How has licensing affected short-term lets in Scotland?

In 2023, Scotland introduced a new licensing scheme for short-term lets (STLs) affecting people renting all or part of their property through platforms like Airbnb. The scheme aims to address several pressing issues with STLs, including ensuring safety and quality standards, alleviating housing pressures and reducing anti-social behaviour. Under the new regulations, anyone offering short-term let services after October 2023 must obtain a license from their local authority or risk fines of up to £2500.

A survey by the Association of Scotland’s Self-Caterers (ASSC) gathered 1367 responses a few weeks before the October deadline. With a third of operators not having applied for a license, this suggested there could be a dramatic market reduction.[1] The tourist industry once predicted an 80% fall in STL listings in Edinburgh as a result of the combined impact of anew visitor levy and the STL regulation.[2]

So, how does the number of licenses issued compare with the number of STLs operating (the compliance question)? And has the number of people offering STL accommodation fallen (the wider impact question)? We try to answer these questions by drawing on licensing data made available by individual local authorities and comparing this with Urban Big Data Centre’s data on STL activity on one platform, Airbnb.[3]  

Data on STL licenses ‍

Scottish Government publishes summary statistics.[4] But here we use the more detailed information made available by two local authorities, Edinburgh and Glasgow. They offer a detailed categorisation of application status (such as license received, pending, issued, invalid and withdrawn), along with property attributes (such as address, postcode and Unique Property Reference Number UPRN). On the downside, each authority seems to use different terms to categorise the status of applications – some standardisation here would be very helpful in the long term.

The regulations required landlords to have applied for a licence by October 2024. Licences do not need to have been granted by this date so, in our analysis, we count the ‘number of licences’ as the number granted plus the number of pending applications.[5] Our analysis focuses on applications to let an entire property (the categories‘ home letting’ and ‘secondary letting’) and ignores those in the home-sharing category.[6]

Data on STL listings

There are no official statistics on activities within the STL market. Although some governments have compelled platforms to provide information. [7] This has not happened in the UK. Estimates can be made by monitoring website activity although companies make it difficult to provide accurate information.

In this blog, we focus on one site, Airbnb, which is seen as the dominant player in the STL market and which Urban Big Data Centre has been monitoring for some time. For each month in 2023, we estimate the number of listings available and the number occupied for Edinburgh and Glasgow.[8] To give the best fit with the licence data, we focus here on entire home listings, ignoring rooms in shared accommodation.

The compliance question

Figure 1 shows monthly totals for Airbnb listings available and occupied in each city during 2023, compared with the cumulative number of licenses (granted or pending). In both cities, license numbers surged just ahead of the October deadline but the extent of compliance with the new regulations appears to vary significantly. In Edinburgh, the number of licenses is slightly greater than the number of available listings in December (around 106%) albeit still below the summer peak. In Glasgow, the number of licences was significantly lower than the number of listings (around 44%).

It is fair to say that STLs have attracted much more debate in the capital than in most other locations, reflecting the scale of the tourism sector there. This may have led to greater efforts to ensure landlords were aware of the new regulations or more enforcement action by the authority. But the scale of the difference with Glasgow is surprising.

Figure 1. Comparing valid license applications and Airbnb available and occupied listings in Edinburgh and Glasgow over 2023.[9]

The wider impact question

In both cities, the number of listings drops in the second half of the year as the licensing regulations come into force. However, we also know that the tourism market is very seasonal. To get a better picture of the possible impact of the regulations, we compare the number of listings in Jun-Dec 2023with the same months in 2021 (Figure 2). Note that, in Glasgow in 2021, there is a spike in listings associated with the COP26 convention in November that year so comparisons need to be restricted to the last three months.

Looking at the number of available listings (left hand side),we can see a marked reduction in both cities (for Glasgow, comparing Oct-Dec to take out the COP26 effect). In Edinburgh, the reduction is slightly greater in the summer months around the Festival than in the winter.

Looking at the number of occupied listings (right hand side), however, we see much less evidence of a decline. In Glasgow, numbers are little changed and the same is true in Edinburgh in the Oct-Dec period. In the summer months, there does appear to be a reduction in Edinburgh, mirroring the drop in the available listings. It is possible that the cost and effort of getting licenced might have a greater deterrent effect for those who let properties only in the summer period.

Figure 2. Comparing active listings on Airbnb in June-December 2021 and 2023.

These changes can also be summarized in occupancy rates (Figure 3, left hand side) –occupied days as a proportion of available days each month. In both cities, occupancy rates are no lower in the summer and are higher in the winter period. Nightly rates are also up in both cities, even allowing for inflation, and particularly in Edinburgh (right hand side). Although many factors lie behind the price increases, this does suggest that license costs may be passed on to guests.

Figure 3. Comparing active listings on Airbnb in June-December 2021 and 2023.

Discussion

It will be interesting to examine the picture for the rest of Scotland but, on first examination, we find what appears to be a wide variation in compliance between the two main cities for reasons which are not obvious. In terms of impacts, however, we see no sign of the collapse in supply predicted by some in the sector. There is some reduction in the number of properties on offer (available listings) but much less if any reduction in occupied listings. This suggests that the more ‘part time’ STL landlords are finding the time and financial costs of regulation more burdensome and dropping out but that more active, professional STL landlords see no barrier to continuing. Rising rental incomes suggest that the additional costs of licensing can be recouped.

Airbnb team: Dr Yang Wang, Prof Nick Bailey, Dr Kristof Gyodi (visiting scholar), Dr David P McArthur, Mr Nick Ves (data scientist)

[1] https://www.heraldscotland.com/news/23824352.third-tourism-operators-leave-short-term-lets-sector/

[2] https://news.stv.tv/east-central/edinburgh-self-catering-host-says-short-term-lets-legislation-will-turn-scotland-into-a-laughing-stock

‍[3] Data is published at small area level in UBDC’s data catalogue, https://data.ubdc.ac.uk/datasets/short-term-let-airbnb-supply-and-performance-small-area-summaries

[4] https://www.gov.scot/news/short-term-lets-licensing-statistics-to-31-december-2023

[5]Edinburgh has 10 statuses. We select Application received, Consultees outstanding, Decision made, Licence issued and surrendered, and pending decisions. For Glasgow, we select Consultation Complete, Granted -with additional conditions, In Consultation and To committee among 9 other statuses. They are categories indicating the properties are likely in operation or preparing to enter the market (new hosts).

[6] Edinburgh’s local registry has 4205 application records. 2056 of them are under the home and secondary letting categories. Glasgow has a selection of 310 from 1179. These numbers are higher than the Government stats (1118 for Edinburgh and 190 for Glasgow under the home and secondary lettings) because we consider extra listings with the status being submitted but may not processed. They are more comparable to the listings on the market.

[7] https://news.airbnb.com/airbnb-welcomes-eu-agreement-on-new-str-rules/.

[8] Details on how we process the data and estimate the number of active listings are available in (Wang et al. 2024) [OPEN ACCESS, https://doi.org/10.1371/journal.pone.0298131].

[9] A data collection glitch in April 2023 has been addressed by interpolating data for that month.