Those applying for a licence in Edinburgh must either be in the process of applying for the correct planning permission or have it in place.
Campaigners claim some owners are “gaming the system” by submitting planning applications while applying for their licence but then withdrawing the planning application after the licence is secured.
Living Rent’s analysis shows 465 of the licensed full property STLs have withdrawn a planning application once, with 110 having withdrawn more than one application.
Chas Booth is a Scottish Green Party councillor in Leith who sits on both the licensing and planning committees.
He said the council was not doing enough to enforce the planning and licensing system, and that the Scottish government’s legislation was not fit for purpose.
“There is a massive loophole in the law, which hundreds of STL owners are exploiting, and which is causing misery for residents,” he said.
“Scottish ministers need to wake up and smell the coffee. This legislation has a loophole as big as a barn door, and they need to take urgent action to close it.”
Niall Robb, of campaign group Living Rent, said the council needed to step up its enforcement.
“For the majority of STLs to have insufficient planning permission demonstrates how landlords are taking advantage of weak legislation and a lack of enforcement to profit at the expense of tenants and neighbourhoods,” he said.
“Increasingly, communities are being undermined at the hands of holiday-let landlords who only care about profit.
“As a result of their actions, residents who keep the city ticking over every day are being forced out by sky high rents and a lack of homes.”
