At a time when Scotland suffers from a chronic undersupply of housing and the private rented sector is being increasingly more regulated, landlords are tempted to shift their properties from the residential sector to the less regulated short term lets market, with its potentially higher gains.
In Scotland there are 31,000 active short term let listings on Airbnb (around three times more than three years ago), with average annual earnings of £3,800, which are the highest of any part of the UK. In the most concentrated areas of Scotland – Skye and Edinburgh City Centre – those listings account for 18.6% and 16.7% of homes respectively.
Despite short term lets having an unquestionable positive impact on local economies, driven by tourism, and financial benefits for hosts, there have been long term concerns about reduced availability of residential housing and negative impact of short term lets on local communities.
New licensing
The Scottish Government has now listened to those concerns and responded to the wide support for short term lets regulation by announcing new powers for local authorities from spring 2021.
These powers will include:
- A new mandatory safety requirement that will cover every type of short term let
- Ability to apply, at a council’s discretion, further conditions to address the concerns of local residents
- Ability to designate control areas to ensure that planning permission will always be required for the change of use of whole properties to short term lets.
Housing Minister, Kevin Stewart said: “Short-term lets can offer people a flexible travel option and have contributed positively to Scotland’s tourism industry and local economies across the country.
“However, we know that in certain areas, particularly tourist hot spots, high numbers of short-term lets are causing problems and often make it harder for people to find homes to live in.
“That is why we are empowering local authorities to implement a system that works for their area. By giving councils the power to set conditions around short-term lets licences and put in place planning control areas to tackle hot spots, communities across Scotland will be able to decide what is best for them and their local economy.
“Everybody wants visitors, hosts, neighbours and local residents to be safe. That is why the licensing scheme includes a safety element which will be mandatory across Scotland for all short-term lets. Separately, local authorities will be given discretion to include further conditions to help tackle littering or overcrowding of properties.
“These powers will allow local authorities to ensure a safe, quality experience for visitors, whilst protecting the interests of local communities.”
How short term lets will be taxed in the future is yet to be proposed, but Scottish ministers are committed to ensuring that they make an appropriate contribution to local communities and support local services.
Impact of short term lets regulation on residential market
Anticipating the impact the new short term letting restrictions might have on the long term private rental sector, Nicky Lloyd, Head of ESPC Lettings, said:
“It’s likely that a number of landlords currently operating short term lets will step away from this market over the next 12 months, with properties either being sold or converted to long term rentals. This may result in an influx of properties coming to the rental market and diluting the supply of properties which has been heavily led with demand over supply.
“However, given the number of people moving in and around the city, it is unlikely that numbers of potential properties coming to the long term rental market will have much of an adverse effect.
“It does mean that referencing and understanding potential tenants’ requirements will become more important than ever, in order to avoid people who were only looking for a short let signing a Private Residential Tenancy and serving their 28 day notice immediately.”
The new measures regulating use of short term lets won’t solve the Scotland’s “acute housing emergency” on their own, said Director of Shelter Scotland, Graeme Brown, but “they will help protect communities and ensure that local housing needs are better met.
“Only by building enough social homes to meet demand – now and in the future – can Scotland fulfil its responsibility of providing the human right of a home for everyone.”
