Non-domestic rates/Council Tax second and empty homes consultation: partial impact assessments

Partial impact assessments relating to the consultation on council tax for second and long term empty homes, and thresholds for non-domestic rates.

6. Island Communities Impact Assessment


6.1 Section 7 of the Islands (Scotland) Act 2018 ("the 2018 Act") sets out a specific duty for relevant public bodies, including the Scottish Ministers, to "have regard to island communities" in carrying out their functions. A related duty under section 8 of the 2018 Act requires us to undertake an Island Communities Impact Assessment (ICIA) "in relation to a policy, strategy or service which, in the authority's opinion, is likely to have an effect on an island community which is significantly different from its effect on other communities(including other island communities) in the area in which the authority exercises its functions."

6.2 This partial assessment considers the potential impact of the following proposals on island communities:

  • to increase council tax on second and empty homes, and/or
  • to alter non-domestic rates thresholds for self-catering accommodation

6.3 Island communities are defined in the 2018 Act as:

  • consisting of two or more individuals, all of whom permanently inhabit an island (whether or not the same island), and
  • based on common interest, identity or geography (including in relation to any uninhabited island whose natural environment and terrestrial, marine and associated ecosystems contribute to the natural or cultural heritage or economy of an inhabited island)


6.4 The objectives for the proposals are set out in chapter 1.

Application of policy to island communities

6.5 The consultation seeks views on how taxation can help councils make best use of existing housing stock. This is not about a one size fits all solution. Nationally the aim is to encourage more residential accommodation to be used as homes for living in and for these to be occupied for more of the time. Local areas need to decide how to achieve the right balance in the use of housing to meet local needs and to support thriving communities.

6.6 It is recognised that geography can often be an important factor, with concentrations of second and empty homes in specific areas across Scotland especially in rural and island locations.

6.7 Over the past decade the growth of online platforms has fuelled the trend for residential homes, particularly in tourist hotspots, to be changed from primary homes to be used for short-term lets or second homes. This can cause problems for neighbours and make it harder for local people, particularly young people or those with fewer resources, to find homes to live in. We also remain concerned about the number of empty homes in Scotland, which could potentially be brought back into use for people to live in.

6.8 Positive impacts for island communities would include increasing the occupancy of residential properties by incentivising second homeowners to minimise the time their property is left empty throughout the year. This could lead to further benefits, for example, providing housing for key workers and more generally increasing spend in a local community. This might also be achieved if self-catering accommodation is let or available to let for more nights or changing the use of the second/ empty home to a private residential tenancy.

6.9 It could also generate additional revenue for the local area. The majority of councils currently choose to charge second home owners the full rate of council tax – the maximum they are able to apply within the current legal framework (25 of 32 councils). The remaining seven councils apply a 10% discount for second homes; no councils choose to offer a 50% discount, which is the minimum amount they could charge.

6.10 Local councils would need to carefully consider when to use discretion to change council tax rates for second and empty homes. Negative impacts might include: loss of tourism economy, homes switching from personal use or self-catering accommodation to empty homes (at least in the short term).

Current situation on the islands

Engagement and Consultation

6.11 A public consultation on the proposals is being undertaken for 12 weeks from 18 April to 11 July 2023.

6.12 The matter of second and empty homes, and short-term lets has been raised during engagement with a wide range of stakeholders to develop our Remote, Rural and Islands Housing Action Plan. This gathered views on the issues and potential solutions to the delivery of homes in remote, rural and island communities. Stakeholders involved include community groups, councils, registered social landlords, rural housing organisations as well as Highlands and Islands Enterprise, South of Scotland Enterprise, and national agencies.

6.13 We have also informally consulted with COSLA during the development of the proposals and will continue this engagement during the consultation.

