SLOW PROGRESS ON SHORT-TERM RENTALS: WHY DESTINATION AUTHORITIES HAVEN’T MET THEIR POLICY TARGETS YET

A popular destination for long vacations and short breaks, Spain is one of the most interesting cases in Europe when it comes to regulating short-term rentals, mainly due to vast range of policy approaches between autonomous communities and major destinations. 

For several years now, Toposophy has been continuously monitoring this sector -resulting in agenda-setting projects with organisations such as HOTREC and European Cities Marketing. For this reason it was important for us to be at the International Conference on the Regulation of the Sharing Economy in Valencia (November 20-22). Further to our involvement in ReformBnB Buenos Aires early in November, this event provided another opportunity to discuss policy measures and levels of compliance, together with academics and practitioners. 

Here we share with you a few of our takeaways, which will give food for thought as we expect 2020 to be another year of market restructuring, stakeholder trade-offs and new policy solutions to be tested around the globe: 

Is Airbnb actually different to Uber? 

The collaborative economy is certainly not immune to market failures. However, under EU law different rules apply for online platforms that match businesses/hosts and users (typically consumers) compared to platforms that provide transportation or real estate services themselves. If the future ruling of the European Court of Justice is aligned with the Advocate General's opinion (and usually it does so) our perceptions of the collaborative economy will undergo a dramatic shift. 

According to the Advocate General, the services provided in France by Airbnb Ireland should benefit from the freedom to provide services laid down by the directive on certain legal aspects of ‘information society services’. The reason is that Airbnb is not thought to “exercise control over the essential procedures for the provision of those services”. In other words, it is still a matter of a final verdict whether the operational framework of the platform has a significant effect on the decisions and behaviour of hosts or whether the platform’s tools provide hosts with enough freedom to determine the terms of their operation. 

For instance, a lot of discussions in the conference focussed on different interpretations of the host’s capacity to determine different elements of the transaction (for example, rates, calendar, availability) against the platform’s capacity to determine the context in which the transaction takes place (for example, providing the information necessary to match supply and demand, or the rating/reputation of a listing).

It’s the data, stupid

Policymakers have spent a fair amount of time trying to close loopholes to ensure that platforms can’t get around their tax obligations. However, have they done the same in order to gain access to comprehensive data sets and discover whether other regulations (activity limitations, safety and security, etc) are enforced? 

Research institutions in Germany have faced resistance when making requests around this topic. Meanwhile, in the UK, a significant number of MPs and council leaders from popular destinations such as the London boroughs, Cornwall or Scotland have recently backed calls for a registration system for all hosts and properties as well as for data sets that will allow them to effectively monitor the activity of platforms. It would definitely be interesting to learn if data access issues are included in Labour’s plans for regulating short-term rentals, as addressed in p.80 of the Labour Party Manifesto, launched ahead of the December 2019 elections (see below). 






Big questions don’t always have obvious answers

If all destination authorities suddenly managed to ensure access to data, there would be certain surprises around well-established assumptions. It would be naive to argue that all academic studies and professional pieces of research stick to the same conclusions regarding the effect of short-term rentals on housing prices. 

Similarly, interpretations of gentrification inevitably vary between areas where real estate interests drive buy-to-let investments and areas where there is a high level of self-ownership and where short-term rentals have contributed to urban regeneration rather than community displacement. The more we understand about the changing nature of the visitor economy, the more we will have to review and assess the perceived effects of short-term rentals.

When it comes to regulations, the first step is getting hosts to understand them 

The Spanish cities present at the conference reported that significant numbers of hosts are failing to comply with the obligation of publishing their registration number on their listing. But is this the platforms’ fault? Similar questions arise in many other cases where destination authorities realize that the introduction of new rules is just the first step towards proper market regulation. It’s all very well a city having a cap on rental days but how well is this understood by hosts, never mind guests? How should authorities respond when hosts divide whole properties and rent out private rooms in order to circumvent restrictions?

Here at TOPOSOPHY we have extensive experience on helping advising destination authorities and industry associations to navigate these complex issues. If you’d like to know more, and to understand how we can tailor our approach to your priorities, please contact us at: info@toposophy.com