Short-term lets consultation: response analysis

Executive Summary

The Scottish Government's 2018-19 Programme for Government^[1] made a commitment to ensure that local authorities have appropriate regulatory powers to balance the needs and concerns of their communities with wider economic and tourism interests.

A Short-Term Lets Delivery Group was established in 2018 to assess the evidence base and the impact of short-term lets, identify the existing powers councils have and explore whether further measures are required. This Group comprises officials from across relevant areas of government including better regulation, community empowerment, consumer policy, housing, licensing, planning, tax and tourism.

On 28 April 2019 the Scottish Government published 'Short-Term Lets: consultation on a regulatory framework for Scotland'^[2], which outlined a regulatory approach that could involve registration and / or licensing of short-term lets, with the possible addition of a market-based mechanism to control numbers. The consultation asked for opinions on the regulatory framework, as well as on the types of short-term lets which should be regulated and the controls which should be applied. 'Why Research, an independent company were commissioned by Scottish Government to carry out an analysis of the consultation responses.

Respondent Profile

In total, there were 1,086 responses to the consultation,^[3] of which 111 were from organisations and 975 from individuals. The sub-groups with the highest number of responses were affected residents and hosts. The Scottish Government also held a number of consultation events to complement the consultation.

Table 1: Respondent Groups

	Number
Affected resident	592
Community organisation	63
Guest	62
Host with 1 property	220
Host with 2+ properties	103
Platform	2
Host intermediary	19
Hotel / B&B owner	16
Local authority	18
Other (non short-term let) landlord	18
Other business	36
Other	118
Total organisations	111
Individuals	975
Total respondents	1,086[4]

Key themes

Throughout responses to the consultation, affected residents, community organisations and other (non short-term lets) landlords cited mainly negative impacts of short-term lets, while hosts, platforms and hosting intermediaries tended to focus on positive impacts. Likewise, affected residents, community organisations and other landlords tended to support more stringent regulation and enforcement within the sector, while hosts, platforms and hosting intermediaries tended to favour a less stringent approach.

A majority of respondents agreed that a regulatory framework should distinguish between the sharing and swapping of properties and secondary letting; some also felt that more stringent regulations should be applied to secondary letting than to sharing and swapping.

Overall, a majority of respondents supported regulation for short-term lets in some form. Views were mixed as to whether there should be registration or licensing for short-term lets, although there was a degree of support for both elements to be introduced, with some support for a mandatory rather than a voluntary scheme. There was little support for a market-based mechanism.

Regardless of whatever regulation is introduced, a common theme was of the need for enforcement to be undertaken; and to be undertaken quickly where there is non-compliance. There were also a number of comments that local authorities will need additional resources to apply and enforce any regulation.

While there was some agreement for a national framework, there were calls for flexibility within this so that local authorities can apply what is most relevant to their area, its economy and the impacts of short-term lets. For example, some respondents differentiated between cities - in particular Edinburgh - with a high density of short-term lets within the city centre and where there are a number of negative impacts of short-term lets; and rural areas where short-term lets are perceived to cause fewer negative impacts and to be more necessary to the local economy. There were a number of comments that a 'one size fits all' approach will not suit the short-term let sector. Additionally, there were some comments that the negative impacts of short-term lets are felt most in Edinburgh and that actions necessary to deal with this in Edinburgh will not be relevant in most other parts of Scotland.

The consultation analysis shows a general perception that short-term lets should be contributing to public services in some shape or form, with some respondents noting there should be no exemptions, no rates relief and a scrapping of the Small Business Bonus Scheme (SBBS). There were also suggestions from a few respondents that owners should be required to prove an intention to let in the year, as well as providing evidence of actual letting in order to be considered exempt from council tax, and liable for non-domestic rates, as recommended by the Barclay Review. That said, there was little consensus on the number of days that should be applied in a days to let limit, with suggestions from respondents ranging between zero to 140 days. However, a few respondents suggested any definition should align with HMRC definitions.

