It's War: Manchester Clamps Down On Profiteering 10% Resi Yields And Airbnb
A new private-rented strategy agreed by Manchester City Council will mean action to control unprecedented yields in some parts of the buy-to-let rental market and curbs on short-term Airbnb-style lettings.
The strategy, which leaves the prime and mid-tier city centre private-rented sector largely untouched, is intended to help lower-income renters who face “varied management and issues linked to property condition and criminality [owned by] by absentee landlords or landlords who simply fail to respond when tenants report problems,” a report to councillors said. It will operate from 2020-2025.
The council said that until the coronavirus pandemic, short-term holiday lets in the city had grown fast, with more than 3,000 listed, up to 75% let through Airbnb and 50% of which are in the city’s Northern Quarter.
“This portion of the short-term lettings market has generated a growing number of problems for residents nearby linked to poor waste management practices, noise and anti-social behaviour as well as, in some instances, criminal activity which has damaged the reputation of the city,” a report to councillors said.
The council is seeking legal advice to identify whether it can avoid properties built on council-owned land being used as short-term lets. The council is a major freeholder and it hopes that clauses and restrictive covenants included within the lease and freehold transfer can provide for strict and controlled lettings within the neighbourhood.
Council data shows that the number of Airbnb listings fell by 16% in Q2 2020. There are now a little over 1,000 listed in the city centre.
The strategy also targets buy-to-let investors in northern and eastern districts of central Manchester.
Manchester’s combination of relatively low property prices and strong rental growth presents a very attractive opportunity for prospective buy-to-let investors, council officers said.
Research by the council found that landlords in north and east Manchester could achieve yields upward of 10%, amongst the highest in the country, and sufficiently strong to wipe out the deterrent effect of the 3% Stamp Duty Land Tax surcharge on second home purchases introduced in April 2016.
“This, coupled with the low value of sterling, high levels of demand and driven by unprecedented post-war levels of population growth, has continued to make Manchester amongst the most attractive cities in the UK for residential investors both at home and abroad,” the report said.
The council’s answer is to introduce licensing of private rentals in an increasing number of neighbourhoods.
All privately rented properties within a designated area require a licence with some exemptions, for example, property rented to family members.
Manchester currently has four Selective Licensing areas encompassing approximately 2,000 private rented properties. A separate report to the council adds around 1,000 more properties in various parts of the city including Rusholme, Gorton and Harpurhey. You can find a map here.