Policy responses to Airbnb

Around the world, governments are responding to the Airbnb phenomenon in a variety of ways. Some are deliberately refraining from proactive agency completely, or at least until a regulatory and governance framework has been established or public consultation has concluded. Others have banned short-term leasing of residential accommodation, or restricted the number of days allowed, with and without registration requirements.

This part of the analysis aims to explore instruments that have been applied by several jurisdictions worldwide to deal with the phenomenon of private short term rentals like Airbnb to inform the adoption of suitable instruments for the WA context. This section provides an overall policy framework and reviews nine international case studies, London, New York, San Francisco, Barcelona, Rome, Berlin, Hong Kong, Amsterdam and Singapore. As a data sources served reports, legal sources and secondary sources such as media reports.

Please note that the tables provided are an indication only and focus on some certain aspects of particular relevance to the case studies and do not purport to be complete.

Employed policy measures

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Policy Tool Description

Based on the analysis of what instruments have been employed to deal with Airbnb in terms of policy reactions in the context of the case study cities, a model of policy instruments could be developed. The above Figure shows this model and can be read as a set of tools that offers an overview of different instruments that are available for governments to deal with a private short term rental phenomenon like Airbnb. These measures can be subdivided into

  • Identification of general attitudes towards Airbnb: First, this category addresses whether the phenomenon is treated in its own right, i.e. as something completely new that requires specific regulations, or something that can be dealt with by making reference to existing regulatory and legislative frameworks. Second, it specifies the different circumstances when short term rentals via the Airbnb platform are permitted or prohibited.
  • The policy response to Airbnb in terms of taxes and charges: This category addresses how different jurisdictions deal with the phenomenon with regards to GST, income taxation /company taxation, tourism tax and other fees and charges.
  • The response to potential issues in terms of amenities (neighborhood security) and consumer safety: This category covers topics and instruments that affect consumer and neighborhood safety and security such as registration, minimum building standards, complaint systems, town planning as well as insurance.
  • Liability and accountability issues: This category addresses whether the onus of responsibility and liability lies with the single provider only or whether the platform is also held reliable.

Please note that the tables provided are an indication only and focus on some certain aspects of particular relevance to the case studies and do not purport to be complete.

amsterdam

Amsterdam, Netherlands

Amsterdam has catered a reputation of being a city welcoming the sharing economy.

In 2014, the City Council explicitly allowed private short term rentals introducing a new category of housing called “Particuliere vakantieverhuur” (private holiday rentals). This category requires that

  • owners (or main occupants, if the landlord consents) only occasionally rent out;
  • pay tourism and income taxes;
  • obey minimum fire safety standards;
  • do not create disproportionate disturbance to neighbours;
  • rent out their premises to a maximum of four people at any time for a maximum of 60 days.

In 2014, Amsterdam was the first European city to sign an agreement with Airbnb regarding the implementation of the specific regulation of private short term rentals and stipulating Airbnb’s assistance. To strengthen implementation (“tackling bad actors”), in 2016, the City of Amsterdam replaced the initial arrangements with an updated agreement, which obliges Airbnb to block listings that do not follow rental rules.

The agreement focuses on four priorities that include

  • An automatic blocking of rentals from the Airbnb platform if they exceed the rental cap of 60 days per year (unless proper licenses can be shown);
  • Introduction of a neighbor complaint online tool as well as a dedicated hotline;
  • Collaboration of Airbnb in sharing aggregate data with the responsible authorities in Amsterdam as well as in responding to justified requests for individual data;
  • Paralleling the pioneering agreement with other home sharing platforms.

References: Amsterdam Marketing 2014; City of Amsterdam 2014, 2016; Gowling 2014; Woolf 2016.

barcelona

Barcelona, Spain

The Government of Catalonia’s Ministry of Business and Knowledge website provides comprehensive information regarding the use of dwellings for tourist use. Key requirements include:

  • Registration of any dwelling rented for a fee for up to 31 days, two or more times per year;
  • Registration is through the town council, and details contained in an official register of the Directorate-General for Tourism;
  • Tourist tax must be collected and paid;
  • Details of guests must be sent to the Directorate-General of Police; and
  • Both guests and neighbours are provided a telephone number for queries or complaints.

There have been reports that the laws have been breached in Barcelona, with fines of €24,000 against Airbnb for hosts failing to register their properties, or attempting to rent out individual rooms instead of the whole dwelling.

