Edinburgh city council’s plans to establish Scotland’s first short-term let control area have been deemed unlawful by the country's supreme civil court, the Court of Session.
Under the proposed plans, due to come into force in four months' time, most short-term lets would have required a planning application to change the use of the property to secondary letting. But Lord Braid has ruled that parts of the new policy, designed to regulate Airbnb-style accommodation in the city by introducing a licensing regime, are not lawful.
Four letting operators and landlords raised an action for judicial review at the Court of Session last month after raising £300,000 to fund the legal costs. It is believed to be the highest crowdfunded legal challenge in the country.
The council proposed the scheme to control anti-social behaviour in certain areas and improve housing supply, in the city centre, where there is a significant amount of this type of accommodation.
However, the proposal was finally deemed unlawful as the policy breached The Provision of Services Regulations 2009 regulations and went beyond the council’s legal responsibilities, such as deciding whether a licence should not be granted because a property is in tenement..
While the outcome of the hearing is a win for short-term let accommodation in the Scottish capital, a one-year letting restriction to these properties is still under consideration.
The decision can now be appealed in the UK's Supreme Court.
What Does This Mean for the Hotel Sector?
Edinburgh’s hotel sector is thriving. Revenue per available room is at its highest, according to preliminary STR data for May, with rates reaching over £160, a 37% increase year-over-year, while occupancy is now broadly on par with pre-pandemic levels.
Despite additions to hotel supply, the city has managed to absorb new rooms, due to robust demand growth. While there is a discussion around competition from short-term lets, these property types can complement hotels in the Scottish capital, with both seeing strong performance results.
Based on data from AirDNA, there are around 7,200 active short-term rental listings in Edinburgh, mostly houses with one or two bedrooms. The number of active listings is reported to have dropped by around 2% quarterly since Q1 2020, as COVID likely affected some hosts. However, to date, these properties are also running at over 80% occupancy with rates just below those achieved by hotel properties, highlighting the city’s appeal as a tourist destination.
Having both types of accommodation is beneficial as a result. Edinburgh’s hotels are often at capacity for much of the high season, including during major events like the Edinburgh Fringe Festival, and short-term accommodation, like AirBnb, can help alleviate some supply-side challenges over busy periods. The news that the proposed policy from Edinburgh City Council is unlawful will therefore be welcomed by the hospitality industry as the decision could have a positive impact on the local tourism industry.
Short-term lets in Scotland still face regulations, despite this latest decision. The Scottish government launched a scheme for hosts of such accommodation to apply for licenses by 1 October to operate, with failure to do so resulting in fines. This is an attempt to regulate safety standards while giving councils some control over the number of rentals. The regulation could deter new hosts from entering the market which could limit the number of accommodation options for visitors to Edinburgh longer term.