The Herald - The Herald Magazine
Regulations leave little room for manoeuvre
New research suggests that proposed new rulings on short-term lets in Scotland’s cities may have a detrimetal impact on jobs and the national economy
WHILE there has been much publicity about the economic impact on Edinburgh of the proposed government regulation of short-term holiday lets, Scotland’s biggest city could also suffer, according to independent research.
Airbnb alone supports nearly 3,000 jobs in Glasgow and generates £58.8m of economic activity in the city per year in Gross Value Added (GVA), according to a report by BiGGAR Economics.*
Of all Scotland’s local authorities, Glasgow is behind only Edinburgh and the Highlands in terms of economic benefits related to Airbnb.
Across the whole of the country Airbnb generates a total of £676.9m per year and supports more than 33,500 full time jobs, the BiGGARr Economics report found.
However the company believes the Scottish Government’s proposed regulations are too costly and bureaucratic, potentially putting many short-term lets accommodation out of business.
According to the report, even a reduction of 10% in Airbnb nights could lead to a reduction in GVA of £67.7 million per annum in Scotland and 3,355 jobs. The impact on the unemployment rate could be +0.1%. In Glasgow this would be a loss of £5.9m per annum and 289 jobs.
Graeme Blackett of BiGGAR Economics agrees there is no question that the lack of housing is an issue for the Scottish economy but pointed out that it is a problem for every advanced economy, even those where the tourism sector is not as large as it is in Scotland. That suggests tourism is not the main driver of the housing problem,” he said.
“The consensus amongst most economists is that there is not enough supply – we don’t build enough houses - so regulations are not going to solve the problem.”
Mr Blackett said any regulations would come with a cost.
“They don’t exist yet so it is not possible to be certain about the effects, but we can look at how such things affect the economy to give us some sort of guidance and if it puts up prices, which it is likely to do, you would expect that to reduce demand.
The other consequence you would expect to happen if there is a regulation system is that it will put off some hosts.” He said some would be likely to question whether the regulation was worth spending money on while others might be put off by the “hassle” of going through the process.
“If there is a reduction in demand and a reduction in properties there will be fewer visitors staying in Airbnb which means there will be less money spent in the economy by guests and Hosts,” said Mr Blackett.
Mr Blackett said people would either not come at all or would have less money to spend in local shops, restaurants and businesses because they were spending more of it on accommodation as they would be paying indirectly for the regulation.
“The key point about the report is it provides some evidence of what the consequences would be of less activity,” he said. “It is then up to the people who are proposing and voting on the legislation to look at the downside as well as whatever problem they hope to solve so they can balance those things and decide whether it is a sensible thing to do.”
Under the new proposals, shortterm lets, hosts may have to pay almost £2,500 just to comply with new regulations, making it the most expensive short-term lets regime in Europe. Hosts might also face costly home alterations, such as replacing wooden floors with lino.
“Contrary to popular myth, Airbnb is actually a strong advocate for sensible proportionate regulation and has entered into over 1000 tax and regulatory agreements worldwide so this is not new to us,” said Amanda Cupples, Airbnb General Manager for Northern Europe.
“The majority of Hosts on Airbnb in Scotland actually share their own home and the average earnings per year are around £1000.
“However the regulations as drafted mean that whether you share your spare room for one night or your entire property, you need to apply for a licence that could cost you up to £2500.”
*BiGGAR Economics Report “Scottish & Local Tourism Economic Impact Assessment”, October 2020, commissioned by Airbnb.