Law catches up with short-term rentals
The shared economy is thriving in the real estate sector. The allure is simple; the exchange of your underutilised asset for monetary gain. Aided, of course, and simplified by technology.
The short-term rental industry existed long before the market moved online, but the rise of digital platforms like Airbnb has seen the industry soar.
Online platforms connect hosts looking to make a quick buck, to guests who can enjoy competitive rates on accommodation options ranging from a couch, to room share, entire penthouses, chateaus and even private islands. For anyone living within a community being overrun with short term renters, there’s a big downside.
Like many disruptive digital platforms, regulatory frameworks and the law are playing catch up. Airbnb has been in a near eightyear feud with the city of New York. The marketplace, along with other short-term rental companies, will soon be required to disclose the name, address and other data on all New York hosts each month to police illegal listings. State law stipulates rentals must be for 30 days or more, unless the host also lives in the property at the time of the rental, effectively rendering every “entire apartment” listing in New York, illegal.
Even stricter legislation was passed in San Francisco requiring hosts to hold a city issued registration number clearly advertised on their listings. A move which saw Airbnb listings drop by 50 per cent.
In Paris, hosts must register with the city government and may only rent their homes for 120 days per year. Amsterdam permitted shortterm rentals of up to 60 days per year but new laws will restrict this to just 30 nights annually from 2019.
Why the drastic regulatory stance? Parties ending in brawls, police arrests, unsavoury and illegal activities taking place behind closed doors have made headlines but these laws are not just aimed at security issues. They are designed to protect the residential nature and spirit of neighbourhoods.
The push for the short-term rental dollar has also reduced supply and driven up rents for local residents, particularly in tourist hotspots. Dubai is well-accustomed with short-term tenants. The Dubai government was ahead of the curve when it introduced short-term leasing regulations way back in 2015.
For Khadija El Otmani, managing partner of Driven Homes: “Dubai is a short-term rental friendly city. Licences have been specifically created to enable real estate investors to generate income while dramatically reducing fraudulent subletting and illegal renting.”
The Department of Tourism and Commerce Marketing (DTCM) governs short-term leasing in Dubai. A regulation decree exists to enable short-term leasing to operate alongside hotels. Before a property can be advertised online, it must be registered as a ‘holiday home’. Upon registration, personal details as well as identification documents and title deeds are collected. For tenants, a no objection certificate from the landlord is required to combat illegal subletting.
Guests are also registered with the DTCM prior to their stay. Booking details, payment transactions and copies of identification are captured. In the event of a complaint, full details of the complainant, nature, action and outcome must also be fully recorded.
“Social problems generally arise with short-term rentals when the market isn’t policed closely,” notes Simon Kennedy, co-founder and CEO of Kennedy Towers. “Dubai is different. The market is highly regulated and the fines for unlicensed activity are high. Detailed minimum furnishing standards for properties, quick and simple unit licensing processes, clear guest registration procedures and regular DTCM inspections maintain the standards set.”
The DTCM states that “a holiday home may be an apartment in a residential or mixed-use building, a townhouse or independent villa but must be a complete unit and not part of a unit.”
A quick scan of Airbnb and other online platforms offering shortterm accommodation in Dubai will return search results for ‘private rooms’ and ‘shared rooms’. While Airbnb outlines the DTCM’s legal requirements for short-term leasing in Dubai in their terms and conditions, it appears that these regulations are not adhered to by at least some of their advertisers.
“At the end of the day, their role is merely to generate bookings. They are not regulators themselves,” adds Kennedy. But critics would argue that international publishers who generate revenues and profits have some responsibility to ensure that local laws are enforced.
As a paid B2C platform for industry professionals, it’s feasible for us to provide these checks and balances. It’s more difficult for global C2C platforms like Airbnb. Difficult but far from impossible.
Dubai is a shortterm rental friendly city Khadija El Otmani, managing partner of Driven Homes