The bill, first announced in 2013, would end rental rules imposed in 1973 but now largely viewed as outdated. These currently prevent Londoners from renting out their homes, or rooms within their homes, on a short term of three months to visitors. Unlike other residents across the UK, Londoners require planning permission if they let a room or home on this basis.
When it becomes law, probably in a few months’ time, it will allow London home owners to rent out rooms or their entire property, for up to three months of the year. According to central London lettings agency E J Harris, a home owner renting out their two bedroom apartment in prime central London could potentially earn anything from £2,000 per month up to over £5,000 per month, depending on location, netting themselves a potential additional income over three months of anything from £6,000 up to £15,000 or more.
At the very top of the luxury housing market in locations such as Knightsbridge or Mayfair an owner of a penthouse could earn themselves £10,000 per week, or up to £120,000 over a three month period.
E J Harris adds that if a home owner decided just to rent out a room in their apartment, then at the top end of the market, rental income for an en-suite bedroom in Knightsbridge could earn them up to £6,600 over a three month period. Renting out a room in a two bedroom Mayfair apartment could potentially earn £500 a week or £6,000 for a three month let. In St John’s Wood a room in a two bedroom property could earn £250 a week, or up to £3,000 over three months.
However, it is not only home owners in luxury addresses who could benefit significantly. E J Harris, estimate that renting out a room without an en-suite bathroom in a typical apartment in inner London could earn the owner around £100 per week, allowing the owner to bring in an extra £1,200 over three months.
Despite the huge sums of money that a wealthy owner in Knightsbridge or Mayfair could earn from a very short term apartment let or room share, Elizabeth Harris, the firm’s managing director, thinks it is unlikely that anyone at this end of the market will choose to enter the short let or room share marketplace.
‘For a super wealthy oil Sheikh or Russian Oligarch an extra £120,000 is pocket change and people who live in addresses such as One Hyde Park or The Knightsbridge really don’t need to room share,’ she said.
‘However, I do forecast that there is a strong potential market from young professionals aged in their late 20s to late 30s who own their first or second home and are still at the age where they don’t mind room sharing with others or undertaking a short let whilst they are away on holiday,’ she explained.
‘Based on this demographic, I think that a post Deregulation Bill housing market could see a significant upturn in short-lets and room shares in locations such as Soho, Fitzrovia, Notting Hill and Midtown where there are a much higher proportion of younger home owners. If the rules are relaxed, I calculate that a room in a two bedroom flat within these areas could earn anything from £300 per week or up to £3,600 over three months,’ she added.
E J Harris highlights that under current legislation, property owners are prevented from letting their properties for short lets of up to three months unless they have obtained planning permission. If this is breached, owners face a potential fine of up to £20,000. The proposed new rules will remove this restriction, allowing more flexibility for home owners to benefit financially from the short stay rental market.
The firm points out that the demand for short term lets is demonstrated by the rise in online websites and applications advertising accommodation for short term rental. For example, Airbnb and onefinestay currently already offer thousands of short term lets within the UK and across the world. Demand for short stay lets increases further during major sporting events taking place in London such as Wimbledon, the ATP World Tour tennis and the upcoming rugby World Cup.
Harris also pointed out that there has been a change in how people live their lives, with overseas professionals and those on secondments travelling to London to work on a temporary basis, and a large number of overseas students studying in London on both a short and medium term basis.
‘People recognise the benefits of having a more flexible approach to renting out their property, from tourists to professionals, short term letting offers an alternative to staying in hotels, that can be overpriced in peak season and provide the opportunity to stay in an apartment instead,’ she said.
Relaxing the rule will allow empty or underused properties to earn an income for their owners. E J Harris has predicted home owners in their 50’s, whose children have flown the nest, are expected to form the top group planning to rent out their properties, as well as overseas buyers looking to rent out their apartment in the months they are away from London.