EU short-term rentals regulation: highlights from Inline’s panel

This blog is based on Inline’s panel discussion “EU short-term rentals regulation: where should compromise between the EU institutions lie?” which took place in April 2023. The event brought together Ivars Ijabs MEP, Shadow Rapporteur for the STR Regulation in the European Parliament’s Internal Market and Consumer Protection - IMCO Committee; Inge Janssen, Director Public Affairs, EMEA at Booking.com and Chair of EU travel tech; and Amaryllis Verhoeven, Head of the Digital Transformation of Industry Unit at DG GROW, European Commission. You can find a recording of the event here.

In a previous blog, we looked at the European Commission’s proposal for a Regulation on data collection and sharing relating to short-term rentals (STR). We explored the aspects that might cause friction among policymakers, and we provided some suggestions on how policymakers could address this friction. Since then, negotiations within the Council of the EU have progressed at record speed and Member States reached a compromise on the file on 20 February 2023, less than four months after the publication of the regulation. With the European Parliament starting to discuss the STR Regulation shortly, this blog analyses how compromise on the file might look and what the likely sticking points between the EU legislators could be.

What is the European Commission proposing?

The proposed Regulation lays down rules on registration; data reporting; information, supervision and enforcement transparency. The rules are for hosts, providers of online STR platforms, and national authorities across EU Member States. It does not intervene in how national, regional or local authorities may regulate access to, or the provision of short-term rentals. As Amaryllis Verhoeven put it, “we are not regulating STR as such, we are looking at transparency”. The proposed Regulation introduces an opt-in registration scheme which mandates hosts, in areas where a registration scheme is in place, to provide information and relevant documentation on the unit(s) rented out.

STR platforms must design and organise their online interfaces in a way that enables hosts to provide a registration number before offering short-term rental services, and they must “make reasonable efforts to randomly check the registration declarations of hosts and the validity of their registration number”. Online platforms must then regularly share activity data with public authorities through Single Digital Entry Points, i.e. gateways to transmit data between platforms and competent authorities that EU Member States will have to establish. The argument goes that, if authorities have more ‘real-time’ data on properties, occupancy rates, concentration and revenue generated by short-term rentals in cities or even in specific areas of cities, they would be able to target and tailor their policy interventions in the area accordingly. In addition, more data would provide further clarity not only for local authorities but also for private actors in the STR sector by giving them a better overview over concentration and competition in specific areas.

The sticking points

Harmonisation: easier said than done? As the STR Regulation attempts to bring harmonisation across the EU’s STR landscape, three main elements are likely to be discussed further: i) how effectively will an opt-in registration scheme address fragmentation, i.e. the presence of different registration schemes with disparate requirements across the EU ; ii) if, and how, policymakers will try to regulate market access through the proposed Regulation, e.g. via provisions on health and safety requirements; and iii) if, and how, amendments in the definitions (e.g. what is a short-term rental) will change the current scope.

With regards to the choice of an opt-in scheme, Ms. Verhoeven stressed that the Regulation would “offer a toolbox that Member States can use if they wish to”, adding that “across different Member States the situation with short-term rentals is very different. In some countries, short-term rentals are hardly developed and therefore encouraged, in others they are much more present”. In other words, the EU would let national, regional, and local authorities decide whether they wish to implement a registration scheme. If they do, however, they will need to follow the proposed Regulation.

Regarding market access, the proposed Regulation explicitly mentions that it will not impinge on health and safety requirements, minimum quality standards or quantitative restrictions that national, regional, or local authorities may impose. While it would be hard to argue for an EU-wide intervention from a legal point of view, the European Parliament may push to introduce further requirements. As Ivars Ijabs MEP mentioned, the European Parliament will likely try to broaden the scope of the Regulation to “balance the needs of local communities”, a hint at the alleged contribution of short-term rentals to issues such as unsocial behaviour, nuisance, and the lack of affordable housing.

Finally, discussions around definitions and who will be in scope are likely to take place. The Commission proposal lets national law define short-term rentals, to have as large a scope as possible, Ms. Verhoeven explained. However, Ms. Janssen called for all platforms advertising short-term rentals, such as metasearch engines, to be in scope. Discussions to harmonise the criteria that establish what constitutes short-term rentals are expected in the Parliament.

Data sharing: what data will be shared and how? In its proposal, the European Commission explicitly banned any possible future use of personal data processed pursuant to the STR Regulation for law enforcement or for taxation and customs purposes. Ms. Verhoeven explained that the Commission’s approach stems from the principle of data minimisation enshrined in the General Data Protection Regulation (GDPR). Accordingly, the collection of personal information should be limited to what is directly relevant and necessary to accomplish a specified purpose. In that case, the Commission’s view is that the EU Directive on Administrative Cooperation (DAC) 7 already covers the sharing of personal data for tax and customs purposes. However, the Council of the EU agreed that processing personal data for law enforcement or for taxation and customs purposes may happen, if in compliance with national and Union law. The Council’s amendment therefore leaves the door open for broader use of the collected data. Mr. Ijabs MEP, while agreeing on leaving tax matters to the DAC 7, conceded that “some of his colleagues in the Parliament may want to go in the opposite direction” and therefore try to use data collected under the STR Regulation for tax purposes. In the upcoming discussions between co-legislators, and possibly in national courts, the topic of whether there exist strong enough procedural safeguards for collecting such sensitive information for purposes other than STR is likely to be discussed.

How data will be shared is another point for discussion. The proposed Regulation mandates Member States to establish a Single Digital Entry Point to receive and forward activity data, the relevant registration number, the detailed address of the unit(s) and the URL of the listings provided by online STR platforms. As Ms. Janssen pointed out, corporates would like to ensure that technical standards and interfaces are harmonised across the EU to avoid compliance burdens for platforms, but also to ensure equal data collection and increased comparability of the shared data.

Looking ahead

As the record-time for approval in the Council of the EU shows, the file was well received by EU Member States, whose position does not substantially modify the Commission’s proposal. In the European Parliament, the Internal Market and Consumer Protection (IMCO) Committee will lead the negotiations. Dutch MEP Kim van Sparrentak from the Greens political group, is the Rapporteur in the IMCO Committee and is expected to present her draft report on 22 May 2023. MEPs will then have until 1 June 2023 to table their amendments, which will be considered throughout June and July 2023. In the meantime, the Civil Liberties, Justice and Home Affairs (LIBE) and the Transport and Tourism (TRAN) Committees will give their non-binding opinions on the Commission proposal. Adoption in the IMCO Committee is expected on 18-19 September 2023, with a final approval in the plenary in October 2023.

At our event, all panellists agreed that the lack of relevant data on short-term rentals poses a challenge. Ms. Janssen from Booking.com said that registration schemes are “the backbone of any regulation”, and Mr. Ijabs MEP stated that, while the EU should not impose regulations that are so strict that hosts might leave STR platforms, “a certain amount of legislation is needed”. Given the sensitivity of subjects such as overtourism and affordable housing in local politics, discussions on STR may become politicised, especially in the run up to the 2024 European Parliament elections. If this is the case, the three legislative institutions will need to balance the EU’s limited competence on the subject with the Parliament’s expected push for stricter EU-wide rules, and the interest of companies and hosts to keep the STR sector as agile and host-friendly as possible.

If you would like to find out more, please contact fabio.barbero@inlinepolicy.com or visit us at www.inlinepolicy.com.