Updated: 4th Sept 2023

Is it a good time to become a private landlord instead?

Short-term lets regulations have changed in Edinburgh, and the deadline for applying for your licence is fast approaching. In this article we take a detailed look at what is changing, how it will affect short term let providers in Edinburgh, and we explore the benefits of taking on long term tenants instead.

Introduction, what are the new short term let regulations and why are they being introduced

From October 2023, all short-term let hosts and landlords in Edinburgh will need to have a licence to operate. Many Edinburgh landlords don’t realise how lengthy the application process is for obtaining a short-term let licence. So we hope that this article will provide some clarity and useful information about how to apply and what to expect.

Edinburgh has a huge number of short-term let properties. Home Sweet Home estimate there are between 6,000 – 10,000 rental properties in the city using online services such as Airbnb to let flats and apartments. Up until now this has been very profitable because Edinburgh is a major city and a top tourist destination.

However, having so many rental properties set aside for visitors to the city has had an impact on the local rental market in Edinburgh. The number of short term lets has contributed to the current shortage of long-term rental housing in Edinburgh. This, along with instances of antisocial behaviour from some Airbnb renters has led the Scottish Government to regulate the short-term let industry.

Because of this, the Scottish Government agreed new measures to regulate Short Term Lets, in January 2022.

From 1st October 2022 any new hosts have to obtain a short-term let license before accepting bookings or receiving guests. The application process can be lengthy (currently around 6 months minimum) and expensive.

Existing hosts (those that have received guests before 1 October 2022) have until 1 October 2023 to apply for a licence. Existing hosts can continue to offer lets until their application has been determined.

What information do you need to provide when applying for a secondary letting licence for short term letting?

For most short term let landlords, a secondary letting licence is required. This is defined as “the letting of property where you do not normally live, for example a second home that is let to guests.”

There are two different aspects to this:-

1. The licence requires you to change the property from a residential dwelling to a commercial self catering unit. To do that you need to get planning permission.

2. You then need to submit a 22 page Short Term Lets Licence Application to Edinburgh council, along with your planning permission decision.

Common documents that you might need to include in a change of use planning application include:

• Floorplans
• Architect’s drawings of elevations etc
• Location plans
• Photos
• Application form

Application processing times

At the time of writing this article, it is currently taking 4-6 months for planning permission to be approved by the City of Edinburgh Council. Then the council has a time limit of up to 12 months to process an application from an existing host (who already ran a short term let before October 22), and up to 9 months for new hosts.

So, already the length of time you can expect to be waiting for planning permission will take you passed the application deadline of October 2023.

If you do not apply for a licence on time and continue to operate, you could get a fine of up to £2,500 and be banned from applying for a licence for a year.

We estimate that there are somewhere between 6,000 and 10,000 Airbnb properties in Edinburgh. Only around 500 – 1000 of these have so far applied for planning permission. So only 5-10% of all hosts have so far applied for planning permission and are still waiting for a decision. Therefore there is a risk that if you delay your application any further, you might get to that point where you have to stop short term letting while you wait for the outcome of your planning permission. 

It’s worth bearing in mind that Edinburgh council are knocking back any applications where they consider there might be a risk of anti-social behaviour. What’s more all properties with communal entrances are being refused a licence. This means that all flats with a shared main/stair door are tending to not even be considered for planning permission at the moment. So it’s important to know before spending money on a planning application. The recent ruling in June 2023 which found some of the legislation unlawful does not seem to have changed the outcome of this.

If you look at the legislation and determine you’re that your property will be deemed unsuitable for short term lets, it could be a good time to start looking at options of what to do with your property.

Annual fees and other costs for Short Term Lets in Edinburgh

On top of the cost of applying for a licence, Short Term letting landlords must pay an annual licencing fee. This is currently over £1,000 per year for an average small property, rising to over £2,400 or more per year for larger properties.

And don’t forget there are other costs involved with short term lets. As a landlord you will be responsible for paying all the utility bills such as gas/electricity, broadband, tv licence, council tax, insurance etc. Many landlords also choose to pay a property management company to take care of all the cleaning, inventory checks and handovers etc. 

Is there a way to get around the licencing system?

