The rise of Airbnb

This article is part of
Guide to unusual buy-to-let

Recently, the Tipton and Coseley Building Society announced it will accept applications from borrowers who wish to list a property on the holiday lettings website.

Karen Bennett, managing director of commercial mortgages at Shawbrook Bank, says: “Traditional property investors have begun to consider Airbnb in lower yielding areas where the combination of rental yield and increasing landlord costs have made traditional single lets less profitable.”

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She thinks the mortgage market has been slow to adjust but that “more options will appear as banks begin to understand the dynamics of this particular niche market”.

Mr Phillips has seen an increase in clients enquiring about buying property specifically for the purpose of letting it short term through Airbnb.

“There have been some tentative forays into the market by lenders, but they are clearly remaining cautious and ensuring that the properties will still pay for themselves if they end up being let as longer term lets, by only allowing a loan based on the six-month assured shorthold tenancy figures,” he explains.

Property pitfalls

What are the pitfalls to avoid? And how can advisers help their clients to navigate Airbnb, when it is still a fairly new concept?

Firstly, there are signs that countries, including the UK, are cracking down on the phenomenon. 

The traditional tourism industry has voiced its concerns about the holiday rentals site, while some cities believe the popularity of renting rooms via Airbnb to tourists is pushing out those residents who are looking for rental properties and rooms to live in.

Stephen Marcon, who is expat, international and overseas mortgage specialist at Connect Mortgages, suggests Airbnb is coming to authorities’ attention.

Mr Phillips agrees: “I think they need to be cautious about the potential backlash from local authorities and possible central government, concerned about the way some towns and cities become unaffordable when large amounts of housing stock is bought up as holiday homes.”

Question marks also surround how much tax is being paid by Airbnb hosts.

Jackie Hall, a tax partner at RSM, acknowledges: “Income from letting a room in your house, or even the entire property, via the Airbnb platform is primarily taxable income from property letting. 

“However, many Airbnb hosts may have previously paid little or no tax on this income as a result of ‘rent-a-room’ relief.”

She explains: “Targeted at income from lodgers, ‘rent-a-room’ relief allows gross income of up to £7,500 a year to be received tax-free on a property that is the individual’s main home.

“The legislation currently does not include any requirement for the landlord to be living in the home at the time, meaning many Airbnb hosts have made use of this relief even where their full property has been let out.”