sector, there is a lot that you need to be wary of:

  1. As a homeowner

  2. As a landlord

  3. As a potential host

  4. Renting via sites such as Airbnb

The key issues were raised by ‘terrific Tomsreport called The Rental Revolution: What the Sharing Economy is doing to the PRS and its impact on London and on landlords whose tenants had sublet their property, normally without the landlords permission.

The report highlighted that on Airbnb:

  • There are 33,000 listings in London alone
  • 65% of these were available for more than 90 days
  • Of the 33,000, 11,296 entire homes were available to rent for more than 90 days

Clearly this suggests that people arent just letting a room temporarily in their home to earn a bit of extra money, but using the site to encourage renters to stay in the whole property, probably for long periods of times.

The RLAs report also revealed:

  1. 15% of landlords had found tenants sub-letting without permission

  2. 34% of landlords found out about the sub-letting when they visited the property

  3. 23% of landlords found out after neighbours complained

  4. 18% found out by seeing their home online!

Does this matter? Well yes it does.

Doug Hall from 3mc Mortgages pointed out:

You may well be in breach of your mortgage terms and conditions and could lose your home if disaster struck while renting out your property.

As a landlord you typically cant sub-let, agreements have to be ASTs on many buy-to-let mortgages.

You may well be in breach of your insurance, so if something happens it might invalidate it.”

Chris Town from the RLA pointed out from a landlords perspective:

If a tenant sub-lets your property, they may put you in breach of licensing laws.

You may end up breaching the ‘right to rentrules if the tenants arent checked properly by the tenant.

In Greater London you actually need planning permission to let property for LESS THAN 90 nights in one year.”

What about the health and safety aspects of letting a room/home?
Whats also frustrating from a landlord and letting agents perspective, is that lots of money is spent on:

  1. Abiding by the 29 rules and regulations of the Housing Health and Safety Rating System

  2. Paying for an annual gas safety certificate

  3. Ensuring the property has no damp/leaks

  4. Providing decent security

  5. Protecting deposits

Thinking about renting out a room? Read our Renting a Room Checklist

What about tax?
As a landlord, in future you are going to be heavily taxed on your investment. Interestingly, the government is looking at allowing people to earn up to a £1,000 a year from this type of initiative and other things such as selling on eBay.

But what I find weird about this suggestion is that, in my mind, its giving the go-ahead to a ‘black economyand I cant see that HMRC has the resources, time or ability to monitor whether people are earning £1,000 or £10,000 from this kind of initiative.

Need to know more about tax? Read our Buy to Let Tax Checklist

Other countries are starting to ban this kind of activity
Interestingly, the report from Tom shows that there are issues not just in London but also in New York. In Berlin they have banned the renting of entire apartments through online short-term rental sites (Payton, 2016). In Paris, City Hall is requesting that Airbnb issues warnings to those who are operating illegally, as the city has lost so many properties from its PRS rental stock to the site.

 

Quick case study on staying in Nottingham

What I was surprised at was that to get any information at all on the properties I had to give away my email address – so data collection at its best!
I had a quick look for Nottingham, where I live, and for this Saturday (31st July) I found eight properties I could rent outright overnight from £67 to £123. Most were outside of the city.

What was quite funny, it listed ‘places nearby to Nottingham as:

Newquay, Bath and Guildford… hmmm its a while since I took a geography exam, but I dont think Id class them as ‘nearbymyself!

In comparison I could stay in a hotel overnight from £56 to £120

A serviced apartment costs £62-£175 (the latter for four people) right in the centre, some of which members of ASAP, the ‘association of serviced apartment providers.

To rent a property costs around £500-600 a month, which is about £16 a night, albeit for a six-month minimum period.

What do you think? Whats your experience?
What I did find a bit scary to read was the ‘standardsthat they have set, which basically say this only works if you treat people with respect and dont harm them. There are guidelines on:

Vandalism, theft, fraud, harming yourself or others, bullying, misrepresentation.

I can see that for decent homes and decent people this is a terrific way to stay somewhere and really do understand why its appealing, but would I do it? Probably only in the name of research if Im honest. But if I was a tenant or a homeowner and needed a bit of extra cash, I can see that this might be a ‘needrather than a wish.

And thats the problem – unfortunately as we already know from programmes which have experts such as Paul Shamplina not everyone abides by decency and the expectation that you’ll be well looked after, both as a renter and as a landlord (or ‘host) may not come to pass.

What do you think? Have you tried Airbnb or other sites? Have you had problems as a landlord, we are interested in your views!


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