27 October 2016
Airbnb raises a policy issue that demands thorough discussion. Photo: Bloomberg
Airbnb raises a policy issue that demands thorough discussion. Photo: Bloomberg

Second thoughts on P2P accommodation

Peer-to-peer (P2P) services have disrupted the operations of various industries. Besides Uber, the short-term lodging rental platform Airbnb is another case worth discussing.

Airbnb boasts several selling points. First, it gives tourists a taste of authentic local experience. Second, it offers an alternative choice of inexpensive accommodation to tourists.

Third, it is said to spread tourist income more evenly, including mom-and-pop stores in neighborhoods that are not traditional tourist destinations.

At the same time, the platform has raised several practical concerns. First, some inconsiderate Airbnb tenants throw wild parties late at night, causing nuisance and disturbance to neighbors.

Second, there are commercial hosts listing multiple properties and operating de facto hotels systematically. According to Inside Airbnb, in London, the top 20 hosts own as many as 30 to 104 listings.

In addition, according to a report by the New York State Attorney General’s Office, 37 percent of the host revenue in New York is attributable to commercial hosts.

Given that commercial hosts account for hefty service fees charged by Airbnb, it is not surprising that the company is reluctant to disclose their identities, rendering law enforcement even more difficult.

In Hong Kong, a sting operation by a local news platform revealed the case of an Airbnb host who let as many as 22 apartments to tourists and raked in HK$190,000 per month.

Such “hotelization” of neighborhoods could make a dent in the housing supply for local citizens and jack up rentals.

The Budget and Legislative Analyst’s Office in San Francisco estimates that the housing market lost around 925 to 1,960 units due to short-term rentals. Some landlords even evict their longstanding tenants in order to make more profits on Airbnb.

Amsterdam is a trailblazer in regulating short-term rentals. The authority allows “private rental” units, a new category of housing, to be rented out on a short-term basis for at most two months per calendar year.

The property owner is obliged to pay income tax and tourist tax. If the authorities receive complaints of noise and nuisance, the property might be prohibited from letting.

In San Francisco, hosts need to apply for business registration certificates and are only allowed to let their primary residential unit, subject to a time limit of 90 nights per calendar year that applies only when the host does not reside in the unit.

The host also needs to provide liability insurance of at least US$500,000.

In Hong Kong, according to the Hotel and Guesthouse Accommodation Ordinance, any party who rents out accommodation premises to visitors for a period less than 28 consecutive days must apply for a license.

The government has been clamping down on unlicensed guesthouses, particularly after the fire at Continental Mansion in North Point in 2013.

An amendment to the Ordinance has also been tabled last year, proposing that the deeds of mutual covenant and the opinions of the owners’ corporations and residents should be taken into account in the processing of granting or renewal of guesthouse licenses.

In comparison, the approach adopted by overseas regulatory regimes (e.g., Amsterdam) is more reactive.

Some suggest developing home-stay facilities in order to expand the city’s capacity to receive tourists.

The home-stay facilities in Taiwan have been popular attractions for some Hong Kong citizens. In Taiwan, Article 5 of the Regulations for the Management of Home Stay Facilities restricts the operation of home-stay facilities to non-urban areas.

In Hong Kong, depending on the circumstances, certain eligible village houses and historic buildings can apply for licenses to operate boutique guesthouses.

However, it might not be appropriate to develop home-stay facilities in the relatively crowded urban areas.

Last but not least, it might be too optimistic to expect short-term rental platforms to compromise their vested interests by telling on the commercial hosts and battling illegal hotels.

Not long ago, it was revealed that Airbnb removed 1,500 suspected commercial listings before submitting the data to the New York authorities. The company later admitted the move, for which it was roundly criticized.

Inevitably, unlicensed guesthouses and hotels running riot under the disguise of “shared accommodation” will reduce housing supply and run counter to the housing demand of local citizens.

Although there has not been as much debate about Airbnb as in the case of Uber in Hong Kong, this policy issue warrants prudence and thorough discussion.

Ben Lee is the writer of this article.

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