Liverpool Party Flats: The Case for Better Regulation

Councillor Nick Small

The sharing economy has many benefits for consumers. Digital platforms like Uber, Deliveroo and Airbnb are disrupting many industries such as taxis, takeaway food and hotels.

Over the last few years, Liverpool, as the UK’s fifth most visited city, has seen a massive increase in Airbnb-style, short-term lets. This is good news for many. People can make some extra money with few barriers to entry by renting out rooms. The latest Airbnb UK Insights Report states that a typical UK host on their platform earns £3,100 a year. Meanwhile, visitors get more choice and flexibility about where they can stay and how much they pay with 78% of guests claiming they choose to travel on Airbnb so they can “live like a local”. Sharing platforms enhance our tourism capacity supplying temporary demand for accommodation more flexibly around big events and there’s emerging evidence post-pandemic that some visitors prefer sharing homes because they consider them safer than other forms of accommodation such as hotels and hostels where there is a higher chance of interaction.

The sharing economy offers new opportunities for economic growth. The average guest travelling with Airbnb spends £100 per day in the UK and 43% of this is spent in the neighbourhoods in which they stay which undoubtedly creates new jobs. The sharing economy is environmentally-sustainable too. When finite resources are shared, fewer resources are wasted. Consumption is reduced.

But there are downsides. The pace of change means that, as with other parts of the sharing economy, analogue regulation built for another age is struggling to keep pace with the structure of the digital economy. New challenges have emerged around workers’ rights, while the enforcement of traditional consumer protections has become more difficult in markets where services are increasingly delivered online.  For example, who does the consumer take legal action against if the service isn’t provided as promised? Is it the host or the platform? Who exactly is providing the service? Meanwhile, in another area of concern, our tax bases are being eroded by new digital platforms where value is often offshored.

We’re also seeing other issues. Longstanding residents are experiencing problems with anti-social behaviour, noise and general disturbance from short-term lets, and there can be environmental issues too, especially with waste collection with bins being left out on non-collection days. In some cases, short-term lets are being used anonymously for criminal activities. What we are finding is that as the number of short-term lets grows and becomes concentrated in an area, the bigger the problem often is for residents.

There are four main problems we’re seeing in Liverpool.

Firstly, there’s a lack of data available for councils and other public agencies, like the fire service and police, about exactly where short-term lets are located. Some platforms do share information but it’s on a very high level. This means it can be difficult to enforce existing laws and regulations around environmental health, nuisance and fire safety. Criminal activities can be very hard to detect and police.

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‘Longstanding residents are experiencing problems with anti-social behaviour, noise and general disturbance from short-term lets.’

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Secondly, there’s a lack of awareness of existing regulation amongst operators. Many people renting out their homes as short-term lets can find themselves unwittingly falling foul of mortgage agreements, tenancy agreements banning subletting or restrictive covenants. Sometimes this can have major negative implications for homeowners, such as banks withdrawing fixed-term mortgage deals.

Thirdly, councils are seeing their tax base changing as the distinction between homes and hotels becomes more blurred. Owners of short-term lets may often legitimately still pay council tax rather than businesses rates. Council tax is generally at a lower rate than business rates, so councils lose out. Student homes are exempt from council tax (and business rates), but there’s some anecdotal local evidence that rooms in purpose-built student accommodation are being rented out on sharing platforms with no local tax being paid. Of course, this goes beyond people not declaring their financial activities; it’s as much about the structure of the tax system. In most incidences, short-term lets qualifying for Business Rates or even tax relief is perfectly legal, but is it right? Cities like Liverpool, with a weak tax base to start with, are particularly exposed when homes are converted into short-term lets with implications for frontline public services. Since 2010, councils have seen central government support grants dwindle away and the proceeds of business rate growth retained locally, but if business rates end up coming at the expense of Council Tax revenues, it just adds to the pressures on public sector budgets.

Finally, there’s often a negative impact on local housing markets with family homes being taken out of the traditional housing supply and people being denied access to affordable housing. When rental yields for short-term lets exceed yields for tenancies, as they do in Liverpool, communities suffer as homes get bought up by speculative investors and local people, especially young people, get priced out of local housing.

We are seeing all four of these downsides in Liverpool. It is especially noticeable in the city centre, in Anfield and in the Smithdown and Sefton Park areas, but these negative effects are being felt in other communities across the city too.

That’s why I tabled a motion along with five other councillors  - Christine Banks, Laura Robertson-Collins, James Roberts, Lena Simic and Billy Marratt -  to Liverpool City Council’s Strategic Development and Housing Select Committee calling for the introduction of a register of tourist accommodation providers. We welcome the ongoing public consultation launched by the Department of Culture, Media and Sport into this matter examining, as it is, how other places around the world are addressing these important issues.

