Growing use of Airbnb may aggravate the country’s housing crisis
An industry body has warned that the increasing popularity of Airbnb in the Capital may aggravate the housing crisis, and that landlords choosing to use the service over traditional longer term rentals could be in breach of their buy to let mortgage terms.
A new report from the Residential Landlords Association (RLA) has revealed that the number of London listings on Airbnb increased by 27% to 42,646 between February and June 2016.
A breakdown of these figures showed that 61% were listed as available for three months or longer, and the number of entire homes or apartments listed increased by 24% to 21,861 in June 2016.
The RLA also found that 41% of all listings in June were ‘multi-listings’, where the owner had multiple properties advertised on the site.
Landlords are attracted to short-term holiday let services, such as Airbnb, because returns on a price per night can be significantly highly than private rents. However, the RLA says that a rise in landlords using Airbnb is threatening to make the country’s housing crisis worse.
Moreover, there is a risk that landlords who switch to short-term holiday lets from long-terms rentals may be in breach of their mortgage terms and conditions and could be liable to face punitive charges from the lender.
Speaking to IBTimes UK, Bernard Clarke from the Council of Mortgage Lenders (CML) said that most lenders do not allow borrowers to offer short-term lets on their properties, whether on an owner-occupied or buy to let mortgage.
"That is because lenders accept the risk associated with a particular kind of mortgage – so a loan to an owner-occupier is advanced on the basis that the property is to be occupied by the borrower and his or her family. Similarly, lenders offer buy-to-let mortgages expecting there to be a stable, reliable rental income to enable repayment of the mortgage,” he said.
"Mortgage products are based on a careful assessment of risk, including cash flow, the risk of default, the level and reliability of income and any risks associated with how the property is to be used. If the mortgage is then used in a different way, the risks for the lender may be different."
Industry advice is consistent on the matter: borrowers should consult their lenders before taking any action that may affect the terms of their loan.
"In our terms and conditions it states that any letting must be on tenancy agreement," said a spokesperson for Virgin Money.
"If a customer was thinking of changing the basis of the tenancy arrangements then they must contact us to seek approval. We request a tenancy agreement to be put in place in order to protect the customer, the tenant and our interest in the property.
"Requests to rent out a property on an ad hoc, short-term basis would not meet the standard buy-to-let mortgage criteria. It is difficult to check whether property is being offered on ad-hoc, short-term lets, but the terms and conditions of a customer's mortgage agreement are made very clear at the outset and there would be a risk on their part to proceed knowingly without talking to us as their lender."
Airbnb is a digital marketplace where people can list, find and book accommodation around the world. The company claims to list property in 34,000 cities across 191 countries, servicing 60,000,000 guests since it was founded in 2008.
12th September 2016
