The Changing Landscape of Short-Term Rentals: New Licensing Scheme Impacts Landlords

Over the past decade, the short-term rental market has experienced exponential growth in available properties, primarily due to the emergence of Airbnb worldwide.

Planning a getaway now involves considering the numerous options available on the Airbnb platform in our desired destination. This expansion has been particularly notable in Edinburgh, where there are widely reported 12,000 properties advertised for short-term stays, accounting for about 30% of all listings in Scotland.

Simultaneously, the Private Rental Sector (PRS) has undergone substantial legislative changes to enhance safety standards and regulate the industry. While these changes have been welcomed, they have also increased costs for PRS landlords.

Surprisingly, no legislation, licensing, or compliance requirements have been implemented in the short-term market. With easy access and no obligation for landlord registration, gas safety certificates, portable appliance tests, legionella risk assessments, or interlinked hard-wired smoke alarms, it is unsurprising that the sector has experienced this significant growth.

Some argue that the increased availability of short-term rentals has reduced the housing stock in the PRS, adversely affecting communities. Additionally, concerns have arisen regarding the influx of tourists frequenting popular areas of the city, the rise of "party flats," and the lack of control over the number of occupants. These issues have prompted widespread concern and garnered negative publicity.

Overall, the short-term rental market surge has presented both opportunities and challenges, profoundly impacting the housing landscape and raising important questions about regulation and community well-being.

Starting from 1st October 2023, the short-term market is undergoing significant changes with the introduction of a new licensing scheme. This means that all operators must obtain a license to continue their operations, bringing safety requirements similar to those in the Private Rented Sector (PRS), along with the need to convert residential properties into commercial ones. The implementation costs are substantial, causing significant concerns across the sector.

Although applying for the license before 1st October 2023 allows landlords to continue their short term lets, the recent report indicates that only a few hundred landlords have applied so far. While regulation is necessary, there is widespread concern about the broad approach, which includes Bed & Breakfasts, house swaps, and individual room rentals under this legislation.

In addition, there is fear about how the Edinburgh Festival and the city's Christmas & New Year celebrations, which have seen considerable growth in recent years, will accommodate the influx of visitors in the future. The impact on the tourist industry and the generated income is expected to be significant.

In the private rental sector (PRS), we are hopeful that the introduction of these licenses will increase the supply of properties available for long-term rentals. The sector faces various challenges, with the shortage of supply being a significant issue.

Although some landlords have already transitioned from the short-term market to the PRS, the impact of these legislative changes across the sector remains to be determined. While the Scottish Government is exploring ways to address the housing shortage, the most effective solution is building more new homes, which, unfortunately, shows little sign of happening in the foreseeable future.

If you or anyone you know operates in the short-term rental market and wants assistance securing long-term tenants in the PRS, please get in touch with us.