Regulating short-term rentals: the case for an EU-level intervention

by Angeliki Tsanta on 17 Nov 2021

The European Commission is planning to regulate short-term rental services across the EU to address existing market imbalances, legal uncertainty, and fragmentation. This blog investigates the policy options and considers their impact on the competing interests of European cities, professional and non-professional (peer) short-term rental providers and online platforms.

In the past couple of years, the EU tourism ecosystem has witnessed a rapid growth of short-term accommodation rental (STR) services. STR now accounts for over 29% of the tourist accommodation sector across the 27 Member States, and is considered key for the recovery and economic development of the tourism ecosystem in the wake of the Covid-19 pandemic.

Much like other collaborative economy services, the emergence of STR has disrupted traditional accommodation services, and has forced local policymakers to reconsider the rules that apply on tourist establishments with regard to health and safety requirements, tax compliance and housing availability in their cities. At the same time, the growth of STR heavily relies on online platforms and their freedom to provide services across the EU.

The current regulatory landscape

The current regulatory landscape is characterised by a lack of clarity regarding the applicable rules for STR providers. This is exacerbated by fragmentation across, and even within, EU Member States that have attempted to regulate this new sector through a variety of divergent requirements, such as night caps, registration and authorisation schemes, zoning and licensing requirements. Indeed, the Commission itself describes these requirements as burdensome. The extent to which these rules properly balance public interest with the business interests of providers has often been questioned by the industry, with the European Commission and the Court of Justice (CJEU) being called to clarify and ensure the balanced application of EU law (and in particular that of the Services Directive) in this sector.

To further complicate this situation, online platforms and other intermediaries are often called upon by local authorities to assist them in enforcing the relevant rules by sharing STR data and identifying and removing STR listings that do not comply with the applicable rules. Platform operators, however, have argued that they cannot always comply with such requests, as they often impose on them an active, general monitoring obligation of listings on their sites, and as such contradict the E-commerce Directive and the ongoing work on a proposal for a Digital Services Act.

EU intervention

This regulatory fragmentation has led the European Commission to explore legislative measures to improve the framework for short-term accommodation rental services. In September 2021, the Commission published a long-awaited Inception Impact Assessment (IIA)/Roadmap on a ‘Tourism services – short-term rental initiative’; a document which outlines the problems the Commission aims to tackle and its initial ideas around the content of the legislative proposal.

The initiative aims to clarify the applicable rules for STR providers, intermediaries, and online platforms in a legislative proposal that would take the form of a regulation. While the Commission is still considering non-legislative options in its IIA/Roadmap, it notes that guidelines have not been effective so far and a regulation would help address the issue of fragmentation.

Local authorities have questioned the EU’s competence to intervene in this field, suggesting that the regulation of STR is inherently linked with housing policy. However, the Commission has clarified that the proposal would not affect local urban planning rules and zoning requirements – on the contrary, it would focus on harmonising market access rules and data sharing obligations to avoid regulatory fragmentation and high compliance costs for all market players.

Issues that could be solved at EU level

Which types of data are relevant and necessary for public authorities?

According to the IIA/Roadmap, the Commission could include data on who rents out property as short-term accommodation, to whom, for how long, how often.

How can public authorities access STR data in compliance with data protection rules?

The policy options under consideration include an EU-wide registration scheme, an EU template or guidelines on national schemes, mandatory registration schemes at national level, as well as the impact of authorisation schemes.

The Commission is also considering imposing data sharing obligations and transparency requirements on online platforms and public authorities.

Another option would be to develop technical tools to facilitate data sharing, such as an application programming interface (API).

Which market access conditions for STR players are proportionate and comply with EU law?

The Commission is considering clarifying and streamlining the ways to differentiate between hosts renting out occasionally, and those renting out in a more professional capacity, to guarantee effective market access and remove unnecessary barriers to the market, particularly for small players.

The initiative could also specify the principles public authorities should respect when implementing registration and authorisation requirements or other conditions, when balancing providers’ interest with urban planning rules and the public interest.

Guidance from the EU on these issues could significantly reduce market barriers for all STR players. Online platforms, STR hosts and property managers have an interest in ensuring that any new data sharing obligations do not lead to disproportionate requirements, inconsistent with the principles of the GDPR, but are clear and simple without imposing further obstacles on their activities.

Public authorities, on the other hand, would also benefit from an EU level initiative which would assist them in evidence-based policymaking, enforcing national legislation (e.g., health and safety requirements), informing urban planning and sustainable development plans, and ensuring that property-owners comply with their obligations under tax law (e.g., income taxes, tourist taxes, business activity taxes etc.).

Next steps

The Commission has opened a public consultation, seeking to collect feedback from all stakeholders on the current situation in the STR market; the usefulness of an EU-level intervention; and the potential impacts of the proposed measures. Hosts, property managers, online platforms and other intermediaries, along with public authorities of all levels from the EU Member States, are called to provide input on the future initiative, which is expected during Q1 2022. Their responses will be considered by the Commission in drafting its impact assessment and legislative proposal. The consultation is open until 12 December 2021, and it provides the STR industry with an early opportunity to engage with policymakers.

short-term-accom-rental-sector-news

Topics: EU, Short-term rentals sector

Angeliki Tsanta

Written by Angeliki Tsanta

Angeliki provides policy analysis and monitoring for clients in the emerging technology sector on the regulation of online platforms, data protection and cybersecurity.

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