Reports of new and extended fines to Airbnb and other home sharing platforms due to continued non-compliance with laws, particularly the necessity to licensing of short term rentals, have emerged towards the end of 2016. This strict course of the city may be partly due to a general situation of strongly growing tourism numbers, particularly in the city centre.

References: Badcock 2016; Investopedia 2015; Tadeo 2017

berlin

Berlin, Germany

In May 2014, Berlin introduced the Law on the Prohibition of Misuse of Housing, aiming to reduce the number of residential apartments that are used for short-term tourist accommodation, and are thus excised from the traditional housing supply. The law bans the short-term letting of entire houses or flats, though individual rooms can continue to be rented out, subject to registration requirements for short-term rentals, and as long as those rooms don’t comprise more than half of the available floor space. There are also restrictions on the amount that can be charged i.e. not more than the average rent for the neighbourhood, intending to remove the financial incentive for short-term rather than long-term rentals.

A recent study analysed Airbnb data sets from 2014 and 2015 in Berlin, and found that 5,555 residential flats – equivalent to 0.3 per cent of total housing stock – were being misused as defined under the new law. Approximately two-thirds of these were located in five central neighbourhoods.

A two year grace period ended on 1 May 2016, and property owners or renters who now breach the law can face fines of up to €100,000. This move does appear to have resulted in the desired drop in entire apartments being listed for short-term rental, with listings on Airbnb dropping from 11,000 in February 2016 to 6,700 in March, ahead of the end of the transition period.

References: O’Sullivan 2016; Schäfer & Braun 2016; The Guardian 2016

hong_kong

Hong Kong, China

Tourist accommodation in Hong Kong is regulated by the Office of the Licensing Authority of the Home Affairs Department. Two distinct classifications of tourist or short term accommodation exist.

The first is defined by the Hotel and Guesthouse Accommodation Ordinance (Cap 438), with a hotel or guesthouse being a premise in which sleeping accommodation is provided in exchange for payment, for a period of less than 28 continuous days. Operators of these premises must be licensed.

The other type of accommodation is known as a bedspace apartment, which is defined under the Bedspace Apartments Ordinance (Cap 447) as any flat where 12 or more bedspaces are occupied or available for occupation under rental agreements. Unlike hotels and guesthouses, no maximum timeframes are specified.

The types of properties advertised through forums such as Airbnb are likely to fall into the category of hotels and guesthouses.

Under Hotel Accommodation Ordnance Cap 348, a Hotel Accommodation Tax is to be imposed on hotel and guesthouse accommodation. However, the rate of tax is 0%, so this effectively no longer applies.

In December 2015, the Home Affairs Department announced additional administrative measures, which included the requirement for a 24-hour manned counter at a licensed guesthouse, public liability insurance of HK$10 million per event, and the introduction of different licences (hotel, and three different types of guesthouse: general, holiday camp and holiday flat) depending on the approved use of the property.

References: Home Affairs Department 2014, 2015; Inland Revenue Department 2013; Office of the Licensing Authority 2009, 2015

london

London, United Kingdom

The government of the United Kingdom (UK) has taken a proactive approach to the sharing economy, including platforms such as Airbnb. In 2014, it commissioned an independent review of the sharing economy. A key outcome of the review was the establishment of the Emerging Industry Action Group in July 2015 comprising public servants and representatives from the Sharing Economy UK (SEUK) – a trade association for organisations such as Airbnb and Taskrabbit established in March 2015.

Other actions following the independent review of the sharing economy include:

  • updating procurement frameworks to allow sharing economy solutions such as Uber and Airbnb for public servant accommodation and travel;
  • establishing two pilot sharing cities (Leeds and Manchester) focusing on transport, car clubs, shared parking, unused spaces and equipment;
  • development of a tax guide and online tax calculator;
  • amending standard tenancy agreements to remove an explicit ban on sub-letting;
  • allowing home sharing in London for up to 90 days p.a. without government approval;
  • supporting car clubs and integrating them with public transport; and
  • vacant government-owned space made available to start-ups, small and medium businesses, charities and social enterprises for free, prior to disposal of surplus assets.

In the above example, the UK government has not only considered regulatory issues, but also actively supported and encouraged new and disruptive market participants. Legislative changes also occurred, including the Deregulation Act 2015, which amended the Greater London Council (General Powers) Act 1973. It allows short-term rentals in the Greater London area for up to 90 days (cumulative per calendar year) without the need for planning permission or registration. Any income received is considered to be rent, and therefore no Value Added Tax (VAT) is payable. Income tax is payable once a tax-free threshold of £7,500 is reached.

