You’d be hard pushed to be a resident of central Edinburgh and not have heard some horror story about Airbnb-type short term lets from those that make the city centre and surrounding areas their home. From tourists arriving in the wee small hours and waking up everyone in a tenement stair unable to work a key safe to access the building, to antisocial partying at all hours and rubbish discarded by those failing to grasp Edinburgh Council’s recycling schemes. So it has come as welcome news to many that live in traditional tenement buildings that the regulation of such accommodation is finally here. It is welcome news too, for many first time buyers or long term local tenants, for whom the huge volume of short term lettings stock has locked them out of suitable properties traditionally suited to younger working professionals in the city.
The Scottish Government started a panel in 2017, held a consultation in 2019 and in 2020 proposed a licensing regime, planning control and a review of tax treatment for such properties with the law passed in January this year. Using the Civic Government (Scotland) Act 1982 the onus is on local councils to create and enforce the regulations. For Edinburgh, this means a Planning Control Area covering the whole of the City of Edinburgh in addition to Short Term Let Licences for hosts.
A short term let is not defined by the length of stay, rather by the guest having another primary residence so that the short term property is not their only or principal home.
In 2021 Edinburgh had approximately 5288 short term let premises, the glut of these in the city centre and Leith Walk area with the council receiving a huge volume of complaints from local residents about many of them in recent years. Airbnb-type short term lets are hugely popular around the world especially in tourist destination cities like ours, offering visitors an alternative to traditional hotel-type accommodation. Airbnb, the website started by two flatmates in San Francisco for visitors to find such accommodation is now valued at a whopping £75 billion – short term lets are big business and have allowed property owners (hosts) to earn more from their properties than they would through longer term lets. This has had a huge impact on residents and communities that make the city their home, has stifled the availability of suitable long term accommodation and has pushed private rental values to almost eye-watering prices – it’s a story commonly heard that first time buyers have found monthly mortgage repayments cheaper than rent, but of course not everyone is in a position to buy their own home or would want to.
What are the licences:
A licence is now required to be held by any host who lets all or part of their home or all or part of a second home that they own with exemptions for hotels/aparthotels/hostels, care/nursing homes & hospitals, traditional bothies or schools/colleges/educational training facilities. License applications opened on the 1st October and any host new to short term letting must apply now and must not take bookings or deposits until their licence is in place. Existing hosts have been granted a transitional period and must apply by the 1st April 2023 with all hosts legally required to have a licence by 1st July 2024. There is currently no information available from Edinburgh Council about how long it will take for the licences to be issued, but the Law Society of Scotland have published an article suggesting it could take months.
In addition to holding a licence, hosts looking to let property in Edinburgh will also require planning permission for the property they intend to let. Edinburgh is the only council in Scotland to have adopted this policy so far, with Badenoch & Strathspey in the Highlands likely to follow suit. The Planning Control Area prohibits change of use from usual residential accommodation to a short term let where there would be a detrimental impact on nearby residents. This will include within shared entrance tenement stairs with Edinburgh Council stating that tenements are unsuitable for short term letting due to character, location and undue nuisance to residents. Any previous issues with noise or antisocial behaviour will be directly relevant to the planning application and will be grounds for refusal.
Much of the existing short term let accommodation in Edinburgh will fall foul of these new regulations, with traditional tenement buildings forming the bulk of city centre accommodation. Whilst Airbnb are likely to argue this will have a commercial impact on Edinburgh’s tourist trade and create changes within the property market as such properties become less desirable to buy-to-let investors, it creates new opportunities for first time buyers and young long-term tenants in the city. These groups have found it increasingly difficult to get on the housing ladder or rental market in recent years. Many would argue that the city has a whole host of suitable hotel and short term stay visitor accommodation, suitable to the needs of travellers. When one door closes, another door opens as they say!
More first-time-buyer suitable properties will certainly become available as some landlords will opt to sell instead of transferring their properties to longer term rentals which don’t require the same planning permission (landlords still must hold a licence) and aren’t as lucrative. If the market is flooded with these types of property this will cause a fluctuation in valuation as the balance of supply and demand flips in favour of the buyers however given the difficulty for first time buyers in recent years, it will help to create a healthier property market overall.
Edinburgh remains a hugely desirable place to live as well as visit, having topped more than one poll in 2022 as the best place in the world to live. It is anticipated that whilst this change to short term lets may have a short term impact, longer term values of properties will remain stable as overall demand outstrips supply and more housing stock will be freed up for first time buyers and long-term tenants. Edinburgh is a geographically small area, hemmed in by the Pentland Hills in one direction and the Firth of Forth in the other, there is therefore finite housing stock in central locations, and with a growing population driven by Scotland’s industry in tech and banking here on the east coast, investing in Edinburgh property will still offer a better return than in many other places.