Economic Impacts of Short-term Lets in Edinburgh

Our independent research into the economic impacts of short-term lets in the City of Edinburgh found that the use of properties as short-term lets generates greater economic activity than if they were used for residential use.

The City of Edinburgh is one of two short-term let control areas in Scotland. In addition to the requirement to obtain a license to operate as a short-term let, wholly let premises must also obtain ‘change of use’ planning permission. With tighter restrictions on short-term lets, in addition to a unique housing market in the city, this makes the City of Edinburgh an interesting area to research the impacts of the sector on the local economy and housing market.

Individual Properties

The economic impact generated by the property depends on the level of spend by those occupying it.

The spending profile associated with residential use depends on the number of people living in the property and the type of household, for example whether the house is occupied by a large family or a single pensioner will have different levels of spend. In terms of short-term lets, the property attracts visitors to the city and their spend is primarily in sectors associated with tourism, such as accommodation, travel, and recreation.

For a two-bedroom property in the City of Edinburgh, the annual average economic impact is estimated to be at least:

£45,818 Gross Value Added (GVA) and 1.2 jobs from short-term let use; and
£13,266 GVA and one-tenth of a job from use as a residential property.

The additional economic impacts arising from short-term let use arise from the generally higher levels of spending visitors have than that of households.

Sector Impact

The impact of short-term lets on the city’s economy will not change significantly by changing the use of one individual property. Our study also looked at the impact of the wider sector and how proportional increases or decreases in the supply of short-term lets in the city could change the level of economic activity.

Using publicly available data on the number of short-term let license applications in the city, it was possible to estimate the number of short-term lets in the city and the number of nights spent in this type of accommodation over the past year.

By spending in the local tourism economy, it was estimated that the total economic impact generated by the short-term let sector in the City of Edinburgh is £154 million GVA, supporting 5,580 jobs in the local economy.

The short-term lets sector is contributing £154 million to the Edinburgh economy each year

A 0.5% increase in the share of housing stock accounted for by short-term lets would increase this impact to £194 million GVA. A 0.5% decrease would reduce the impact to £97 million GVA.

Relation to Edinburgh’s Housing Market

One argument against the use of residential properties as STLs is that this prevents the home being used, or bought for, residential purposes. Our research found that short-term let properties account for only 1.5% of Edinburgh’s housing stock, secondary lets of which are estimated at 0.8%, too low a proportion to have a meaningful impact on the local housing market. Vacant dwellings account for 4%.

Rising levels of empty properties and property prices in the city, coupled with declining sales volume indicate that there are wider factors influencing the housing crisis in the long-term.