Experts share Europe's experience of short-term let licencing

A report from Edinburgh Council found that the city could see an 80% drop in the number of short-term lets available when the rules come into force on October 1.

Council leader Cammy Day said there was no intention of reducing the number of short-term lets operating in the city by that amount and that the figures in the report failed to take into account double-counting of properties.

Still, the reaction has been fierce.

The owner of short-term let agency Dickins, which rents out dozens of properties within the city, said it would make Scotland “a laughing stock around the world” and that “we should all say goodbye to the Edinburgh Fringe” as the lack of short-term lets would make it unfeasible.

While the Scottish Bed & Breakfast Association said it will do “absolutely nothing” to tackle residents concerns about housing challenges – mainly the lack of availability of properties to rent and buy.

But similar schemes have already come into place in numerous cities across Europe.

So, we spoke to some experts to see what the impact of those schemes had been and asked whether the catastrophic predictions of some organisations in Scotland are likely to come true.

The case of Barcelona

Rodrigo Martinez is an assistant professor of real estate and finance at University College London.

His research has involved looking into whether a rise in AirBnB listings in Barcelona resulted in an increase in rent and property prices.

“We found that it did,” he told The National.

“That’s because it introduces a very attractive option to landlords. They were thinking ‘why should I let out my property for €800 a month when I can rent it to several tourists for €2000?’

“But that was resulting in property supply being taken away from the normal rental market and being listed as short-term rentals instead”.

In an attempt to tackle this problem, a licencing scheme was brought in.

However, at first, a lack of enforcement meant AirBnB rentals continued to rise in the city – many of which were unlicenced.

Barcelona struggled to deal with an influx of AirBnB properties until a licencing scheme came into place (Image: Wikipedia Creative Commons)

“That was until 2016,” said Martinez.

“The local government decided to implement this kind of shock plan. They were going to find out who was renting and whether they were doing it legally – that is, with a licence.

“Anyone they found without a licence was then given a fine of up to €60,000.

“In reality, a lot of procedures were started but not that many fines handed out. However, it resulted in around 50% of AirBnB properties disappearing because people got scared”.

There’s no data available to show that this has had a beneficial impact on the rental or property markets.

However, Martinez stressed that it allowed the local government to assess which areas of the city were overpopulated with short-term lets and grant licences accordingly.

READ MORE: Cammy Day backtracks from support of short-term let deadline extension

For example, if an AirBnB in the city centre loses it licence, officials are able to decide whether or not to grant a new one in its place and therefore keep the number of short-term lets at a manageable level within specific areas.

“Ultimately, AirBnB is an economic activity which can have consequences to others that are unintended and managing economic activities is quite normal,” said Martinez.

“You might have people coming in at all times of the day and night or having parties on weekdays.

“But Barcelona’s licencing scheme meant the council could try and concentrate AirBnB properties in single buildings so at least that disruption wasn’t impacting permanent residents in the city.

“It just makes sense to regulate it”.

Will Scotland really be a laughing stock?

Kenneth Haar, a researcher for Corporate Europe Observatory, has observed the rollout of many licencing schemes in cities across Europe including Barcelona, Paris and Berlin.

He told The National that opposition to the schemes from businesses was unsurprising but said claims licencing would make Scotland a laughing stock were “ridiculous”.

“They’re defending a territory that, in many places, has been left unregulated," he said. 

“Of course, as a business that’s quite nice because you don’t have to consider any rules or restrictions.

“But with the explosion of AirBnB around a ten years ago, many cities have realised the adverse impact it can have on access to housing for locals.

“The idea is would make Scotland a laughing stock is ridiculous - mainly because many cities across Europe have put licencing schemes in place to various degrees over the past decade”.Many landlords let out numerous properties on AirBnB

Haar added that a reduction in short-term lets didn’t necessarily hurt the tourism industry, particularly with consumer habits with regards to AirBnB changing.

However, he noted that licencing schemes were seen as particularly valuable in cities where a large portion of AirBnB listings were coming from commercial enterprises.

According to the Inside AirBnB project, which tracks data concerning AirBnB listings, nearly 50% of people listing on the site in Edinburgh did so with numerous properties.

Haar said: “The industry would like to present itself as an option for people who want to earn a little bit of extra money letting out their apartment while they go on vacation.

“But in some cities such as Edinburgh commercial operations dominate, which suggests this isn’t about letting out a spare room.

“It’s more like creating a parallel hotel industry”.

The licencing scheme is due to come into place in Scotland on October 1.

And while many businesses are calling for a delay, the lessons from Europe suggest that licencing, in one form or another, is necessary when it comes to cities which act as globally renowned tourist attractions as well as a home for locals.