In short, no. Given the large number of Short Term let properties in Edinburgh, we expect some landlords will continue to offer Short Term Lets without applying for a licence. We don’t recommend doing this, because the risk of receiving a large fine from City of Edinburgh Council.

Obviously it will be difficult for the council to police unlicenced landlords, but we expect two things to happen which will make it difficult to let out an unlicenced property:

1. We expect Airbnb and other online booking portals to demand that landlords provide their registration number before being allowed to advertise their property.

2. We expect Edinburgh residents to be actively reporting any unlicenced lets to the authorities. It is now much easier for Edinburgh residents to report antisocial behaviour in short term lets, and many groups of neighbours are now coordinated their complaints so the council feel more pressure to act.

What are your options if you will not be eligible for a short term let licence?

1. You could sell your property. 

The property market in Edinburgh is performing OK, with property prices dipping for the first time for a number of years recently. However, with interest rates increasing and the possibility of hundreds of ex-short term let properties hitting the market at the same time, competition will be strong and owners may have to compromise on the sales price or the time it takes to sell.

Edinburgh will continue to be an attractive city to live in and good quality properties will always find a buyer. Therefore, many landlords view selling their rental property as a good alternative to applying to become a registered Short Term Let provider.

1. Switch to Long-Term Letting.

There is a huge demand for long-term lets in Edinburgh. Turning your short term let property into a long term is now simpler than applying for a short term let licence. Having long term tenants is beneficial both financially and in terms of the effort involved in day-to-day running. Read on as we explain some of the benefits to having long term tenants in your property.

The advantages of Long Term Tenancy over Short Term Lets

As you can see, we think that the age of highly profitable, unregulated short term lets is coming to an end in Edinburgh. Because of this, now is a very good time to consider your options as a landlord. While many of the more speculative landlords will undoubtedly be selling their properties, there is a huge opportunity to transition smoothly into the much more stable, less demanding business of long term lets.

We believe that offering a long term tenancy is the best course of action for many landlords, both as a business decision, and as a way of helping to solve the current housing crisis in Edinburgh. The main benefits of having long term instead of short term tenants are as follows:

• High demand for rental properties in Edinburgh: We are currently receiving dozens, or even hundreds of applications for each rental property we put on the market. There is a huge shortage of flats for rent in the city which means you can pick from the best applicants, and you’ll get a very good rental income.
• Reduced vacancy and turnover costs: As a long-term tenancy landlord you can avoid the costs associated with finding new short term tenants, such as annual licencing fees, online platform service fees, TV licence, utility bills, cleaning and preparation costs. Also a short term let property will almost certainly be empty for periods of each year.
• Stable rental income: Long-term tenants provide landlords with a predictable rental income, allowing you to better plan your finances and manage your business cash flow.
• Reduced wear and tear: Short-term tenants will often be on holiday or using your property to socialise/ have a party, resulting in increased wear and tear on the property. Long-term tenants, on the other hand, are more likely to treat the property with care, resulting in fewer repairs and maintenance costs. If you rent your property unfurnished, you will not be liable for any of the furniture.
• Better tenant relationships: Long-term tenancies provide landlords with the opportunity to establish better relationships with their tenants, leading to improved communication, trust, and mutual respect.
• Lower tenant turnover rates: With long-term tenants, landlords can expect lower turnover rates, which can help reduce the costs associated with filling vacancies and maintaining the property.
• Reduced administrative costs: Long-term tenants require less administrative work, such as drafting new leases, conducting move-in and move-out inspections, and handling security deposits.

Overall, providing a long-term tenancy can benefit you as a landlord in a variety of ways, including reduced vacancy and turnover costs, stable rental income, and better tenant relationships.

Want to find out more about becoming a Private Residential Tenancy Landlord?

If you would like to find out more, and for some great advice about becoming a long term letting landlord, please call Home Sweet Home on 0131 554 6050, or email us at info@hshletting.co.uk.

Whether you are a first-time landlord, or thinking of making the switch from short term letting, we can offer you a wealth of experience in setting up a Private Residential Tenancy (PRT). With the right help it can be a hassle free way of making your property work for you.

Find out how much your property could be worth using our rental valuation tool – and call us today!