While there were a few suggestions that properties that are short-term lets during the peak tourist season could revert to long-term lets outwith the peak season, it was felt this would not be practicable because the regulatory system which applies to long-term lets is more stringent. However, there were a number of calls for the same regulatory system to be applied to short-term lets, particularly in respect of health and safety requirements which it was felt should be a minimum for any property that is let out. Consistency in regulation across the short and long-term let sectors would also ensure that all conform and operate at the same level. This might also help to return some properties to the long-term letting market and disincentivise short-term lets. It was also felt by a few respondents that some long-term lets have changed to short-term lets because the latter generate higher levels of income and face less stringent regulation.

There were some calls for a list of owners of short-term lets to be available for ease of contact and for the quick resolution of any complaints. There were also calls for a complaint system that is easy to access and use, transparent and which provides fast resolution to complaints.

Overall, there were a number of mentions of the need for a balanced approach taking into account the needs of local communities and residents as well as the benefits to the tourist sector and the local economy that short-term lets bring.

Consultation Questions

This section summarises the main findings from each of the consultation questions.

Main Findings: Awareness of Data on the Impacts of Short-Term Lets (Question 1)

Awareness of additional data on the impacts of short-term lets

A majority of respondents answering this question were unaware of any additional data on the impacts of short-term lets. The most widely cited data source was the Association of Scotland's Self-Caterers' (ASSC) report 'Far More than Just Houses'. There were some concerns over how data are interpreted; as well as calls for a robust evidence base upon which decisions can be made.

Main Findings: Definition of Short-Term Lets (Questions 2 - 4)

Views on whether a regulatory framework should distinguish between sharing, swapping and secondary letting

A majority of respondents answering this question agreed that a regulatory framework should distinguish between sharing, swapping and secondary letting. The key reason for distinguishing between sharing, swapping and secondary lets, cited by a large minority of respondents, was that secondary lets have negative impacts in terms of community, disruption and housing availability, whereas these impacts do not occur with sharing or swapping. A few respondents requested clear or statutory definitions for each of the different types of short-term lets, without specifying whether the suggested definitions in the consultation paper met this objective. There were also some comments of a need to distinguish between perceived different types of secondary letting, with different regulatory treatment for each; many examples were given including self-catering lets, serviced apartments, holiday cottages, pods and caravans.

Views on whether the rules should be capable of being different depending on the type of accommodation offered

A large minority of respondents answering this question agreed that the rules should be capable of being different depending on the type of accommodation rented, although slightly more disagreed. Tenements, flats or shared blocks in particular were seen as needing special treatment because of the higher levels of negative impacts they have on neighbours. As such, there were requests for stricter rules and protection for residents in tenements or flats, with some requests for short-term lets to be banned or to have their numbers restricted in tenements. A few respondents agreed with differentiating between residences with communal entrances and those with private entrances. There were some comments that there are relatively limited consequences of short-term lets in detached houses. A few respondents were anti a 'one size fits all' approach as the impacts of short-term lets differ depending on property type. There were also some comments of the need to offer flexibility dependent on location, to reflect local issues and impacts. Those disagreeing that the rules should be capable of being different depending on the type of accommodation, generally felt that all short-term lets have the same impact and should not be distinguished separately, but mainly agreed that there should be some form of regulation.

Comments on other aspects of the definition of short-term lets

To an extent, comments at this question echoed those made at earlier questions. A few respondents noted it is difficult to get a precise definition because short-term lets are not easy to categorise, although there were calls for a simple or straightforward definition to ensure ease of compliance and enforcement. A few respondents proposed different treatment for sharing from other types of short-term let.

Main Findings: Regulation of Short-Term Lets in Scotland (Questions 5 - 23)

The impacts of short-term lets and examples of positive or negative impacts of short-term lets

Affected residents, community organisations and other (non short-term lets) landlords cited mainly negative impacts, while hosts, platforms and hosting intermediaries tended to focus on positive impacts. However, overall a greater number of negative impacts than positive impacts were cited. Key positive impacts were increased tourism and tourist revenue, economic benefits at a local community level and the provision of an alternative positive experience for visitors. Key negative impacts outlined by respondents included damage to local communities, increases in antisocial behaviour and negative effects on the lives of residents; these were particularly noted in relation to short-term lets in tenements and other buildings with communal areas. A small minority of respondents focused on negative impacts in relation to Edinburgh specifically. As an antidote to the negative impacts of short-term lets, there were calls for regulation within this sector.