The 90-day-per-year limit has recently been reified in an agreement with Airbnb, which resulted in the (promised) automatic ban of listings from the platform once the 90 days p.a. were reached.

References: Department of Business, Innovation and Skills 2015; UK Government 2016; Woolf 2016; Wosskow 2014.

new_york

New York, USA

The New York State Multiple Dwelling Law was amended in 2010 to remove ambiguity regarding the short-term rental of permanent residences in Class A multiple dwelling buildings, whether owned or rented. The amendment makes clear that renting out a residential apartment for a period of less than 30 days is prohibited, unless the permanent resident is present. In addition, the City of New York increased fines for illegal conversion of apartments in residential buildings into short-stay hotel rooms.

In June 2016, both houses of the New York legislature voted to further amend the Multiple Dwelling Law to make it unlawful to even advertise a property in a Class A multiple dwelling building, with $1,000 for a first offence, $5,000 for a second violation and $7,500 for each further violation. In October 2016, the bill was signed by the Governor, which means that New York further tightened the leeway for short term rentals, declaring the posting or advertising of an unlawful situation (short term rentals without the owner present) on a website as a criminal offence.

Similar to some other jurisdictions, New York has tourist accommodation fees and taxes that apply to registered hotels and other tourist accommodation, e.g. the New York State Hotel Unit Fee and the Hotel Room Occupancy Tax. New York State and City sales taxes also apply. The host is responsible for collecting and remitting these hotel taxes.

Airbnb has repeatedly called for changes to New York City laws to allow Airbnb to collect and remit these taxes, as it does in other jurisdictions, but as the current laws ban short-term rentals, it is unable to do so.

References: Airbnb 2016; City of New York 2012; Clampet 2016; Dalton 2017; Department of Finance n.d.; State of New York 2010, 2016; Walters 2017

rome

Rome, Italy

To assess the situation in Rome, a mix of national, regional and city-specific regulations need to be considered. Among others, the national legislation differentiates between professional and non-professional (occasional) accommodation providers and defines the parameters for taxation.

Regarding income tax, income from short term rentals need to be declared. VAT (i.e. GST) applies as for every other commercial activity. There, is a possible exclusion form VAT (GST) if the service can be considered as occasional and non-professional.

On the national level, there is a specific legislative proposal on the sharing economy pending for discussion in the Italian parliament (Tentori et al. 2016). This proposal suggests recognising the sharing economy as a specific form of economic activity, requiring specific legislation, regulation and taxation lump sums. However, platform operators would be obliged to collect these taxes (“tax substitute”).

Tourism regulations include different categories that could apply to Airbnb listings as well. In addition, there is an obligation to communicate the details of persons hosted, for every publicly offered for profit accommodation, including rentals for periods shorter than 30 days. “Holiday apartments” without host residing are considered as non professional activity and require a period of non activity of at least 100 days per year and rental periods of between 3 days and 3 months; all safety and security, sanitary and town planning requirements must be adhered to. Finally, private apartments used as tourism accommodations must be declared to the municipality, as is specifically noted.

The City of Rome has recently amplified existing legislation to cover offers of the sharing economy. In addition, Airbnb signed an agreement with the municipality that obliges its service providers to register every guest in a specific online system for security purposes.

References: Nozzoli 2016; Regione Lazio 2015; TULPS 1931

san_francisco

San Francisco, USA

As the home of Airbnb, San Francisco was the first city in the world to enter into a formal tourism partnership with the San Francisco Travel Association. This is intended to support local merchants and meeting and event planners by providing neighbourhood-specific tourism tool kits, and help ensure hosts meet local planning and taxation obligations (Airbnb 2015).

The San Francisco Office of Short Term Rentals is responsible for registration of short term rental properties. It has a comprehensive website outlining the relevant laws and planning codes, and the rights and responsibilities of property owners wishing to rent out all or part of their home. San Francisco Ordinance No 218-14 was signed in October 2014, amending administrative and planning codes relating to short term rental of residential properties, and allowing those under certain conditions. Effective from 1 February 2015, a residential unit may be let

  • by the permanent resident (including tenants) for periods of 30 nights or fewer;
  • Part or whole of a residential unit may be rented for a maximum of 90 days per year if the permanent resident is not present, and no maximum number of nights if the permanent resident is present;
  • Residential units must be registered with the Office of Short Term Rentals, and hosts must complete quarterly reports outlining all stays within the previous three months;
  • The registration number must be included at the top of the listing details when advertising a registered property on platforms such as Airbnb;
  • Tenants may not charge more than their monthly rent when renting out their residential property;
  • Proof of liability insurance for $500,000 or more must be provided at the time of applying for registration;
  • Only one residential unit may be registered by any person; and
  • Affordable housing / income restricted housing units are not eligible to be registered for short-term rental.

