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Relaxation of short term rent laws in London and PRS

Tue 01 Jul 2014

In recent years a number of developers and private landlords have become unstuck by a little known legal provision set out in section 25 of the Greater London Council (General Powers) Act 1973 (the 1973 Act) that applies to residential dwellings (in use class C3) in London only.

The effect of this provision is that where a dwelling is used as temporary sleeping accommodation (ie used by the same person for less than 90 consecutive nights) this will be regarded as a material change in use of that dwelling and will constitute “development” for the purposes of Section 55 of the Town and Country Planning Act 1990.

In such circumstances there is deemed to be a breach of planning control, namely a material change of use requiring the grant of planning permission. No offence is committed, but like all breaches of planning control, the breach opens the possibility of enforcement action by the local planning authority if they considered such action expedient.

The effect of all this in practice is that developers and private landlords and owners have been unable to rent out homes in London for short term (less than 90 day) lets unless planning permission has first been obtained.

On 9 June 2014 the Department for Communities and Local Government (DCLG) announced that it will reform the law by bringing an end to these restrictions but at the same time putting in place safeguards  that will prevent abuse of the reforms or the permanent loss of residential accommodation in London (turning homes into hotels or hostels for example would still require planning permission for "change of use").

The Government recognises that the restriction, which applies only to London, is irregularly enforced by different London Boroughs  and it is time that Londoners may rent their homes on a temporary basis. This also means that developers that have obtained planning permission for residential C3 units may dispose of units on a short term rental basis or dispose of blocks of units to the Private Rented Sector market, where there are now a number of companies specifically looking to deliver homes on such a short term rent basis.

The reforms will be brought in by way of an amendment to the Deregulation Bill 2013-14 that was laid before Parliament in January this year as part of the Government's Red Tape Challenge to remove unnecessary bureaucracy and regulatory burden on business and amends / repeals 182 pieces of legislation.

Whilst this is part of the Government's push to reduce regulation it also fits into the wider issue of the chronic housing shortage in London. It is acknowledged that the largest tenure in London now and will be in the future is that of the Private Rented Sector (PRS).  In a growing market and one that the Government is keen to support (it has set up a PRS task force within DCLG) we are starting to see some guidance and publications on this type of housing and how it should be built and delivered.

In April this year the Urban Land Institute backed by the PRS Task force published "Build to Rent" - the guide/standard on how PRS should be built.

As with most issues on housing delivery, the key will be the ability to deliver without delay and to ensure a consistent approach by local authorities.  It will come as no surprise that London boroughs do not have an agreed consistent approach to delivery of PRS, particularly in terms of how PRS will sit with their affordable housing requirements and how it will be considered in relation to housing targets and numbers.

We will be giving detailed consideration to the key points affecting PRS and the issues facing the housing industry (including private developershouse builders and registered providers) in our next edition of E:gen.

Winckworth Sherwood is holding a seminar on PRS with the Urban Land Institute on 9 July 2014 at the International Festival of Business in Liverpool.

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