Earlier this month, the Scottish Minister for Local Government, Housing and Planning, Kevin Stewart MSP, announced the Scottish Government’s proposals for the regulation of short-term lets in Scotland.
Mr Stewart announced that the Scottish Government intends to:
- Prioritise giving local authorities powers to create short-term let control areas via the Planning (Scotland) Act 2019
- Establish a property licensing scheme using powers under the Civic Government (Scotland) Act 1982
- Review the tax treatment of short-term lets to ensure they make an appropriate contribution.
The impact of short-term lets
The use of houses and flats for short-term letting has increased significantly in recent years. Research commissioned by the Scottish Government, published in October 2019, found that the number of listings in Scotland on Airbnb, had tripled from just under 10,500 in April 2016 to approximately 32,000 in May 2019. The research showed that this increase is focused primarily in the City of Edinburgh and Highland areas, which together comprised 50.5 per cent of all Airbnb listings in Scotland. Local economic benefits in terms of increased tourism-related spending and jobs were identified, as well as increased household income for hosts.
However, the Scottish Government’s research also identified concerns regarding the reduced availability of properties for mainstream residential housing, negative impacts on the quality of life for residents of neighbouring properties, and increased tourism congestion.
Planning and short-term lets
City of Edinburgh Council, in particular, has used planning enforcement to tackle perceived amenity issues created by short term letting. Their position has been that commercial short term letting is a material change of use requiring planning permission. However, planning enforcement can be a blunt tool, dependent on the particular facts and circumstances of each individual case. Enforcement action is also retrospective, often prompted by complaints from other residents.
Planning enforcement does not enable local authorities to be proactive in their approach, and actively plan for the proliferation of commercial short term letting.
The recently enacted Planning (Scotland) Act 2019 aims to address this issue by giving local authorities powers to designate certain areas ‘short-term let control areas’. In these designated areas, use of a dwelling for short-term lets would constitute a ‘material change of use’ – meaning that planning permission would always be required. Kevin Stewart has announced that the necessary regulations for these powers are expected to come into force in Spring 2021, and City of Edinburgh Council has already announced its intention to designate all or part of the City as a short term let control area once these powers go 'live'.
Short-term lets and licensing
While the planning regime focuses on the appropriateness of the use in planning terms, the Scottish Government’s proposals for a licensing scheme for short term lets will focus on how properties are operated. Kevin Stewart’s announcement outlined that licensing of short-term lets would enable local authorities to monitor and enforce safety requirements, as well as impose conditions on licences to tackle issues like over-crowding and littering.
Details on the licensing scheme are still to be provided, but it is likely to share similarities with the HMO (house in multiple occupation) licensing regime, commonly used to control the use and operation of properties as student accommodation. HMO licence requirements often require landlords to make significant internal alterations to properties in order to bring them up to the required standard (e.g. installing fire proof doors). Compliance with licence conditions has cost implications for owners, and in certain cases will need building control and listed building consent.
Local authorities have also used the HMO licensing regime to control the concentration of HMO properties in certain areas, by making planning permission a pre-requisite to the grant of an HMO license and imposing limitations on the number of HMO licences they will grant in certain areas. Similar controls may now be used for short term lets.
Taxation
In his announcement, Mr Stewart advised that the Scottish Government are urgently considering the tax treatment of short-term lets, with a view to ensuring these properties are contributing to their local communities and services. The Minister noted that this tax would have to complement the transient visitor levy (aka ‘tourist tax’) which the Scottish Government is expected to bring forward before the end of the current parliament in 2021.
Conclusion
The new planning and licensing controls look set to be rolled out in early 2021.
To date, short term letting of properties has been relatively unregulated, with the vast majority of properties being able to operate without any additional planning or license requirements. That is due to change, with a range of new controls being introduced by both the Scottish Government and local authorities. Owners who are already using properties for short term letting, or thinking of moving into this area, will need to consider not just the current controls but the impacts of these changes.
Even if only a proportion of the 14,000 properties in Edinburgh that the Council say are registered on Airbnb need planning permission and a separate license, this will create a significant administrative burden and may prevent or delay properties being available to rent meantime.
Burges Salmon’s Planning and Compulsory Purchase team advises on planning strategy, applications and enforcement. For further information please contact Lynsey Reid.