Unscrupulous landlords could use a loophole to turn thousands of homes permanently into Airbnb-style short term lets and avoid a crackdown, it has been warned.
In the Budget, Chancellor Jeremy Hunt announced a tax clampdown on second-home owners who rent out their properties for tourists rather than to long-term tenants.
But there are fears that landlords will use an “amnesty” period floated by Government to automatically reclassify thousands of homes as short term lets.
In a letter to Housing Secretary Michael Gove, Westminster council warned the system was open to abuse.
Council leader Adam Hug said he welcomed plans to tighten up regulation on short term lets, but added: “At the same time Michael Gove is holding open a generously sized escape hatch for landlords who want to escape any regulation at all, which will effectively rob the private rented sector of thousands of homes.
"The real losers in this will be people looking to rent properties who now have even less chance of a home in Westminster."
A mandatory national register will be set up to provide local authorities with information on holiday homes in their area.
There are currently around 12,000 short-term lets in central London, more than any other area in the country.
Westminster council officials estimate entire residential blocks in the borough are now effectively hotels. A town hall investigation found at Park West apartments in Edgware Road, 90 per cent of the flats in the building were being used as short term lets, accommodating more tourists per night than the Ritz Hotel.
Mr Hunt scraped tax perks for landlords who use furnished holiday lets laws to deduct the full cost of mortgage interest payments from their rental income and pay lower capital gains tax if they sell up.
He said he was ending the programme to help ease the housing crisis in places such as London and Cornwall.
“I am concerned that this tax regime is creating a distortion meaning that there are not enough properties available for long term rental by local people,” he said.
“So to make the tax system work better for local communities, I am going to abolish the Furnished Holiday Lettings regime.”
Mr Hug added: “We must get the details of the proposed planning changes and registration scheme right.
“While the principle of a mandatory registration scheme is the right one, we are keen to see the detail to make sure hosts are accountable for any illegal activity from excessive noise to dumping waste.
“We are deeply concerned by the proposal that properties which are already used for short-term letting are automatically exempt from the need for planning permission.
“Our data suggests that at least 10,500 homes would meet the proposed definition of short-term letting – equivalent to homes for over 25,000 people – and so would be permanently removed from the residential market should the proposals be brought forward in their current form.
“To put that figure into context, we currently have approximately 4,000 households on our housing waiting list.”