Scotland is well ahead of England on this. The Scottish Government set up an expert panel on the sharing economy in 2017. It included representatives from sharing economy platforms like Airbnb. As a result, the Scottish Government brought in the Licensing Order and Control Area Amendment Regulations in March of this year which will introduce a licensing scheme for short-term lets; existing hosts will have until 1 April 2023 to apply. This means Scottish councils will know what’s happening in their area, house by house, street by street, so they’ll be able to prioritise resources and tackle problems more effectively.

The new regulations allow Scottish councils to declare control areas, where owners will need a specific change of use planning permission to convert a dwelling into a short-term let. Edinburgh City Council became the first council in Scotland to use these new powers. There are already similar planning powers in England, but only in London and only covering certain types of short-term lets. In London, owners need planning permission if they are renting out their home for more than 90 days a year. Responsible platforms like Airbnb enforce this; others do not. Elsewhere in England, there is no such requirement.

The Welsh Government announced proposals for additional regulatory and tax measures against short-term lets in July. A new mandatory licensing scheme is planned. Councils will be able to require homeowners to change the status of their dwellings from primary homes into second homes or short-term holiday accommodation. They’ll also be able to charge additional council tax on second homes and holiday lets.

In Northern Ireland, they’ve had a tourist accommodation certificate scheme, which covers sharing platforms, in place since 1992. It is an offence to offer tourist accommodation without a certificate and is punishable by a £2,500 fine or six months imprisonment.

Outside the UK, other places are doing even more.

In Portugal, there’s a national registration scheme for all tourist accommodation and councils can introduce containment areas limiting the number of short-term lets. Meanwhile, starting last month, the city of Barcelona has banned outright the short-term let of private rooms, though not whole houses or apartments, which are still acceptable providing owners have a licence.

It goes on. The Netherlands has a national registration scheme that local councils can opt into. Ireland has designated some areas as Rent Pressure Zones, where hosts can only rent out rooms after being licensed to do so. New York City requires sharing platforms to share data on hosts with the city authorities. Boston only allows short-term lets in homes where hosts are present and San Francisco bans short-term lets in second homes entirely. Both have local registration schemes. In Japan, there’s been a licensing regime in place since 2018. If the host doesn’t live onsite, they must have a designated administrator to be responsible. A short-term let can only be operated for 180 days a year and waste has to be collected as trade waste, rather than domestic waste.

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‘Our tax bases are being eroded by new digital platforms where value is often offshored. Cities like Liverpool, with a weak tax base to start with, are particularly exposed when homes are converted into short-term lets with implications for frontline public services.’

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So what interventions are we calling for in Liverpool?

First, we want to recognise good practice. There are a lot of great hosts in Liverpool causing few, if any, problems for neighbours. I live in the city centre and have had an Airbnb host as a neighbour for several years. I’ve never encountered any issues. The council is starting to work more closely with responsible hosts in the same way that it works with the Private Landlords’ Forum and that is exactly as it should be. There’s a lot that everyone can learn from each other through better dialogue. Responsible hosts should have a voice on groups like the Liverpool City Region Visitor Economy Board.

Secondly, we need new powers on planning. Permission for a change of use to a short-term let must be introduced and, as a minimum, the 90-day requirement in London should be extended to the rest of England. This would allow councils to assess each and every application on its individual merits, taking into account the amenity value for neighbours and whether the area is primarily residential or mixed use. We could then put conditions in place as appropriate including operational management plans which look at how a short-term let is managed. If we get this right, it will stop communities becoming blighted by an over-concentration of short-term lets.

Thirdly, there should be a national tourist accommodation registration scheme, delivered locally by councils. I see Liverpool’s landlord licensing scheme as being a roaring success, as it’s given the council extra financial resources as well as the data to enforce health and safety, consumer protection and other regulations much more effectively. It means there’s no race to the bottom. Responsible operators are rewarded, dodgy operators are targeted for enforcement and problems for neighbours are reduced. Most importantly, it will give councils better data to respond to change in a strategic way, giving communities more power to shape the future of their neighbourhoods.

Finally, there needs to be changes in how short-terms lets are taxed. They should be treated as businesses, subject to business rates and not council tax. Waste generated by short-term lets should not be collected by councils at the same price as those paid by permanent residents. It should be more expensive.

The Department of Culture, Media and Sport consultation is open until 21 September. As a result of our motion, Liverpool City Council will be submitting evidence into that process. We’ll be supporting the proposal that councils be given the strongest possible powers to make the sharing economy work better for everyone. I hope that the new Government will respond positively to that suggestion.

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Nick Small is the Labour and Co-operative Councillor for the Central Liverpool ward and has been in elected office since 2004. He is currently part of a 6-member group campaigning for stronger regulation of the short-term let market within the city.  Nick tweets @cllrnicksmall.

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