Airbnb review economic impact of proposed government regulation

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 just 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 equate to a loss of £5.9m per annum and the loss of 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.

“If you do something that impacts on prices then it will have an economic effect. It does not really matter how much it is as any sort of cost will increase prices. Any regulation will have a cost and that will feed its way through and the question is whether people will think that cost is worth it.

“It might be that if a price goes up by 1% it will make no difference to most people but it will to some and they won’t come any more so you will see the effect in terms of lower demand.”

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, short-term 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.

“However these proposals are among the strictest in the world and incredibly costly. 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. This is really disproportionate.  In this post-pandemic phase, a lot of Hosts on Airbnb rely on that additional income to make ends meet so we want to do the right thing by them.”

As well as being in favour of registration for those letting out their properties, Airbnb has a neighbourhood support hotline and a range of other tools available to local authorities and communities to help them manage tourism.

*BiGGAR Economics Report “Scottish & Local Tourism Economic Impact Assessment”, October 2020, commissioned by Airbnb.

This article is brought to you in partnership with Airbnb.