Regulating short-term lets could see rents ‘plateau’, says property expert

Plans to regulate short-term lets are already causing an “exodus” of landlords offering Airbnb-style rents and could see the price of rents plateau, a property manager has said.

Holyrood passed legislation last month that will require landlords to have a licence for short-term lets by July 2024 at the latest.

Edinburgh City Council also passed a policy that would mean landlords wanting to list properties that are not their usual home would need to apply for a “change of use” through their planning department, although this will need to be agreed by the Government.

Malcolm Pickard, a director at Tay Letting who manages more than 1,800 properties in Glasgow, Edinburgh and Dundee, said regulating the short-term rental sector is a “tipping point” for many landlords concerned that costs could rise.

The policy is “likely to have a plateauing effect” on the price of rent as landlords shift from short to longer-term lets, Mr Pickard said.

In the wake of the decision in Edinburgh – home to a third of all short-term lets in Scotland – he said there has been an “an exodus from the short-term let market into the private rental sector” since the Covid-19 pandemic began when the market was virtually wiped out.

Mr Pickard continued: “Those who have toughed it out or returned to the short-term let market were probably hopeful of recovery, but if approved by the Scottish Government, this move from the city council will prove the tipping point for most.

“Since the start of the year, we’ve seen dozens of landlords come to us to inquire about switching from short-term lets to private rentals.

“One property owner, who lets out two of their three city centre properties on Airbnb, plans to move them all to private rental as it’s no longer worth it.

“Others have seen this move coming and decided short-term letting is no longer for them.

“The gross income from short-term lets is the big attraction for owners, but these new regulations are likely to mean tighter control around things such as gas and electrical safety certificates; short-term rental registration; water safety certificates; furniture and appliance checks; and more, and that all brings with it additional costs many will not be prepared to swallow.”

He added: “A continuation in the flow of traffic from short-term lets to the private rental sector which, of course, increases the supply of properties, is likely to have a plateauing effect on rents, which will be good for renters in the short term.

“We did, however, see this during and after the pandemic, but rental prices began to rise again as demand inevitably increased and I’d expect to see the same happen again.”

The City of Edinburgh Council’s planning committee unanimously backed the plans to require a change of use application on Wednesday, an outcome convener Neil Gardiner hailed as “great news for people across the city”.

A consultation on the plans found 85% of respondents are in favour of the control zone covering the whole council area.

The Scottish Government will now need to agree with the city council, which said the new rules would not block people from renting out rooms or their whole house while on holiday.

Mr Gardiner said: “If approved by Government, these new powers for Edinburgh will provide the clarity we need where planning permission is required for a change of use.

“Just now, if it’s reported to us that a property has changed its use without planning permission, our enforcement team has to look at each case individually.

“This is a very lengthy and time-consuming process.”