Why new short-term letting laws won’t increase long-term rental supply
Posted on: 15 December 2022
Thousands of former short-term lettings may end up being left empty or used as corporate lets, explains Dr Sarah Hamill, School of Law, in an analysis piece that was first published by The Irish Times.
“Ever tried. Ever failed. No matter. Try again. Fail again. Fail better.” The Government runs the risk of this Samuel Beckett quote describing its efforts to regulate short-term lets such as those advertised by platforms like Airbnb. Last week, a little more than three years after first attempting to regulate short-term letting, the Government announced new rules for this sector. While these new regulations are both welcome and overdue, there is cause for concern that they will not achieve their stated goals.
The number of dwellings returning to the long-term rental market may be fewer than the Government hopes.
The reason why these newly announced regulations are overdue is that similar rules were in existence elsewhere when Ireland first attempted to regulate short-term letting in 2019. Unlike various US and Canadian efforts to control short-term letting, Ireland did not seek to require platforms like Airbnb to check that advertised properties complied with the rules.
By 2019, several North American cities required those advertising short-term lets to have a special business licence and prohibited the advertising of such lets without the relevant licence. Yet Ireland’s first set of regulations left the online platforms out of the equation.
Instead, Ireland required those seeking to use dwellings as short-term lets to apply for planning permission if the dwellings were in a rent pressure zone. Individuals seeking to use their own home were exempted from this requirement provided the entire property was not used for short-term letting for more than 90 days per year.
Suffice to say that various studies have suggested almost no one applied for the necessary planning permission. The end result being that as many as 20,000 entire dwellings are offered as short-term tourist lets instead of being used as long-term housing. In short, the 2019 regulations have failed to limit short-term letting.
In September 2022, the Government introduced legislation that would have required platforms facilitating short-term letting to check that planning permission had been acquired. This particular rule has not come into force and arguably has now been superseded by last week’s announcement of a registration system for short-term letting.
The Government’s new plans are that short-term lettings must be registered with Fáilte Ireland and that no property can be let without such registration. These rules will apply to lets of up to and including 21 days, and will run alongside the existing requirement for planning permission for those dwellings in rent pressure zones. Such owners will have six months’ grace to apply for the necessary planning permission.
The hope is that these new regulations will see up to 12,000 dwellings return to the long-term rental market. Special authorised officers will be introduced to oversee compliance and both online platforms and those placing adverts will face fines for noncompliance, as well as enforcement action under planning laws where relevant.
The number of dwellings returning to the long-term rental market may, however, be fewer than the Government hopes. It must be remembered that these new rules around short-term letting appear against the backdrop of a broader exodus of small-scale landlords from the long-term rental market.
In previous years, landlords exiting the long-term rental market may have opted to use their property for short-term letting given the flexibility around regaining possession and the greater financial returns. Such owners will now either sell, leave their property vacant, or use their property as a corporate let.
It remains to be seen whether and, if so, how the Fáilte Ireland register will interact with the recently announced vacant homes tax. There is a risk that owners may prefer to leave a property empty and pay additional tax instead of returning to the long-term rental market.
Alternatively, those owners who cannot afford to leave their properties empty might opt to use their property as a corporate let. Corporate lets are typically longer than short-term lets, being at least four weeks, and remain legal under the new rules. However, corporate lets also put pressure on the long-term rental market.
Last month there were reports of several apartments in build-to-rent developments being advertised as short-term or corporate lets. Many build-to-rent developments appear fully leased but it would seem at least some tenants have multiple properties and are subleasing via the short-term and corporate letting markets.
While the reported adverts were swiftly removed, their existence highlights the need for cross-referencing between the new Fáilte Ireland register and the Residential Tenancies Board’s register. So too do these adverts highlight the need to consider whether and how to regulate corporate lettings. A failure to do so could easily lead to the goal of these new short-term letting regulations being undermined.
To be clear, the recently announced regulations are an important step but gaps in the law remain. The Government should, as a matter of urgency, consider closing them or risk seeing thousands of former short-term lettings lie empty or used as corporate lets. Such an outcome would be a failure. Again.