The impacts of short-term lets on the housing market

Key negative impacts cited were that short-term lets contribute to a lack of available housing and an increase in property prices and long-term rental costs, with some specific reference to Edinburgh, although respondents also cited other areas such as Skye and Arran. There was also a perception from a few respondents that landlords are switching from long-term letting to short-term letting as it is more profitable and subject to less regulation. Conversely, a small minority of respondents perceived little impact on the housing market from short-term lets and cited other issues such as a lack of social housing, poor tourism policies, empty homes and second home ownership as contributing to problems. There were suggestions from a few respondents for the use of regulatory tools to counteract the problems caused by short-term lets on the housing market.

Breach of planning law

A large minority of respondents answering this question felt that all short-term lets should have to apply for planning permission, although a few respondents noted that current planning law is not designed for short-term lets. Additionally, there was also a perception from a few respondents that planning law will not resolve some issues of short-term lets such as antisocial behaviour. There were requests from a few respondents for clear and consistent guidelines on what constitutes a material change of use; and a similar number supported Andy Wightman's amendment. A small minority also pointed out that local authorities will need to have the necessary resources for enforcement of planning law. A few respondents suggested there should be stricter controls such as a maximum number of properties in specific areas that can be used for short-term lets, the prohibition of short-term lets in tenements, the introduction of higher council tax rates for short-term lets or a requirement to comply with health and safety regulations. A small number of respondents called for discretion for local authorities to have local flexibility to meet local needs in a local context; there were also some calls for enforcement of any regulations.

Antisocial behaviour

A few respondents felt that a registration or licensing scheme, similar to that for the Houses in Multiple Occupations (HMO) sector, should be introduced in order to tackle antisocial behaviour caused by short-term lets. Similar numbers of respondents referred to a need for penalties for landlords and the need for enforcement and powers to impose fines or revoke licences. A few respondents also requested a register of owners to enable direct contact if a complaint needs to be resolved; a similar number of respondents felt that antisocial behaviour cannot be attributed solely to short-term lets; and a few suggested that existing enforcement powers should be utilised.

Complaints

Three strands, each cited by a few respondents, were that they were unaware of a complaints system, that there is not a complaints system at present or that the current complaints system is ineffective. A few respondents outlined a number of required key elements of a complaints system; these included staff who respond quickly, transparency, ease of access and rapid enforcement; a small minority also noted the importance of increasing awareness of the complaints system. There were suggestions from a few respondents for licensing or registration along the lines of the private rental sector.

Safety issues

A large minority of respondents mentioned that safety standards should be the same for short-term lets as in the private rental sector; a smaller number of respondents suggested that safety standards should be the same as apply to bed and breakfasts (B&Bs), hotels and guest houses. A small minority of respondents also suggested a need for licensing or regulation to ensure that safety issues will be addressed.

Eligibility for non-domestic rates

There was a view from a large number of respondents that short-term lets or self-catering properties should be contributing in some way to the services they use, with a common theme, cited by a large minority of respondents, being that all should pay either non-domestic rates or council tax. In comparison, a few respondents felt they should not be classed as rateable and be able to quality for full Small Business Bonus Scheme (SBBS) relief. However, a few respondents noted their support for the current system and felt the 140 day rule works effectively.

Additional eligibility requirements recommended by the Barclay Review

A large minority of respondents agreed with the recommendations made by the Barclay Review, with smaller numbers also noting there should be no exemptions, no rates relief and a scrapping of SBBS. Small numbers of respondents noted their support for local authorities to have discretionary powers to decide upon the number of days of letting as not all areas across Scotland will be able to let for as many as 70 days.

