Landlord Instructions Still Falling — Why Smart London Landlords Are Switching to Short-Term Lets in 2026

The Numbers Don't Lie — London's Rental Supply Is Shrinking Fast

The latest data from the Royal Institution of Chartered Surveyors (RICS), published in early 2026, paints a stark picture: landlord instructions to let properties on a long-term basis are still falling. This isn't a blip. It's a sustained, structural retreat from the traditional buy-to-let model that has been accelerating since the Renters' Rights Act received Royal Assent and the regulatory landscape for long-term landlords became significantly more onerous.

For thousands of London property owners, the reaction has been paralysis. They don't want to sell — particularly not into a market where capital gains tax changes have already eaten into exit profits. But they're equally reluctant to sign up for a long-term tenancy regime that strips away Section 21, imposes indefinite rolling tenancies, introduces a landlord register with compliance obligations, and layers on ever-rising costs with thinning margins.

So what are these landlords supposed to do? Sit on an empty property and watch their investment bleed?

There's a better answer — and it's one that a growing number of savvy London landlords are already acting on.

The 'Stuck in the Middle' Landlord Problem

Let's be honest about what's happening. The current market has created a two-tier London rental economy:

• Long-term rental supply is contracting sharply. RICS reports that tenant demand continues to outstrip new landlord instructions, pushing rents higher but making the economics and regulatory burden of long-term letting increasingly unattractive for individual landlords.
• Short-term rental demand remains resilient and, in many London boroughs, stronger than ever. Tourism has fully recovered post-pandemic, corporate travel is booming, and platforms like Airbnb continue to see record booking volumes across Zone 1–3 properties.

Caught between these two realities is a large cohort of landlords who are effectively doing nothing. Their property sits underperforming — perhaps let to a long-term tenant on below-market rent they're nervous to increase, or worse, sitting vacant while they weigh up their options.

The Renters' Rights Act was designed to protect tenants, and in many respects it does. But an unintended consequence has been to make the long-term letting proposition so complex and so weighted against landlords that many are simply walking away from the sector entirely. The RICS data is the proof.

What the Renters' Rights Act Means in Practice

For landlords still considering long-term lets, here's a snapshot of what they're now navigating:

• No Section 21 'no-fault' evictions — removing the ability to regain possession of your property without grounds
• Open-ended periodic tenancies as the default, meaning you can't plan around fixed terms
• A new Private Rented Sector Database and Ombudsman with registration requirements and compliance costs
• Enhanced Decent Homes Standard applied to private rentals for the first time
• Stricter rules on rent increases, making it harder to keep pace with rising costs
• Potential penalties of up to £7,000 for first-time compliance breaches

When you add this regulatory overhead to the existing burden of mortgage interest tax relief restrictions (Section 24), increased capital gains tax rates, and rising maintenance costs, the net yield on a traditional London buy-to-let can look decidedly anaemic.

Why Short-Term Lets Are Winning the Yield Argument

Here's where the comparison becomes compelling. A well-managed short-term let in London can generate 30–60% more gross revenue than an equivalent long-term tenancy — and that's a conservative estimate for popular areas like Kensington, Shoreditch, Marylebone, Canary Wharf, and South Bank.

Short-term lets also offer landlords something the new long-term regime explicitly removes: flexibility. You retain full control of your property. You can block out dates for personal use. You can adjust pricing dynamically based on demand. And crucially, you're not locked into an indefinite tenancy with no guaranteed exit route.

London's 90-day rule for short-term lets on platforms like Airbnb is often cited as a limitation, but professional operators know how to work within — and around — this framework. Properties with appropriate planning permission or those operating under serviced accommodation models can legally exceed the 90-day cap, and a knowledgeable management partner will ensure your property is fully compliant while maximising every available night.

The Self-Management Trap

Of course, the yield premium of short-term letting comes with operational complexity. Managing guest communications, dynamic pricing, professional cleaning turnovers, linen management, key exchanges, maintenance call-outs, review management, and regulatory compliance is essentially a full-time job. For landlords who already have careers, families, or portfolios to manage, self-managing an Airbnb is a fast track to burnout.

This is precisely why the professional management model exists — and why companies like Airhosts have seen a significant increase in enquiries from London landlords looking for a hands-off, high-yield alternative to the traditional letting market.

The Professional Management Advantage

Working with an experienced short-term rental management company transforms the economics and the experience of property ownership. Here's what that looks like in practice:

• Revenue optimisation — Professional dynamic pricing tools and market expertise ensure your nightly rates respond in real time to demand, events, seasonality, and competitor pricing. This alone can add 15–20% to annual revenue versus static self-set pricing.
• Operational excellence — From five-star cleaning and linen services to 24/7 guest support, professional management protects your property's reputation and review scores, which directly drive future bookings.
• Regulatory compliance — London's short-term let rules are nuanced and borough-specific. A professional partner handles everything from the 90-day reporting to health and safety obligations, giving you peace of mind that your property is operating legally.
• Complete transparency — With Airhosts, landlords receive detailed monthly performance reports showing occupancy, revenue, expenses, and net income. You see exactly what your property is earning, without lifting a finger.

The result? Higher income, zero hassle, and full flexibility to change course whenever your circumstances require it.

What London Landlords Should Do Right Now

If you're a London landlord reading the RICS headlines and feeling that familiar knot of uncertainty, here's some practical advice:

1. Don't sell in a reactive panic. London property remains a strong long-term asset. The landlords who sold in 2024–25 to avoid regulation are already watching values recover.
2. Reassess your letting strategy. If your current long-term tenancy is delivering a net yield below 4%, it's worth modelling the short-term let alternative for your specific property and location.
3. Get a professional appraisal. A reputable short-term let management company will provide a free income projection based on real comparable data — not guesswork.
4. Prioritise compliance from day one. Whether you're in Westminster, Camden, Tower Hamlets, or Wandsworth, the rules differ. Professional management ensures you start — and stay — on the right side of them.
5. Think about your time. Even if you could self-manage, the question is whether you should. Your time has a value, and for most landlords, outsourcing operations to professionals delivers a better net return once you factor in the hours saved.

The Bottom Line

The RICS data tells us what we already know intuitively: London's long-term rental market is becoming a hostile environment for individual landlords. But the property itself hasn't lost its value — far from it. London remains one of the most desirable short-stay destinations in the world, and landlords who pivot to professionally managed short-term lets are capturing that demand at significantly higher yields.

The gap between 'doing nothing' and maximising your property's income has never been wider. Airhosts exists to close that gap — handling every aspect of short-term let management so you can enjoy the returns without the operational burden.

If you own a property in London and you're uncertain about your next move, now is the time to have the conversation. Get in touch with the Airhosts team today for a free, no-obligation income assessment and discover what your property could really be earning.