Edinburgh’s Visitor Levy Housing Plans Could Face Legal Challenges, Warn Self-Caterers, Here’s All You Need to Know

Published on December 5, 2025

The City of Edinburgh Council’s plans to use funds from its newly implemented Visitor Levy to build affordable homes have come under scrutiny. The Association of Scotland’s Self-Caterers has warned that this could amount to a breach of the law and has threatened a potential legal challenge. The plans were approved by Edinburgh’s Housing, Homelessness, and Fair Work Committee on December 4, 2025, raising concerns about the misuse of funds meant for tourism infrastructure.

The Controversial Proposal: Housing and Tourism Mitigation Fund

Edinburgh’s Visitor Levy scheme, which was formally approved in early 2025, is designed to generate funds from visitors staying in paid overnight accommodations. A portion of this revenue was earmarked for a £5 million Housing and Tourism Mitigation Fund to support the construction of affordable housing in the city. This fund, which is projected to finance 472 affordable homes between 2026 and 2029, aims to address Edinburgh’s growing housing crisis, with over 75% of the homes intended for social rent.

However, the ASSC argues that this proposed use of funds may be illegal under the Visitor Levy (Scotland) Act 2024, which specifies that revenue from the levy should be used for “local facilities and services substantially used by business and leisure visitors.” The ASSC contends that long-term social housing does not align with the intended purpose of the levy and that using these funds for housing construction could potentially violate statutory limitations.

Legal Concerns Over Misuse of Visitor Levy Funds

The ASSC’s Fiona Campbell MBE expressed concerns that the council’s decision could lead to legal repercussions. She pointed out that the Visitor Levy was specifically intended to support tourism-related infrastructure and services, not to fund housing projects. According to Campbell, tourism businesses, including self-catering operators, are being unfairly blamed for issues such as the city’s housing shortage. She stressed that Edinburgh Council could face legal and reputational risks if the housing initiative moves forward without proper legal evaluation.

“The ASSC fully supports the delivery of more affordable housing, but this is not the right way to go about it,” Campbell said. “The levy was meant to support visitor infrastructure and services, not fund housing projects. Tourism businesses are once again being scapegoated for issues far beyond their making.”

Campbell urged the council to halt the housing plans until a thorough legal review is conducted to assess the risks and potential implications of using the visitor levy for housing purposes.

Edinburgh’s Housing Crisis and Visitor Economy Workers

Despite the legal concerns raised by the ASSC, Edinburgh Council leader Jane Meagher defended the initiative. She emphasized that Edinburgh is facing a housing emergency, and the new Visitor Levy funds would help alleviate some of the strain on temporary accommodation in the city. Meagher noted that many workers in the city’s visitor economy—such as hotel and restaurant staff—are struggling to find affordable housing, which affects the broader tourism sector.

“Many workers in the visitor economy cannot afford to live in Edinburgh, which places added pressure on temporary accommodation options, like bed and breakfasts, reducing their availability for tourists,” Meagher explained. “That’s why it’s so important that this new funding is committed to the Housing and Tourism Mitigation Fund. It will ensure affordable homes are available for workers in the tourism sector, allowing more bed and breakfast and hotel rooms to be used for their intended purpose—welcoming visitors to Edinburgh.”

The Visitor Levy Scheme: Funding for Tourism and City Improvements

Edinburgh’s Visitor Levy is set to be introduced in July 2026 and will apply to all paid overnight accommodations booked after October 1, 2025. The levy will charge a 5% fee on the accommodation-only cost for the first five nights of a stay. This is projected to raise up to £50 million annually. The funds will be reinvested in various initiatives designed to benefit both residents and visitors, including supporting city operations, managing the destination, enhancing cultural events, and implementing participatory budgeting programs.

The housing investment, however, is still subject to approval at Edinburgh’s budget meeting in February 2026, and annual reports will be presented to the Housing, Homelessness, and Fair Work Committee for review. If the housing component is approved, the council plans to proceed with the construction of affordable homes, with the first set of homes expected to be available by 2027.

Potential Impact on Edinburgh’s Tourism Sector

The ongoing debate over the appropriate use of Visitor Levy funds raises important questions about the long-term impact on Edinburgh’s tourism industry. While the city grapples with a significant housing shortage, which is exacerbated by the demand for temporary accommodation, some in the tourism sector argue that the levy should be used solely to enhance infrastructure that directly benefits visitors. These investments could include improving public transport, upgrading tourist facilities, and funding events that draw tourists to Edinburgh year-round.

For self-catering businesses, which make up a significant portion of the city’s visitor economy, any potential increase in legal challenges surrounding the use of the levy could create a sense of uncertainty. The ASSC’s concerns highlight how tourism businesses—especially those in the self-catering sector—could be affected by the broader issues at play, including potential legal complications and reputational damage to the city’s tourism strategy.

Moving Forward: A Need for Clarity and Fair Use of Funds

In the future, uses that relate to housing will require very careful consideration by the City of Edinburgh Council of the legal consequences of such use of Visitor Levy funds, with exploration of alternative solutions that are consistent with the intended purpose of the levy. With thoughtfulness and transparency, Edinburgh can continue to thrive as a vibrant, attractive destination while addressing the pressing housing challenges facing its residents and workforce.