6.14 In addition we intend to engage with relevant businesses/organisations via established forums/ groups, including but not limited to the following:

  • The Industry Advisory Group facilitated by Visit Scotland and comprising representation from Association of Scottish Self Caterers, Scottish B&B Association, Scottish Tourism Alliance and Short Term Accommodation Association
  • Scottish Ratepayers Forum
  • Scottish Ratepayers Surveyors Forum
  • Industry Leadership Advisory Group
  • Institute of Revenues Rating and Valuation Scotland
  • Scottish Assessors Association

Current Council Tax policies in Island Communities

Island: Na h-Eileanan Siar

Second Homes: No discount

Homes empty for longer than 12 months: Up to 100% premium

Additional Information: Newly owned properties that are under major repair have a 50% discount applied for up to two years from start of liability, while under repair. Newly owned properties that are long term empty have 6 months at full charge while empty before the additional 100% charge applies.

Island: Orkney

Second Homes: 10% discount for 12 months

Homes empty for longer than 12 months: Up to 100% premium

Additional Information: Residents of the North Isles with a second home on the Orkney mainland may receive a 50% discount if they require the second home for the purposes of maintaining their employment.

Island: Shetland

Second Homes: 10% discount

Homes empty for longer than 12 months: 10% discount

Additional Information:

Housing supply in island communities

6.15 Over the last Parliament we delivered 6,000 affordable homes in remote, rural and island communities, and we have a target of delivering 110,000 affordable homes in Scotland by 2032, with at least 10% of these in remote, rural and island communities. Building more homes is important but, to be able to ensure local housing needs are met, councils need to be able to make the best use of existing housing stock.

6.16 Data on the number of private rented households and social rented housing stock for three island councils are set out in the table below, which shows that the share of private rented stock and social rented stock is lower in island local authorities than in Scotland as a whole.[8]

Table 1. Number and share of private rented households and social rented dwellings in island local authorities, 2019
Private rented households Social rented stock
Estimated Number As percent of all dwellings Number As percent of all dwellings
Na h-Eileanan Siar 900 7% 2,200 15%
Orkney Islands 1,000 9% 1,700 15%
Shetland Islands 600 6% 2,400 21%
Scotland 340,000 14% 600,100 23%

Sources: Private rented household based on Scottish Household Survey 2019 estimates of the proportion of private rented households; Social rented stock from Scottish Government Annual Housing Statistics – Stock by Tenure tables for 2019

6.17 Although published external data is not always broken down to cover specific individual island communities, the Isle of Arran Local Island Plan,[9] for example, includes the output of local engagement with the community on the Isle of Arran. Comments in the Plan also referred to private sector housing being in short supply as owners may generate a greater income from holiday lets, as well as concerns about 'island premium' costs – the greater costs of living experienced by those in island communities.

Second Homes

6.18 As at September 2022 there were 24,287[10] second homes (classified for council tax purposes). This equates to around 1% of all residential accommodation in Scotland. The number of second homes varies considerably between, and within, individual councils, with the peak numbers found mainly in tourist hotspots, rural and island areas.

Table 2. Top 10 Councils for number of second homes (2022)
Local Authority Number of second homes
Highland 3,720
Argyll & Bute 3,045
Fife 2,374
Edinburgh 1,660
North Ayrshire 1,527
Dumfries & Galloway 1,390
Perth & Kinross 1,223
Aberdeenshire 1,214
Scottish Borders 1,031
Na h-Eileanan Siar 885

Source: Scottish Government (Housing statistics: Empty properties and second homes - (

6.19 While Na h-Eileanan Siar is the only island council in the top 10 councils in terms of absolute numbers of second homes, Orkney and Shetland Islands also feature in top 10 councils based on the percentage of second homes.

Table 3. Second homes as a percentage of the total number of dwellings by local authority, where share is above national average of 0.9% (2022) [11]
Council Area Share of second homes
Argyll & Bute 6.2%
Na h-Eileanan Siar 5.9%
Orkney Islands 4.8%
Highland 3.0%
North Ayrshire 2.2%
Dumfries & Galloway 1.8%
Moray 1.7%
Scottish Borders 1.7%
Perth & Kinross 1.6%
Shetland Islands 1.5%
Fife 1.3%
Scottish Average 0.9%

Source: Scottish Government, Housing statistics: Empty properties and second homes and CTAXBASE 2022.

6.20 Figure 3 also illustrates that as at September 2021, the vast majority of second homes are situated in remote rural areas, with 10,000 out of the total of 24,000 second homes in Scotland (43%) located in such areas. Second homes comprise 6.4% of all dwellings in remote rural areas.

