This article appeared on the Daily Business news platform and the online version can be viewed here.

Edvard Munch’s painting The Scream is among the most instantly recognisable works of art, and visual shorthand for pain, anguish, and indeed a whole host of negative feelings. For some of us, it may embody our current state of mind given the domestic economic and political issues we face, in addition to wider regional and global concerns.

It might also represent an expression of the feelings of anyone with a stake in the Scottish government’s regulations for the short-term lets sector, given the potential economic implications for operators, the tourism sector, and for wider business.

Passed in early 2022, the aims of the Scottish regulations are generally accepted as laudable. The introduction of a licensing scheme addressing safety concerns is widely considered to be reasonable by operators and owners, even though there are cost implications.

The other key aspect to the regulations is achieving a greater balance between the interests of local communities (relating to noise, antisocial behaviour from so-called “party flats”, and the supply of housing in certain areas) and the economic and tourism benefits of the sector. It is the way in which this second limb is being introduced that is causing concern amongst operators.

Each local authority is required to implement the rules in their own area. Edinburgh, as home to over a third of Scotland’s short-term let properties, has gone further than other local authorities and designated the entire Edinburgh council area as a planning control area. This means that any property used for secondary letting (i.e. which is not the primary residence of the person offering the accommodation) will require planning consent for change of use from residential, in addition to a licence, in order to let the property on a short-term basis.

Edinburgh Council views the planning control area as a way of helping manage high concentrations of secondary letting, by restricting, or preventing short-term lets in inappropriate places or building types (i.e. flats accessed from a common stair) and ensuring that homes are used to best effect in their areas.

Operators, on the other hand, see this as an overreaction to the (undisputed) ills of “party flats”, and the unjustified vilification of their sector as the cause of housing shortages. They view the implementation of the new regulations in the city as heavy-handed, not to mention potentially catastrophic for the sector and the wider tourism economy.

Additionally, it is argued that a smaller supply of accommodation will have the likely effect of increasing prices and reducing both the competitiveness of the local tourism sector and guest spending in the already struggling hospitality industry.

So concerned are some in the self-catering/short-term lets sector, that four operators, on behalf of the sector as a whole, are seeking a Judicial Review to consider the lawfulness of the regulations being introduced by Edinburgh Council.

The hearing is set for early May and the hope is that the review will lead to the Council amending the regulations, so that reasonable operators are able to obtain planning consent and a licence, thereby avoiding the scheme jeopardising the short-term let sector, and the livelihoods of the individuals and related businesses that depend on it.

Whatever the outcome of the Judicial Review it will be of interest to many, although they may sit on different sides of the argument. For those in the hotel business, for example, the proposed regulatory changes to short-term lets might be viewed as good news and represent a redressing of balance in the industry for an accommodation sector which has felt a hard squeeze from the rise of the Airbnb business model over the past decade.

In the meantime, the deadline for licensing of short-term lets has been pushed back to 1 October and given the potentially high number of (non-refundable) licence applications likely to result in a refusal, most operators of accommodation have yet to apply for either planning consent or the licence.

At least the new October deadline spares any impact on the Edinburgh Festival this year.
Pandemic aside, there are already major economic concerns relating to the sustainability of the Festival, and many Fringe performers are now finding the economics of taking a show to Edinburgh almost completely unworkable. Anyone familiar with Edinburgh knows how important the various festivals are to the city and its economy, so any additional pressure on the cost and availability of accommodation would be a further blow.

Wherever this regulation scheme lands not everyone will be happy, but just as the present unregulated system is not serving everyone well, the proposed scheme for Edinburgh feels akin to using a sledgehammer to crack a nut.

So, returning to Munch, let’s hope Edinburgh can emerge with a regulation scheme for short-term lets that leaves those who will be most affected by its implementation feeling less like The Scream, and more like another of Munch’s works – The Sun, and its bright rays of light.