Short-term lets. What is all the fuss about?

Posted on by

There has been quite a stooshie about new short-term letting (STL) regulations. The deadline for applying for an STL license is 1 October 2023 (having been extended for 6 months from 1 April 2023).

What is going on?

Background

I spent a fair amount of time campaigning on the topic of short-term lets when I was an MSP. I launched the Homes First campaign in November 2017 in response to widespread concerns about the rapid growth of short-term lets in Edinburgh, often within shared residential spaces. The public policy issues identified including disturbance, nuisance, impact on housing supply and the safety and wellbeing of guests.

I recognised that short-term lets were not a new phenomenon and that the self-catering industry was well established and contributed significantly to the tourism and so my campaigning focussed on the following.

From the outset I identified a distinction between home-sharing (letting out a room in someone’s home) and commercial short-term letting where a residential property is converted to a commercial operation and ceases to be anyone’s home.

In addition there were and continue to be hybrid situations such as has happened in Edinburgh where local residents vacate their homes and let them out during the Edinburgh Festival.

Our proposals for reform were based upon tightening up planning land and introducing a licensing scheme to ensure basic safety and other requirements were met by operators.

A Word about Planning

Short-term lets are a sui generis use class under The Town and Country Planning (Use Classes) (Scotland) Order 1997. This means that they stand in a class of their own and, if converting a domestic dwelling to a STL is a material change of use, then planning consent is required and always has been. Whether any change is material can only be determined by the planning authority.

This proved to be a substantial cause of contention in Edinburgh and more widely with thousands of STLS operating without planning consent and thus, potentially, unlawfully. As the City of Edinburgh and other councils were persuaded of the need for stricter planning enforcement, the numbers of applications for retrospective consent grew and many were rejected, decisions which were subsequently upheld on appeal.

Legislation

The Scottish Government dithered for quite a while before accepting the need for two reforms – to planning and to licensing.

Powers were provided in the Planning (Scotland) Act 2019 to establish short-term let control areas. These would be areas where planning permission would always be needed for changing the use of a dwelling house to a short-term let whether the change was material or not. The legislation was passed by Parliament in February 2021. I voted against it since it gave a veto to Ministers over powers which should in may view have been the exclusive right of local authorities to implement. There is currently one such area in operation covering the whole of the City of Edinburgh council area.

The designation makes no difference to the requirement for consent for material change of use outside control areas (so in the whole of Scotland outside Edinburgh) and thus by and large all STLs at the very least need to satisfy themselves that the planning authority is satisfied that there is no material change of use involved.

Licensing was to prove more contentious. Industry representatives argued for a registration scheme but Ministers proposed a licensing scheme along the lines of similar schemes for taxis, sale of alcohol, tattoo parlours and other such activities. The powers to introduce new licensing schemes lie in the Civic Government (Scotland) Act 1982.

The first licensing scheme was introduced to Parliament in December 2020 and was intended to come into force on 1 April 2021. The Local Government and Housing Committee debated the regulations on 3 February 2021. I voted against the legislation on the basis that it covered Bed and Breakfast accommodation which I felt should not have been included (more on this below). The regulations were withdrawn by the Minister later in February but were then re-introduced and passed in January 2022 with the Conservatives and Liberal Democrat MSPs voting against.

The new licensing regime means that anyone operating a commercial short-term let (where it is not anyone’s home) and home letting and sharing (renting all or part of your own house requires a licence to operate). Operating without one is a criminal offence. There are mandatory conditions relating to gas electrical and fire safety as well as public liability insurance, water safety and maximum occupancy.

Operators must apply for a license by 1 October 2023 and must have secured one by 1 July 2024.

What is all the fuss about?

In recent weeks there has been growing criticism of the regulatory regime with industry bodies calling for a further delay in implementation and a review of its operation. Claims have been made that the new rules will decimate the self-catering industry and adversely affect Scotland’s tourism economy. Today, MSPs from Conservative, Liberal Democrat and Labour parties wrote to the First Minister asking him to pause the legislation (see below for extract)

So what is going on? As is often the case there are multiple and overlapping agendas.

  • Some operators are only belatedly waking up to the new rules.
  • Some operators are using the new rules as an excuse to have a go at the SNP/Greens and the Scottish Government. this is being weaponised by some opposition MSPs.
  • Many Bed and Breakfast business resent being incorporated into a scheme designed (they argue) to address very different problems (see below).
  • Some operators have known fine for a long time that they need to comply with the rules but have resisted making an application for a licence because they feared rejection.

This last reason is what lies behind the low application and success rate in Edinburgh with reports that 97% of STLs have still not applied for a licence. The predominant reason for this is the fact that in order to obtain a licence, the STL operator must demonstrate that they have planning consent for the property from which they intend to let accommodation (this applies to commercial letting of whole properties and not home sharing).

For years now, Edinburgh has been rejecting planning applications for STLs in tenements where access is off a shared stair. These refusals have been upheld on appeal.

The simple fact is that hundreds and possibly thousands of STLs in Edinburgh have been operating unlawfully for many years. For example, in research I conducted in 2020, we examined all the STLs on the Valuation Roll for Edinburgh and discovered that of 1609 properties being used for commercial short term letting, a mere 6 had planning consent to operate as STLs.

Thus there is a particular unrest among operators in Edinburgh who know that their license will be rejected because they do not have planning consent and who also know that if they apply for planning consent, they are likely to be refused.

What about Bed and Breakfast?

Bed and breakfast businesses feel particularly sore about the new licensing regime which includes elements that they never had to comply with before but on the core fire, safety and insurance conditions they have always been compliant (notwithstanding a few rogue operators).

I voted against the first iteration of the licensing scheme precisely because I never thought B&Bs should have been included. Good policy demands that there is an identifiable wrong or problem that needs to be addressed.

There have never been any systematic or substantial complaints or concerns about the operation of B&Bs in Scotland. Any that have been made about specific businesses can generally be tackled by local authority officials and the Scottish Fire and Rescue Service.

B&Bs got swept up in the scheme because there was Scottish Ministers argued that, if they were excluded, operators on platforms such as AirBnB who were renting out rooms could simply provide a simple breakfast and claim that they were B&Bs and thus be exempt from licensing.

In other words, a group that had never resulted in any cause for concern would be forced to apply for a license because another group might seek to impersonate them. I take the view that this is wholly inappropriate and wrong notwithstanding difficulties in seeking to differentiate the two groups in law.

The proportionate answer would have been to establish a registration scheme for home sharing and B&Bs where in all cases, rooms were being let out in someone’s main home and where that person was ordinarily resident. A registration scheme would involve a simple tick box exercise confirming compliance with basic safety and insurance conditions and the name and contact details of the person legally responsible for operating the B&B.

Local authorities would then have a comprehensive register and could conduct proportionate and risk-based inspections and enforcement. In due course, if there were ever to be a case made for licensing, then that could be introduced in future.

Meanwhile the main regulatory focus would be on commercial short-term lets where the property is no longer anyone’s home.

What Next?

The Scottish Government is digging in its heels and refusing calls for any review, pause or extension of timescales.

It is right to do so in relation to commercial STLs.

But by insisting on the continuing inclusion of Bed and Breakfast accommodation, it is building up hostility among a great many small businesses where there is no demonstrable need for the regime that they now have to comply with.

As someone who argued long and hard for better regulation, I ended up voting against the two sets of regulations that were introduced. Parliament has had plenty time to re-consider the matter and has chosen to proceed largely in the same manner. Time will tell whether the doom-laden predictions of the industry come to pass. But the over-reach in relation to Bed and Breakfast may well come back to haunt Ministers.