In line with other tourist accommodation in San Francisco, a 14% hotel tax (Transient Occupancy Tax) applies to Airbnb rentals, and is collected through Airbnb’s payment system. Income tax is applied to the income earned by hosts, and a host may be considered to be running a business for tax purposes if substantial services are offered for a fee.

In July 2016, there were 5,504 active Airbnb listings in San Francisco in 2016, 29% higher than in 2015, which was in turn 21% higher than in 2014. In comparison, however, only 2,587 hosts from all short-term rental platforms had obtained the required business registration certificate, and as of July 2016, only 1,472 had successfully registered as required with the Office of Short-Term Rentals and included their registration number on all listings. In order to improve compliance with the law, amendments were approved in June 2016, which required hosting platforms to verify any listings were validly registered with the Office of Short-Term Rentals, or face penalties of $1,000 per violation per day.

Airbnb has objected to these changes, and has filed a suit with the US District Court claiming that the changes are unlawful and unconstitutional. However, the court decision rejected Airbnb’s claim, which led the company to offer closer collaboration with the city.

References: Airbnb 2015; Kokalitcheva 2016; Office of Short Term Rentals n.d.; Said 2016; San Francisco Business Portal 2015; San Francisco Chronicle, n.d.

singapore

Singapore

Under existing guidelines overseen by the Urban Redevelopment Authority (n.d.), renting, leasing or subletting a whole private residential unit or individual room is not allowed in Singapore for a period of less than six months on a daily, weekly or monthly basis. Similar rules apply for subletting properties purchased through the Housing and Development Board, with a minimum period of six months for any subletting application. If a residential property is rented, including subletting, for six months or more, income tax is payable on the rent received.

In early 2015, it was reported that the Singapore government had started a review of these guidelines, and that the Urban Redevelopment Authority had commenced public consultation into the guidelines governing short term rentals through platforms such as Airbnb. Despite consultation in 2015 involving approximately 2,000 online survey respondents and discussions with almost 100 stakeholders including Airbnb, the Urban Redevelopment Authority announced in May 2016 that the current six month minimum term restriction on renting, leasing or subletting residential properties will remain in place, while the Authority takes more time to consider the issues involved.

In early 2017, the Urban Redevelopment Authority announced that the creation of a new category of private homes, which would allow for short term rentals, is under consideration.

References: Chuan 2017; Housing and Development Board n.d.; Inland Revenue Authority of Singapore n.d.; Lee 2015; Purnell 2015; Yeo 2016

Concluding remarks on the multiple case study analysis

Overall, the analysis indicates that most of the case study cities try to deal with Airbnb in terms of existing regulations in the fields of tourism and the rental property market. While these regulative and legislative frameworks might need to be adapted, it is rather rare that cities consider the sharing economy or Airbnb specifically as phenomena in their own right.

Most of the cities that have been reviewed for this report seem to adopt a middle ground in terms of restrictiveness by trying to avoid a complete prohibition of the phenomenon on the one hand and limiting potentially adverse effects and unfair competition on the other. This is often done by defining a clear line between private and commercial realms of operation. This line is usually drawn by referring to caps on maximum time of short-term rental per year, maximum prices and to the maximum number of sublet short-term units per owner. In more and more instances, Airbnb has agreed to automatically ban properties from their platform that do not obey to a city’s imposed limits. Cities that take a more restrictive approach limit permission to the type of properties, to licenced providers and/or to owners in residence (partly requiring their physical co-presence).

In terms of taxes, most surveyed cities avoid exceptions. If applicable, tourism taxes need to be paid. Concerning neighbourhood amenities, the diversity in actions taken is significant. Whereas many analysed cities request a registration of short-term rental properties it is rather rare that they are required to register their guests as well. Similarly, neighbourhood complaint systems and an obligation to take out insurance are required only in a minority of the case study cities. Whereas some cities try to hold the platform itself (airbnb.com) co-responsible for offenses, in all cases the onus is primarily on the private accommodation provider (lessor).