This item was written in 2018 about a report on the impact of Airbnb and similar platforms. It calls for tighter regulation.
In parts of Edinburgh, the proliferation of Airbnb and its imitators is having a detrimental impact on local amenity and community cohesion, says a new report by Edinburgh’s Civic Trust, the Cockburn Association. While recognising that short-term self-catering accommodation can make efficient use of under-utilised space, and offer affordable accommodation, the report notes that it can also reduce the supply of long-term renting. In Edinburgh, the Old Town is the area most directly affected, though by no means the only one. Some properties have been converted to commercial short-lets, in effect breaching the requirement to get planning permission for change of use. There are concerns, well expressd by an Old Town resident quoted in the report, about the disrption that such conversion causes within a tenemental property, and how absent owners complicate issues of property maintenance and repair.
The report reviews ways that other cities, including Berlin, Barcelona, Paris, San Fransisco, New York and Montreal have approached the need to regulate short-term letting. It concludes with a set of recommendations for action, arguing that a system of licensing offers the best way forward. However, there is als a call to amend the Use Classes Order. “Short-term letting of an entire residential unit for more than 90 days in a calendar year, regardless of the platform or agency used should be deemed to be commercial use, requiring planing permission.” It argues that this would still allow the original “sharing” model to operate, which has long existed in Edinburgh where many people rent out rooms or entire properties during the annual Festival in August.
Here is the Executive Summary
Rising concern in Edinburgh about the impacts of Airbnb and other short-term letting platforms led the Cockburn Association to organise a mini-conference on the theme in March 2018. Although temporary renting out of flats and even whole houses has long been a feature of the city, most notably during the period of the annual Festival, the recent boom in short-term lets has attracted criticism, as has been the case in other tourist cities in Europe and North America.
Airbnb listings are most prominent in the Old and New Towns, Leith Walk and the Western Harbour area. There is a correlation between Airbnb listings and areas with high levels of private renting. High returns, a favourable tax regime, limited regulation and legislative changes impacting adversely on landlords offering traditional long tenancies are factors driving change, along with the capacity of the internet to connect multiple providers and consumers.
Tourism is a key sector of Scotland’s and Edinburgh’s economy, and the strategy is focused on growth. Short, self-catering lets can increase the supply of accommodation.
Local authorities have powers to deal with nuisance and anti-social behaviour that may arise from short-term lets, and very few complaints have been registered in Edinburgh in recent years. However, the experience of people living in tenement stairs where flats have been converted to Airbnb (or similar) is that problems can be endemic, even if a complaint is not registered.
There are concerns that the stock of available and affordable housing is being reduced, and that the character of the Old Town in particular is being changed. The burden of managing the stair in a tenement becomes more onerous and falls on the diminishing number of permanent residents. Since many short-lets are in older properties, this constitutes a long term threat to the fabric of Edinburgh. There are also concerns that commercial lets may not be paying proper rates and taxes.
Licensing options could include a registration scheme, or there could be “negative licensing” under which all properties would be registered and eligible to do short-lets, but the council would have power to remove problem properties from the register, or a “full licensing system” in which granting a license would take account of the suitability of the property and of the landlord. There would be powers to suspend, refuse or revoke the licence. Regulation also needs enforcement, and support from the Scottish Government.
The Cockburn Association view is that there needs to be regulation, and in tenements the consent of other residents should be required, along with proof of insurance. Short-term letting of an entire property for more than 90 days a year should be a change of use requiring planning permission. Action is needed now, but longer-term monitoring is also required.
Here is the report’s summary of my own input to the Conference:
The Airbnb phenomenon
Emeritus Professor Cliff Hague, Chair of the Cockburn Association, opened the conference with a presentation entitled, “The sharing economy, disruptive technologies and short-term lets”. He sketched the origins of Airbnb. Joe Gebbia and Brian Chesky, young graduates from the Rhode Island School of Design were living in San Francisco in 2007, and struggling to pay their rent. When a big design conference came to town they grasped the opportunity to rent out three airbeds on the floor of their living room, and cook breakfast for their guests. Next day they set up a website, and soon recruited a computer science graduate, Nathan Blecharczyk, to work on it. Airbnb was born (Salter, 2012).
The business boomed and quickly went global. It also spawned imitators. By 2017 Airbnb alone was worth £1M a day to the Scottish economy. It helped create the concept of the “sharing economy”, which has been defined as ““The sharing of underutilised assets, monetised or not, in ways that improve efficiency, sustainability and community.” (Rinne, 2017).
The Platform Business Model – A Disruptive Technology
Cliff Hague explained how the basis of Airbnb, and a growing number of other businesses, is the platform. It is a business model that creates value by facilitating exchanges between two or more interdependent groups, which are usually consumers and producers. The platform is the intermediary: it does not own the assets (Indigo House, 2017). The global reach of the internet has made it possible to create large, scalable networks of users and resources that can be accessed on demand.
Such models are by no means restricted to short-term letting of properties. Uber is another well-known example. Furthermore, such businesses are expected to continue to grow. In the UK alone, the activity of sharing platforms is expected to expand at over 30% each year over the next decade, facilitating £140 billion worth of transactions per year by 2025 (PwC, 2016).
The platform is just one example of the disruptive technologies that are being targeted at the management of cities. A disruptive technology is one that displaces an established technology by creating new ways of doing things, and new business models. The Chairman of the ARUP Group has argued that “The sharing economy is making cities redefine land-use strategies, minimize their costs, optimize public assets and collaborate with other actors (for-profits, non-profits, social enterprises, communities and other cities) in developing policies and frameworks that encourage continued innovation in this area.“ (Hodkinson, 2017).
Businesses have recognised the huge opportunities that urban areas offer. Cities are concentrations of consumers and assets, many of which are under-utilised at any point in time. Those who can connect supply and demand, and monetarise assets that were not previously commodities, can reap huge rewards.
Austerity further fuels this process. People are hooked into “hyper consumption”, as the desire for short breaks and urban tourism is now well embedded in our culture, and made attainable by budget airlines offering cheap flights. Yet austerity following the 2007-8 financial crisis has seen incomes stalled and pension rights reduced. This “perfect storm” has created a new demand for more “affordable” tourist accommodation (or taxis), and a new set of suppliers who want to supplement their earnings or pensions.
Political economy and technology have intertwined to drive urban change. Thus short-term lets can be seen as a win-win in hard times: income for providers; reduced costs to consumers; monetarization of idle assets; and even the nurturing of new micro-entrepreneurs, some of whom may morph into more substantial enterprises. What’s not to like? Will the current boom in short-term lets in Edinburgh and similar cities continue at its present rate, plateau out, or fall back?
