Edinburgh tourist tax: 5 per cent levy expected to launch in 2026 with millions for affordable housing

The Visitor Levy will apply to paid-for accommodation including hotels, short-term lets, hostels and bed and breakfasts, but excluding campsites.

The revenue generated will be reinvested in initiatives which the council says will benefit residents and enhance visitor experiences, including a ‘Well Kept City Fund’, affordable housing, city infrastructure, destination marketing and support for major events and festivals.

A five per cent tourist tax is expected to come into force in summer 2026. Picture: Lisa Ferguson. | TSPL

The next step is a formal 12-week public consultation seeking further input from residents, visitors and businesses, which will help shape the final scheme, due to be agreed in January 2025, with the levy coming into force in summer 2026.

Council leader Cammy Day said: “We can’t take Edinburgh’s incredible cultural offering and reputation as a fantastic place to visit for granted, and a visitor levy presents an innovative way of sustaining the sector and the city.

“It will significantly increase our ability to invest in the visitor experience and the tourism pressures we face, from keeping the city clean to responding to our housing emergency, so that everyone can continue to enjoy all that the city has to offer. By better supporting these services we can secure Edinburgh’s future as a top global destination.”

New affordable homes funded through the tourist tax will primarily focus on mid-market housing for ‘key workers’ rather than increasing the number of social rent properties, chief executive Paul Lawrence said.

He said taking £5m from the potential £50m-a-year boost the city’s finances would “plug the viability gap” at council-owned land earmarked for housing, including at Granton Waterfront and Meadowbank.

It is estimated that through borrowing this could generate an additional £70m for housebuilding – which campaigners say is a “critical opportunity to address the housing emergency in Edinburgh”.

After taking £5m for housing and two per cent of the income for community projects to “improve the quality of life for local residents, particularly in areas that are heavily impacted by tourism” it is proposed 55 per cent of what is left would be spent on street cleaning, park improvements and maintaining popular tourist attractions. Then 35 per cent would support the local arts and culture sector, and the remaining 10 per cent would fund tourism marketing for the city.

Council officer Elin Williamson, who has led work on the visitor levy, said the idea behind funding affordable housing from the tourist tax was to support both mid-market, which is below the cost of renting in the private sector, and social rent, the cheapest and most in-demand type of accommodation.

This will “ensure there is somewhere for people who work in the tourism and hospitality industry to live,” she said, “and they don’t all need social housing; many of them have a steady income but still can’t afford to live in private homes in Edinburgh.”

Mr Lawrence added: “We’ve broadly thought of this as what you might call key worker housing, which is a phrase that sometimes get used, which is people in an important sector of the economy who are struggling to find a way of their wages sustaining tenancies and the open market.”

He added: “Our problem at the moment is not the lack of land, it’s actually the viability problem and lack of affordable housing supply grant.

“We own a number of sites, most notable is Granton Waterfront. At the moment to take that site forward in the way the plans members have agreed sets out, with the appropriate environmental standards, quality of public realm, placemaking and so on, and given what is in the ground in terms of contaminants and so on … there is about a £70m funding gap. One of the objectives here was to try and use this money to plug the viability gap.”

An SNP proposed to increase the housing allocation from £5m to £20m was defeated. SNP councillor Kate Campbell said: “Given we have declared a housing emergency – and I think people did expect probably a larger proportion, I certainly was expecting officers to come forward with a larger proportion of funding.”

But council leader Cammy Day said: “Increasing that to a higher amount at this stage is probably a higher risk than we’d like.”

Ella Rook from tenants’ union Living Rent said: “The proposed visitor levy provides an inspiring and critical opportunity to address the housing emergency in Edinburgh.

“We strongly support the proposal that £5m from the levy is put toward housing and would encourage this to be increased.

“We believe the maximum amount of this should be used to increase the council housing stock, to provide affordable, permanent secure homes.

“Currently the draft scheme for the visitor levy only mentions spending funds from the £70m on mid-market housing. It would be a mistake to think that mid market housing is the route to ending the housing crisis in Edinburgh. Mid-market housing will not be affordable to many of the city’s residents.

“The council has spent nearly £50m on temporary accommodation in the 2022-23 year – a whopping increase from the £18m spent in 2019-2020.

“Reducing the number of residents in temporary accommodation in hotels and B&Bs would also free up this space for visitors. The high cost of housing in Edinburgh is also a barrier for tourism workers to be able to live near where they work.”