Entering the ‘sharing economy’: Short Term Housing Rental comes to London

Image © AirBnB

The generation often referred to as ‘generation rent’ after the global financial crisis has influenced yet another sector of the economy. First as teenage consumers overturning the music and retail establishment and then re-shaping their workplace upon entering the workforce. And now generation rent can officially be called ‘generation share’ in London as they take on the hospitality and residential markets.

The proposed law change in London now formally allowing short-term property letting on flats, houses and spare rooms may have huge implications for the London market. Of course many Londoners have been listing and renting out their housing illegally for years, but this new legalization could bring big changes to our already pressurized housing economy.

London is opening its doors to the individual, the entrepreneur, generation share, and tech companies looking to shake up the way existing markets work. Instead of them facing fines and investigations like in other cities, by allowing people to rent their homes out for under ninety days a year they are able to subside the fears of neighbors and councils that a hotel may open up next door and still allow people to subsidize their outrageous London housing cost.

The global rise of peer-to-peer property rentals has grown exponentially over the last several years, with market leader AirBNB recently valued at over $13 billion dollars US. However the impact on the hospitality and housing industry has yet to be fully quantified.

Image © Gensler

Considering that the core demographic for AirBNB is younger and more cost-conscious, essentially generation share, the growth of short-term property rentals could have a more immediate impact on certain sectors of the London hospitality industry. With these travelers given greater access to more economical flats and shared room accommodations, this may cut into the business of the lower-end budget hotels more than those that cater to business travelers and those seeking high-end lodging. However, as more and more luxury listings become comfortable with such house sharing schemes that dynamic could change. No wonder then that there is such strong opposition to this law change by the British Hospitality Association.

Conversely, this could make London more affordable for travelers, who in turn will have more available income to spend on restaurants, retail, and attractions. While it may negatively impact hotel revenue, overall tourist spending could be increased. It also makes the city more attractive to those working on short-term jobs, and those looking to move to the city temporarily.

The implications on London’s current housing shortage are the most serious. Foreign speculators who are already investing in London property will now have an income generating stream to make their investments even more lucrative. Will this increase already sky-high property prices even higher as investors look to profit on short-term rental income? Or will this allow “regular" property owners a means to afford the high prices by supplementing their income while they are away?

Other questions include: How will the ninety day yearly maximum be enforced? Will an increased “real” occupancy rate generate tax income for the city or just increase congestion? What are the cultural implications for residential neighbourhoods of having a sudden influx of temporary visitors?

Jonathan is an architect with fifteen years of experience working in the residential, hospitality, retail centers, and mixed-use sectors. He joined Gensler’s Los Angeles office in 2011 and has played a leading role on large retail and entertainment driven mixed-use projects throughout world. Now in London he is currently researching the London residential market as part of a Firmwide initiative RESIDE. Contact him at jonathan_breen@gensler.com.