Eligibility for the Small Business Bonus Scheme (SBBS)

A large minority of respondents felt there should be no tax breaks or exemptions. Some of these respondents referred specifically to owners of short-term lets, some to owners of self-catering properties and some did not specify to whom this should apply. Additionally, there were also comments from a few respondents that owners should be paying some form of tax or pay higher rates of tax than at present. A small number of respondents noted that taxation levels should not favour short-term lets over long-term lets and that the same regulatory and taxation systems should apply to both. Conversely, a small minority of respondents noted their support for the status quo on the basis that guests contribute to the local economy or that SBBS helps to keep some businesses viable.

Other comments on taxation relating to short-term lets

Comments made in response to this question tended to echo those from the previous questions. A small minority of respondents across most sub-groups felt that taxes should be paid by short-term lets owners. A smaller number of respondents suggested that short-term lets should pay higher rates of tax.

Design principles for a regulatory framework

There was general agreement from a large majority of respondents with the design principles outlined in the consultation paper, although a few respondents noted that these should have a greater focus on residents and communities and their housing needs. A similar number of respondents also commented that the regulatory framework should be well regulated and robustly enforced.

Scope of a regulatory framework

Views were mixed as to whether there should be registration for short-term lets or go further and include licensing, although there was a degree of support for both elements to be introduced, with some support for a mandatory rather than a voluntary scheme. The few in favour of a licensing scheme also noted this would help to introduce greater control in the sector and that licences could be revoked. A few respondents supported a national framework, although views were mixed as to whether this should offer a consistent approach across Scotland or whether there should be local flexibility.

Controls or conditions that councils should be able to set through a registration or licensing regime

A majority of respondents supported regulation in some form. Small minorities of respondents noted their support for a Level 1 Registration Scheme or a Level 2 Licensing Scheme, with only small numbers not supporting either of these options. Again, there were calls from a few respondents for any scheme introduced to match that in the long-term rental sector. Once again, there were requests from a small minority for local authorities to have discretionary powers to be able to implement measures appropriate to their area. Allied to this, there were also calls from a few respondents for local authorities to have sufficient staff and resources to be able to enforce any scheme that is introduced.

Views on whether a licensing scheme and / or market-based approach should apply to all types of short-term lets

A small minority of respondents noted that a licensing scheme should apply to all types of short-term lets, regardless of their size, type of property or location. That said, a small minority of respondents differentiated between secondary letting and sharing or swapping, with some suggestions that registration should not be needed for the latter. There were also comments from a few respondents that conditions and / or a charge should vary according to the size of a property, or that there should be a stepped charge depending on location, or on the type of property.

Days per year limit

There was a higher level of disagreement with a days per year limit for short-term lets than there was support for this (a small minority of respondents disagreed compared to a few who agreed). A small minority of respondents made suggestions for the number of days that should be applied in a days per year limit, although there was little consensus. A very small number of respondents suggested a limit on the number of short-term lets per year. Once again, there was some differentiation between sharing and secondary letting, with a few suggestions that the former should not be subject to a days per year limit.

Commercial Hosts

A large minority of respondents answering this question made comments about how to define commercial hosts, largely based on the factors outlined in the consultation paper; i.e. VAT registration, the number of properties being hosted by the same host and the concentration of accommodation offered for short-term letting. The largest numbers of these respondents discussed demarcating commercial hosts based on the number of properties offered for short-term lets. Views were split as to whether there should be any differentiation between secondary letting and those which are shared or swapped. A few respondents made other suggestions on how to define commercial; including amount of earnings, the number of days let or revenue achieved each year. Overall, there were also comments from a large majority of respondents on how to regulate commercial hosts, although there was little consensus on how this should be applied. That said, there were calls for more stringent and rigorous regulations as well as robust enforcement; and some calls for limitations on commercial hosts in terms of the number of properties owned. Some respondents outlined concerns over regulations adding more administration and bureaucracy, particularly for small scale hosts.

Enforcement, Violations and Sanctions

There was support for the suggestions in the consultation paper. Key support from a small minority of respondents was for owners / landlords to be subject to enforcement and sanctions. Smaller numbers of respondents also supported enforcement and sanctions for anyone associated with secondary letting of premises, hosts, online letting platforms and agents or management companies.