The minimal regulation and ease of commercial entry to short-term holiday letting, has made it both a mellow and highly fruitful business opportunity for thousands of property owners across Scotland. This may begin to change this Autumn however with the second wave of Scottish Government controls coming before Parliament. With less favourable weather ahead for the sector, Angus Dodds tries to peer through the mist to explain what’s in store and suggest how affected property owners should respond.
Owners of properties that are let out on a short-term basis to provide visitor accommodation should already be aware that the Scottish Government is effectively halfway through its programme to better regulate the sector. For some MSP’s heading off for the summer recess, the break will act as a chance to prepare for the frenetic Committee work that will await them at the end of August, when they are expected to put the second half of these regulatory controls in place.
Nearly two months on from the Scottish parliamentary elections, the composition of the Local Government, Housing and Planning Committee is now known. This Committee will effectively replace the Local Government and Communities Committee from the last parliament. It is this body that will scrutinise the amended short-term letting Licensing Order that was held back from being laid before parliament in April this year.
On 21 June, the Cabinet Secretary for Social Justice, Housing and Local Government wrote to the new Committee, explaining the planned way forward for the amended Order. Later the same week, the Scottish Government published the draft Legislation and Guidance for a final round of consultation until 13 August. The consultation documents make it clear that this is not to revisit the principle of implementing a licensing scheme, but rather to focus on technical and practical aspects of the draft Order. The new Committee will have the chance in late August and September to reflect on this final consultation to help inform its critique of the proposed legislation before it becomes law. Following Committee scrutiny, the Order is now expected to be laid before Parliament in September 2021.
For those in need of a refresher course on how the Government plans to better control the sector, it’s worth thinking of the regulatory proposals as a two stage process. In April this year, regulations under the Planning Act came into force empowering those Local Authorities that feel they have an over-concentration of such properties in specific localities to create ‘short-term letting control areas’. Within these areas, any such premises previously used as conventional flats and houses but now providing visitor accommodation (even if already well-established) will need to seek the benefit of planning permission to formalise this change of use. To help this process along, the Scottish Government also just published its Planning Circular on how these areas should be created – effectively firing the starting gun for Local Authorities to begin formalizing these zones.
The second half of the proposed regulations come under the Civic Government Act, and will add some real bite to the new planning requirements. The measures in the Order have been drafted to prompt property owners in the new control zones to be proactive about seeking planning permission. It is these controls that will be discussed after the summer break and made law in September.
In short, unlike the Planning Order which will only affect areas selected at a Council’s discretion, the Licensing Order will cover the whole country. Crucially though, the draft Licensing Order stipulates that in areas where Council’s have already created short-term letting control zones, having a planning permission in place will be a necessary pre-condition to securing a Licence. After April 2024, only licence holders will be able to operate such visitor accommodation, with fines of up to £50,000 proposed as sanctions for those without the necessary paperwork in place.
Where the draft Order does give discretion to Councils is in determining the exact format and content of their licence applications; which will be administered and enforced locally. Local Authorities will have until October 2022 to finalise these, with all affected property owners expected to have licence applications submitted by April 2023.
For many accommodation providers across the country, the new measures are perhaps unlikely to carry much risk to their business. The six month window between any new regulations and the application deadline should be ample time for straightforward submissions to be prepared and sent in. For those where planning permission may be required however, the 20 month window to April 2023 shouldn’t be a period to prevaricate. Especially for property owners in Edinburgh, they would be well advised to watch this issue carefully – and think seriously about trying to secure planning permission sooner rather than later.
Firstly, there is no certainty at this time exactly which areas might be covered by a short term letting control area in the capital. However every indication is that such a zone will definitely be set up to capture the City Centre Council Ward, where around 8% of Scotland’s total short-term holiday lets are situated. If the Council was to look to operate a quota system in such areas, early movers would be rewarded.
Secondly, Edinburgh’s current Local Development Plan was adopted in November 2016, before the issue of short-term letting became such a hot topic. Accordingly the policy currently used to assess these types of planning applications is perhaps not entirely fit for purpose. It does however seem to be reasonably permissive, subject to applicants satisfactorily addressing neighbourhood amenity issues. Accordingly property owners will need to decide whether they apply for planning permission sooner under the current policy, or wait and see in the hope that the revised policy in the next iteration of the Plan (expected in September 2021) looks even more favourable. Based on consultation responses on the next Local Plan however, the risk would be that the next policy might be even less charitable.
Finally, there is also the issue of resourcing. Edinburgh City Council currently deals with around 400- 500 applications per month. If the figures suggested in the consultation papers are accurate, there may be over 10,000 properties in the capital requiring planning permission under the new measures. Getting all of these through the planning production line could take a very long time indeed.
Taking all of the above into account, perhaps moving sooner rather than later to address the new planning requirements might be a wise move. Then again, affected property owners couldn’t be blamed for choosing to sit on the sidelines in the immediate term, given there is still much uncertainty about exactly which areas might be affected, and exactly what type of properties might be successful in securing a consent.
If you want to discuss any of the above in greater detail, please feel free to contact me by phone or email for an informal chat.