Leeds Building Society to restrict lending on Holiday Lets

leeds building society to restrict lending on holiday lets

Leeds Building Society has just announced a suspension of lending on Holiday Let properties in certain locations throughout the UK. Specifically, they have stopped lending in North Norfolk and parts of North Yorkshire. The lending suspension will run for a trial 12-month period.

Why has the Leeds Building Society restricted lending on holiday let properties?

Leeds says that, as these are areas that have proved very popular with Holiday Let investors, by restricting holiday let mortgages, they will be putting home ownership within the reach of more people, especially first-time buyers who face difficulties getting onto the housing ladder.

This seems to be part of a much wider problem facing Holiday “Hot Spot” communities throughout the UK. In December, The Times ran an article entitled “Letting away with it?” that focussed on how the boom in holiday lets and second homes is breaking apart rural communities and how these communities are trying to fight back.

Specifically, the problems caused by lack of housing have resulted in the following issues:

  • Lack of accommodation for local workers. Local employers have to either offer subsidised housing or help with the travel expenses involved for those who are travelling long distances to work.
  • Community breakdown as local residents are unable to buy. Evidence from The Times article included one local resident of a popular rural village being the only property owner who actually lived in the village. The other 19 homes on his road were all owned by Holiday Let investors.
  • Loss of essential local services such as schools, GP surgeries and libraries as local people are unable to settle in the local area.

Local authorities fighting back for balanced local housing

As a result of these problems, some Local Authorities have started to fight back. The move by Leeds Building is one of the first practical results of this. Leeds BS have stated the following:

“After liaising with the councils over the restrictions, we’ve sought to balance local housing needs with the economic benefits tourism can provide. Each authority has identified postcode areas where housing pressures are most serious and where they agree with holiday let lending being restricted. Those postcode locations will now be added to our systems to prevent any mortgage applications received in those areas from being approved”.

Local politicians have welcomed the Leeds move, with Councillor Wendy Fredericks, Portfolio Holder for Housing and People Services at North Norfolk District Council, commenting as follows:

“In North Norfolk we have a really severe shortage of homes that people on local wages can afford. Increasing numbers of holiday lets reduce the number of rental homes available for year-round use by local people.”

Councillor Simon Myers, North Yorkshire Council Executive member for culture, arts and housing, said:

“We are pleased to support this initiative by Leeds Building Society. We welcome the fact that it is being specifically targeted at those locations where there are a high concentration of holiday lets.”

Lack of housing supply due to Holiday Lets

Generation Rent is one of the organisations that have highlighted the growing impact of Holiday Lets on the housing market, with its recent research highlighting that there are now more than 73,000-holiday homes in Great Britain, with an annual increase of 7,000.

How have property investors reacted?

Not all property investors are happy with these types of restrictions.

Bob Biggs-Price owns and operates 11 buy-to-let properties. Of these, about 5 are pure Holiday Lets. He admits that the potential rental income is higher than standard buy-to-let but points out that “It is a business. People think these rich greedy landlords, they’ve got all these properties. But its hard work costs money to maintain things”.

Many in the Holiday Let business feel that their industry is being made a scapegoat for wider structural problems in the British Housing Market, especially the failure of the planning system which they see as bureaucratic and inefficient.

In 2022 a study carried out by Sykes Cottages and the Short Term Accommodation Association (STAA) holiday lets did not add significantly to housing costs.

A more recent analysis has shown that failures and inefficiencies in the planning system have potentially blocked the building of up to two million homes. They point out that the holiday let industry has made a significant contribution to UK GDP (up to £27.7bn in 2021). This has supported 496,000 jobs and generated £4.6bn in tax revenue.

Andy Fenner, the chief executive of the STAA, has called for a proper list of holiday lets to be compiled so that the effect of these properties can be clearly seen in the local area. He said;

“Without a central register, policymakers are only seeing the growth of short-term lets without understanding the corresponding decline in other forms of tourist accommodation. This limited view can lead to inaccurate assessments of the overall impact of short-term lets on our towns and cities.”

Looking for a holiday let mortgage?

As a leading mortgage broker Goldmanread offers a comprehensive choice of mortgages across the market and can give you access the UK’s leading Holiday Home Mortgages.

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Clive Read

Clive Read is an appointed representative of PRIMIS Mortgage Network. PRIMIS Mortgage Network is a trading style of Personal Touch Financial Services Ltd which is authorised and regulated by the Financial Conduct Authority.

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