June 21, 2013 7:08 pm

Crackdown on people using their homes as short-term rentals

A number of cities in Europe and North America are seeking to restrict people from letting out their properties to tourists
Illustration by Chris Madden of tourist and house keys being exchanged©Chris Madden

About 5m visitors stayed in privately rented holiday apartments in Berlin in 2011, according to government and local industry estimates. But if a proposed new law is approved before Germany’s parliamentary break this summer, that figure could be nearer zero within the next couple of years.

Berlin is not alone in seeking to restrict people from letting out their properties to tourists. Paris and New York already have similar measures to control an unregulated market of landlords who compete with hotels but do not pay the same taxes. Such restrictions are also designed to ensure there are enough properties available to meet local demand and to prevent the noise and nuisance of tourists trampling through residential apartment blocks.

In North America the holiday lettings industry is on edge after one New York host on Airbnb, an online booking site, was fined $2,400 last month when a judge determined they had violated a city law that prohibits rentals for less than 30 days. Airbnb is helping to fight an appeal – the first time it has got involved in an individual host’s case – and has described the legal reasoning behind the fine as “tortured”.

Similarly, in San Francisco rentals of fewer than 30 days are banned. Quebec City is also on the case of errant owners, at present investigating 2,000 people for renting out their properties for short lets.

In response to this sudden scrutiny, Airbnb has joined other online booking sites such as HomeAway and TripAdvisor to form the Short Term Rental Advocacy Center (Strac) to fight “restrictive short-term rental regulations at the local level”.

“We strongly support people complying with local laws but we’ve seen other governments take a different tack: treat those engaged in short-term rentals as partners and build a constructive relationship that simultaneously benefits providers, tourists and local residents,” says Tim Doyle of Strac, who cites Palm Springs in California as a positive example. The desert city has registered at least 550 properties, bringing in $600,000 in transient occupancy taxes.

Property owners across Spain face a double hit. Not only have many seen their homes decrease in value by up to 50 per cent in the downturn; now they face losing, or at least limiting, their financial lifeline: holiday lets.

New Spanish laws to regulate holiday rentals by insisting owners are licensed and conform to the same regulations as hotels are seen primarily as a way to increase tax revenues. In Barcelona, noise and litter in residential neighbourhoods were becoming a problem, so holiday-let properties now have to be licensed. With no more licences available in the Old Town, apartments that come with them are far easier to sell than those that do not, says Alex Vaughan, director of Lucas Fox estate agency.

There are restrictions already in place in the Canaries and Balearics. Elsewhere in Spain, it will be up to each autonomous community to decide how to interpret the new law. Charles Gubbins, of Chesterton Humberts, says that in Sotogrande, the largest privately owned residential development in Andalucia, “it won’t deter people from buying, as there is little yield in the rental market anyway, so people who buy here do so for their own use”.

At the Desert Springs golf resort in Almeria, sales director Simon Coaker welcomes more regulation. “The bottom line is that it’s all about licensing, which means the owner is registered and the government knows they can expect tax payments from them. Reputable companies like us deduct tax on behalf of the owners who rent out their properties.”

If a model is required for other cities looking to clamp down on holiday lets, then it would probably look a bit like Austria’s, where a two-tier property market now exists between those that have permission to rent out and those that do not.

“The vast majority of foreign buyers want to rent out their property, so properties without permission are languishing on the market and falling dramatically in price as they are only of interest to locals. Property designated for holiday lets is selling fast and at high prices: up to €7,000 per sq metre in places such as Zell Am See,” says Giles Gale, managing director of Mark Warner Property.

. . .

In Berlin, meanwhile, the Senate has approved new laws to address the city’s housing shortage. Fuelled largely by foreign buyers, property prices rose 19 per cent last year, according to Alex Upson, director of Cluttons Resorts, a company marketing flats costing between €414,000 and €1.6m at Yoo Berlin, a new 10-storey riverbank block of 87 apartments in the central Mitte district.

Upson says investors in such schemes, about 30 per cent of whom are non-German, will be undeterred by the new rental laws. “The purpose is to clean up some of the shabby properties that are used by landlords for short lets or illegally sublet as holiday flats,” he says.

“It’s a bit of pain to get long-term gain and our buyers are actually pleased about it because there is a shortage of properties of this quality in Berlin. What they really want is the stability of long-term rentals rather than the sporadic nature and high maintenance of short lets.”

But owners who advertise their properties on sites such as HouseTrip are nervous. “If the law is brought in, it will be a disaster,” says Arnaud Bertrand, HouseTrip chief executive, who thinks Berlin is making the holiday rental sector “a scapegoat for a bigger problem”.

That bigger problem is a swelling population: 40,000 people are moving to Berlin each year, mainly young people from elsewhere in Germany. “That’s where the pressure on the housing market is coming from – not the 5,000 or so holiday rental flats mainly owned by people who use them occasionally, so they won’t go back on the domestic long-term rental market anyway,” says Bertrand.

With a decision due to be made in Berlin before parliament goes on its summer holiday, homeowners there will soon know what lies in store for them. But property broker Jason Thackray, head of Your Place Berlin, thinks the new law will have “a limited effect” on property buyers. “Most invest on the basis of long-term rental prognosis. The amateur or part-time investors, who come to Berlin sometimes and let out their apartment occasionally, will be the main ones affected,” he says.

One such investor is Damian Gallardo, an English expat who rents out several flats in the city through HolidayLettings.co.uk. “There has been a massive flooding of the market with holiday apartments, which has affected certain neighbourhoods, especially Kreuzberg, and there are businesses that have 200 holiday apartments and where entire buildings are converted from normal flats to holiday apartments.

“These should be top priority to ban but it’s far from clear what the new law will mean for small fish like me.”

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