Scotland Puts Its Short-Term Let Licensing Order Back Before Parliament

On 23 November 2021, the Scottish Government announced that legislation to license short-term lets, the Scottish term for short-term rentals, had been laid before the Scottish Parliament. Under it, every council in Scotland would have to establish a licensing scheme by October 2022, existing hosts and operators would have until 1 April 2023 to apply for a license for each property, and all short-term lets in Scotland would have to be licensed by 1 July 2024.

The date was the government's own. Its news release was dated 23 November 2021 and said the legislation had been laid. It did not give the day of laying.

The order was not law. The release said it was subject to approval by members of the Scottish Parliament. It was also the government's second attempt: a first licensing order was laid in December 2020 and withdrawn in February 2021.

What the order would require

The government's impact assessment said the scheme's mandatory safety conditions would apply across Scotland to all types of short-term let and would cover water, electrical, gas and fire safety. Councils, as licensing authorities, would run the schemes and set the fees.

Shona Robison, the Cabinet Secretary for Social Justice, Housing and Local Government, added detail in her foreword to a consultation report published the same day. Subject to the Parliament's approval, the legislation would come into force on 1 March 2022. Councils would have until 1 October 2022 to establish their schemes and open them to applications. Existing hosts who applied by 1 April 2023 could continue operating while the application was processed. The final deadline of 1 July 2024, the report said, had been extended from 1 April 2024.

Licensing was one half of the regime. The other, legislation that let councils establish control areas, came into force in April 2021, and the report noted the City of Edinburgh Council's consultation on designating the city as one.

Why it came back

The government's release said the legislation was developed after residents across Scotland raised significant concerns about the effect of short-term lets on their communities, among them noise, antisocial behavior and the supply of housing in some areas.

The first order did not reach a vote. The impact assessment said it was approved by a parliamentary committee and then withdrawn before the Parliament voted, because of concerns raised by members and stakeholders. A revised draft went out on 25 June 2021 for a third consultation, which ran until 13 August and drew 1,026 responses.

What changed from the draft

Robison first set out changes in a letter to a parliamentary committee on 7 October 2021. The consultation report of 23 November listed them as changes made to the draft order. Four bore directly on hosts.

• Overprovision powers were removed. Holyrood magazine described them as powers for councils to stop short-term lets being established where an area already had a significant number. The report said control areas were sufficient for that.
• The insurance figure was removed. The draft required public liability insurance of not less than £5 million, and Airbnb and the Scottish Bed and Breakfast Association had raised concerns about the cost. The report said the order instead required adequate insurance, needed only while guests were staying.
• A host's own name was taken out of the planned public register. Company names stayed.
• Inspections were to be targeted. The government said it wanted councils to let applicants self-certify that they met the mandatory conditions and to inspect on a risk basis.

One request was refused. A cap on fees had been suggested at the government's stakeholder working group. The report said councils were expected to recover their costs through fees, so an absolute cap would not work.

The fees and the numbers

The fee figures published in November 2021 were a government model, not charges set by any council. The impact assessment estimated what a council would need to charge to cover its running costs, assuming an application every three years. Its indicative average fee ran from £214, at a 10% inspection rate in its low-cost scenario, to £436, at a 100% inspection rate in its high-cost scenario.

Guidance would tell councils to tier their fees, the assessment said, with lower fees for home sharing and home letting than for secondary letting, its term for letting a whole property.

The Association of Scotland's Self-Caterers gave a far higher number. In its consultation response, reprinted in an annex to the assessment, it called licensing costs unknown and open-ended and estimated them at £1,000 plus, with council inspection charges on top.

The assessment's measure of the market dated from May 2019. It cited research that found just under 32,000 active Airbnb listings across Scotland in that month, nearly 70% of them whole properties, and an estimate that such lets accounted for just over one in ten of all dwellings in Edinburgh city center and on Skye.

Who objected and who welcomed it

The self-caterers' association opposed the order on the day it was announced. The Edinburgh Evening News quoted Fiona Campbell, its chief executive, as saying: “We are very disappointed that the Scottish Government are pressing ahead with these onerous and ill-considered regulations, which will damage Scotland’s vital tourism sector at a time when we should be supporting small businesses to recover from Covid-19.”

The association wanted a mandatory registration scheme with health and safety provisions in place of licensing. Campbell said that proposal had cross-party political support, the Scottish Greens excepted. ShortTermRentalz, reporting on 26 November, quoted her as putting Scotland's self-catering sector at £867 million, the association's own figure.

The hospitality trade took the other side. The Edinburgh Evening News quoted Leon Thompson, executive director of UKHospitality Scotland, as welcoming the laying of the order and saying his organization had been consistent in backing efforts to put short-term lets under the same type of regulation as other accommodation providers.

Edinburgh's council welcomed it too. The same paper quoted Catherine Fullerton, the council's regulatory convener, as saying: “Short-term lets continue to hollow out communities in Edinburgh, reducing housing supply, increasing housing costs and causing anti-social behaviour.”

Robison said in the release: “This is the next significant step to delivering a licensing scheme that will ensure short-term lets are safe and the people providing them are suitable.” She added that in certain areas, particularly tourist hotspots, high numbers of lets could cause problems for neighbors and make it harder for people to find homes.

What it meant for hosts

In November 2021 the order gave a host in Scotland nothing to file and no fee to pay. It still needed the Parliament's approval. What the month gave hosts was a timetable and a list of things to prepare.

• One application for each property. An existing host who applied by 1 April 2023 would be able to keep operating while the council processed it.
• Safety paperwork. The mandatory safety conditions covered water, electrical, gas and fire safety for all types of let.
• Insurance. The report said the order required adequate public liability insurance, with no figure set, while guests were staying.
• The budget. The government's model put the average fee at £214 to £436 for three years, and the self-caterers' association expected £1,000 plus. Each council would set its own.
• Planning. The report said compliance with planning control was a mandatory license condition inside a control area, and noted Edinburgh's consultation on designating the city as one.

Guidance on the scheme was to be published early in 2022, the government said.

Sources

1. Scottish Government (gov.scot), Licensing short-term lets (23 November 2021).
2. Scottish Government (gov.scot), Short-term lets: business and regulatory impact assessment (23 November 2021).
3. Scottish Government (gov.scot), Short term lets - draft Licensing Order and business and regulatory impact assessment: consultation report (23 November 2021).
4. Edinburgh Evening News, All short-term lets to be licensed by local councils in Scotland (23 November 2021).
5. ShortTermRentalz, ASSC denounces “ill-considered” Scottish rental licensing proposals (26 November 2021).
6. Scottish Parliament, Letter from Cabinet Secretary for Social Justice, Housing and Local Government to the Convener - 7 October 2021 (7 October 2021).
7. Holyrood magazine, Scottish Government scraps ‘overprovision’ powers in holiday lets licensing scheme (8 October 2021).