The Budget last week included plans to increase tax on Furnished Holiday Lettings. It is proposed to make the system of tax allowances less advantageous than for other businesses. The idea behind it is that the owners of these properties may decide to switch to providing them for long-term rent.
A better approach would be to ease tax and regulatory burdens on landlords rather than increase them on holiday lettings owners. Of course, the fundamental problem is the housing shortage – and the solution is removing obstacles to building more homes. Redistributing the shortage so that the relative cost of buying, renting, or going on holiday is varied in some modest way is not a serious alternative.
Scotland is some way ahead of England in embarking down this blind alley.
Brian Wilson, a former Labour MP, writes in The Scotsman:
“It is difficult to think of a more blameless sector of the Scottish economy than providers of Bed and Breakfast accommodation; for generations an integral and homely ingredient of our tourism offering. Correspondingly, it must rank as one of the SNP regime’s more spectacular achievements that it has managed to turn Scotland’s B&B operators into a protest movement, with two-thirds thinking of packing it in rather than submit to the might of St Andrew’s House.”
He “was talking to a friend” who inherited a modest B&B and decided to keep it going; “it gives him a modest income and an enjoyable degree of sociability, with guests returning or keeping in touch from around the world. Traditional Scottish hospitality, you might say.” But “he faces costs of £4,000 under the licensing scheme and doubts if it is worth the hassle.”
It is tempting for politicians to indulge in displacement activity. If there is a housing shortage the answer is to provide more housing. If there is crime and anti-social behaviour the answer is to ensure the law is enforced through the police and criminal justice system. But imposing more bureaucracy on those who provide tourists with hospitality is easier.
I’m afraid it’s not just the Scottish Nationalists who are indulging in this but also the Scottish Labour Party. Edinburgh City Council, which is Labour-led, has been zealous in taking part in the battle against short-term lettings.
The Edinburgh Evening News reports:
“No criminal reports have been made since the start of a crackdown on short-term lets in Edinburgh last October.
“The Scottish Government introduced a licensing system amid outcry over the impact of Airbnb and other online booking sites on housing stocks across the country. City of Edinburgh Council, which recently declared a housing emergency, now has the power to investigate landlords suspected of not registering their short-term lets.
“The scheme caused a backlash from parts of the tourism sector, who claimed the cost of registering holiday lets would cause an exodus of operators from the market. Non-compliant landlords could face fines of up to £2,500.”
Another report warns of an 80 per cent drop in properties for hire on Airbnb in Edinburgh; an “act of self-sabotage on their businesses and livelihoods”. It even extends to house swaps. It is a criminal offence to occasionally let out a spare room or sublet a property while on holiday – without all the expense and rigmarole of the licensing.
If you are rich you will still be able to afford to go on holiday in Edinburgh, staying in a smart hotel. It is those on more modest incomes who will be hit. One chroncler of this saga, Gethin Chamberlin, writes:
“This is a direct attack on those who are looking for affordable short term accommodation – whether that’s holidaymakers, festival workers and visitors and transient workers. People who stay in B&Bs, self catering apartments and guesthouses have various reasons, but budget is an important element. This penalises those who can’t afford top end prices.”
Resistance is strong. It is even reported that “the Association of Scotland’s Self-Caterers has written to First Minister Humza Yousaf suggesting that the legislation may be in breach of the European Convention of Human Rights, and data protection and privacy laws.” There have been legal victories against Edinburgh City Council on narrower grounds.
Marc Crothall, chief executive of the Scottish Tourism Alliance, warns it is not just “pure tourism” being harmed by the short-term lettings legislation. Local authorities looking for emergency temporary accommodation are causing themselves difficulties by restricting supply.
Plucky resistance on social media and legal challenges are all very well. Self-catering properties across Scotland do (or did) generate £672 million in economic activity directly while also resulting in visitors spending another £867 million thus helping other businesses in tourism and hospitality. So that sector has some clout. But if the Scots are determined to elect politicians who wish to destroy the tourism industry then I suppose they will get their way.
The concern is that England shows every sign of following Scotland with this folly. The Scottish Conservatives have been highlighting the disastrous consequences of what is happening but feel undermined that the Conservative Government in the UK are so keen to copy this socialist regulation.
I suppose at some stage the data will be so conclusive as to show the approach has failed both sides of the border. Perhaps the rules will then be liberalised. But by then how many holiday lettings will still be in business?
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Author: Harry Phibbs
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