A revolutionary business quickly changed the travel and tourism industry in a way that only seemed to benefit the consumer, the local economy and global tourism as a whole. However, it didn’t take long until cracks began to show in the set-up of San Francisco based company Airbnb.
The London rental market contains no fewer than 43,000 by storm and now boasts an incredible 43,000 listings, and counting, in the capital. And it has become the staple of any foreign trip or journey abroad for anyone under 35. It has, however recently shown the negative aspects that are associated with a service that is so not guided by any laws as it slips between the lines of hotel and real estate company.
The majority of these issues have arisen in cities such as New York, Paris and San Francisco, where low salaries and the rising cost of property has led to a housing crisis. It would be ridiculous to even begin to say that Airbnb and its competitors have been the cause of this, however it is how the service is exacerbating the problem as the short ter rewards for property owners are hard to resist. As more landlords use Airbnb, the number of properties remaining on the private rental market decreases, this leads to a higher demand for properties, which subsequently leads to increased letting fees.
Incentives that are further convincing landlords to make the most of the demand for Airbnb, is the governments tax free income allowance for online-activity, under which Airbnb qualify. When this is combined with changes in mortgage relief rates, the RLA (Residential Landlords Association) rightly suggests that there has been a shift from taxing Landlords income, to their profit generated. Airbnb, in its attempt to self-regulate mentioned how it would begin to “clamp down” on users who rent their property beyond the 90 day per annum regulation. Its ability to make good on its commitment however is extremely limited as users can easily bypass this ruling and critics rightly remain sceptical.
Currently, the largest challenge for both Airbnb and it’s opposition, is a complete lack of data in support of each position. Due to the previous reaction of Airbnb to release figures that would give either side a more definitive idea of the effects on local rental markets. This has allowed Airbnb to dismiss complaints and disputes over such issues as speculation as the information hasn’t been there for review.
Approaches from governments had in the past been limited, with Greece one of the first nations to call on Airbnb to provide usage data and information on how the company behaves in Greece, in order to aide the government stop the illegal over-lettings of properties on the platform. Airbnb refused to provide any of this information to the government and remained free to act almost unregulated. While governments were unable to continue large scale investigations, further studies from independent groups who had become frustrated at the knock-on effects of Airbnb to local housing markets. In June 2016, a study in New York, focusing on the market changes due to private rentals being removed from the market to be placed on Airbnb, proved that even a small number of properties used in this way, can significantly alter the rental rates popular boroughs.
This effect has been seen in all levels of the housing market. A Mayfair estate agent, dealing in property rental for the ‘super-rich’ has even seen landlords find a market on Airbnb. As the lettings markets current form leaves high level rental properties, in London boroughs such as Chelsea and Kensington, on the market for an average of 107 days – representing a large amount of time properties are not reaching their earning potential.
On the back of increased uproar from local councils and the hotel industry, Airbnb has come under further global scrutiny. In coverage from the Financial Times, this is down to the increased attention that the head of leading French hotel industry group Ahtop, Jean- Bernard Falco, has brought to the French government. “There is a revolution in the hotel industry group that has been fighting for tighter regulations” he comments, “There is a revolution in the industry, but the new actors simply have not been respecting the rules. We are now educating policymakers in the damage this is causing” Mr.Falco added. A recent ruling in the French courts has forced Airbnb to send tax data of all its users to the French government and is the first step in making them responsible for the long-term actions of their users.
As this ruling is certain to make waves across Europe, hosts and users of Airbnb should be ready to read any updated terms and conditions the company requires, and to ensure you are compliant with UK laws and legislation surrounding short-term and private rentals. Whilst the revolution Airbnb has brought with it is bringing change, it is clear to note that the sunny disposition of many that have previously abused the system, might be replaced with trepidation.
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Daniel Peacock
How crass of the UK government to be surprised at the growth of holiday lettings in the PRS. What were we supposed to do after the introduction of Section 24? Roll over and die? My portfolio is being totally turned over to short let’s. Thanks, George!