Figure 3. The number of second homes and the number of second homes as a percentage of the number of dwellings by 6-fold urban-rural classification as at September 2021.
shows the number of second homes and the number of second homes as a percentage of the total number of dwellings by 6-fold urban rural classification as at September 2021. The 6 categories within the 6-fold urban rural classification are Large Urban Areas, Other Urban Areas, Accessible Small Towns, Remote Small Towns, Accessible Rural Areas and Remote Rural Areas. The number of second homes as a percentage of the total number of dwellings for Scotland as a whole is also shown.

Source: National Records of Scotland, Household and Dwelling Estimates by Urban Rural Classification (2011 Data Zone based)

Empty Homes

6.21 As at September 2022 there were 42,865[12] long-term empty (6 months or more) homes (classified for council tax purposes), equating to around 2% of all residential accommodation in Scotland.

Table 4. Breakdown of empty homes by island councils as at September 2022
Total No. empty 6 mths+ Of which No. of homes empty 12 mths+ No. charged less than 10% discount or premium applied
Na h-Eileanan Siar 631 529 349
Orkney Islands 211 153 153
Shetland Islands 552 394 0
Scotland 42,865 27,692 20,279

Source: Scottish Government, Housing statistics: Empty properties and second homes

6.22 Even allowing for data improvements, reclassifications and the impact of the Covid-19 pandemic, there is still clearly an upward trend in the numbers of long-term empty homes, with the number of long-term empty properties increasing by 17.7% between 2015 and 2022. The process to bring long-term empty homes back into use is typically complex, takes time and is often reliant on there being sufficient funds for refurbishment/ renovation.

6.23 Overall, approximately two thirds of empty homes are empty for longer than 12 months. This proportion has remained consistent since 2017.

6.24 The Scottish Empty Homes Partnership Annual Report 2020-21 sets out the range of reasons homes become and remain empty. An overview of the data has also been included in the Business and Regulatory Impact Assessment.

6.25 We have commissioned an independent researcher to conduct an audit of our long-term empty homes policy and interventions. This will be to:

  • set out the scale of the problem in Scotland (including how this compares to other UK nations) and the factors that lead to homes becoming empty for longer than 6 months
  • identify the learning from various interventions and use of powers across Scotland to bring long-term empty homes back into use
  • review UK and other relevant approaches to tackling empty homes to identify whether any of these might be used to enhance the effectiveness of tackling/ preventing empty homes in Scotland, including the appropriateness across different demographics (urban, rural, islands)
  • produce a high quality, balanced and impartial report, ensuring that the full range and nature of underlying evidence and views are presented

6.26 The audit findings and consultation responses will help to inform further development of these proposals, as appropriate.

Non-Domestic Rates

6.27 In October 2022 there were 18,290 self-catering accommodation units on the valuation roll for non-domestic rates across Scotland. This represents an upward trend in numbers of more than 20% over the past five years. Self-catering accommodation accounts for 7% of all premises in Scotland liable for non-domestic rates.

6.28 The numbers of units per council area vary considerably, with the highest numbers in 2022 located in tourist hotspots such as Highland (5,050), Argyll and Bute (2,290), the City of Edinburgh (1,410), Dumfries and Galloway (1,400) and Perth and Kinross (1,100).

Table 5. Increase in the numbers of self-catering units on the Valuation Roll, between 2017 and 2022 in three island councils
Council 2017 2022 %-/+
Na h-Eileanan Siar 510 750 32
Orkney Islands 380 440 14
Shetland Islands 250 250 0
Scotland 14,180 18,290 22

6.29 The owners, tenants or occupiers of self-catering accommodation (who may be businesses, the public or the third sectors) may be liable for either council tax or non-domestic rates. This includes owners of second homes who use them for self-catering accommodation. To be liable for non-domestic rates rather than council tax, self-catering holiday accommodation must be actually let for a period of at least 70 days and available to let for 140 days or more in each financial year.

Tourism/Short term let data

6.30 Short-term lets support the tourism and visitor economy, which can be vital to island communities through:

  • income received by hosts,
  • support for local businesses such as tourist attractions, restaurants and shops by short-term let guests, and
  • employment opportunities, such as cleaning and maintenance

6.31 Our research[13] into the impact of short-term lets on communities found that just over half (51%) of short-term lets in Scotland were found in just 24 council wards (out of 354), demonstrating that short-term lets are geographically concentrated.

6.32 Of those 24 wards, 4 include island communities as set-out in Table 6:

Table 6. Type of active Airbnb listings by ward, May 2019
Ward Entire Home Private Room Shared Room Total % of total Dwellings (2017)
Skye 663 412 8 1083 3.4% 16,759
Oban North and Lorn[14] 332 108 1 441 1.4% 5,171
Caol and Mallaig[15] 244 172 9 425 1.3% 3,971
Oban South and Isles[16] 263 116 12 391 1.2% 5,894

Source: Indigo House and Scottish Government, Short-term lets - impact on communities: research - (

6.33 In May 2019, some 1.2% of homes in Scotland were listed on Airbnb (as home sharing, home letting or secondary letting). However, in Skye this rose to 18.6% (the highest penetration rate by ward in Scotland). For context, the penetration rate in Edinburgh City Centre Ward was 16.2%.

6.34 The research also provided a breakdown of the total number of Airbnbs in operation in each local authority, including the three local authorities that exclusively cover island areas, as illustrated in table 7.

Table 7. Type of active Airbnb listings by local authority area, May 2019
Local authority Entire home / apartment Private Room Shared Room Total (May 2019) % of total (Scotland wide)
Na h-Eileanan Siar 397 113 3 513 1.6%
Orkney Islands 198 98 0 296 0.9%
Shetland Islands 163 62 0 225 0.7%

Source: Indigo House and Scottish Government, Short-term lets - impact on communities: research - (

6.35 The total population of Scotland's islands, as at the 2011 census, was 103,702.[17] The total population of Scotland at the 2011 census was 5,295,000. This suggests that just under 2% of Scotland's population lives on islands (in 2011).

6.36 Short-term let licensing commenced in October 2022 and will provide us with a clearer picture about the numbers of short-term lets in Scotland. Based on data collated in 2019, the number of short-term lets on the islands of Skye, Na h-Eileanan Siar, Orkney Islands, Shetland Islands was 6.6% (2,120) of the Scottish total. The number of short-term lets operating across all islands in May 2019[18] will have been be significantly greater if it were possible to account for numbers in Arran, Bute and Mull. This emphasises the importance of tourism, and short-term lets, for island communities compared to Scotland as a whole.

6.37 Although Airbnb have a large share of the short-term letting market, they are not the only platform for short-term lets in Scotland. Vrbo (Expedia) and, as well as other platforms and independent operators with their own website or marketing channels, are important too. The above data quoted only covers short-term let properties listed on Airbnb, and is a snapshot of the picture in island communities.

6.38 Second homes can positively support the wider islands economy through providing accommodation for seasonal workers and short-term lets.

6.39 In responses to the consultation on short-term let licensing, a number of hosts in rural and island areas noted that running a second property (or properties) as a short-term let provided them with full-time employment and allowed them to sustain their position in the community. They noted that alternative employment opportunities were often limited.

6.40 The negative impacts of second homes, empty homes and short-term lets on access to housing include:

  • Reduced availability of residential housing – particularly in areas where there are high concentrations of short-term lets and/or second homes There are reports of people being unable to take up jobs in certain locations, including Skye and the Western Isles, due to lack of available housing[19]
  • Increased strain on local public services
  • Negative impacts on communities' quality of life, for example due to noise and anti-social behaviour, which can be an issue in rural and island areas, particularly from larger 'party mansion' type short-term lets

Screening summary

6.41 Our consultation proposals could have an effect on island communities However, the additional powers proposed for councils would be discretionary and it would be for local areas to assess the benefit and cost to their local communities before deciding whether to introduce higher council tax charges for second and/or empty homes.

6.42 We will review whether to complete a full ICIA after the consultation exercise is complete.



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