Short-term rental rules begin to take shape internationally; London announces its plans

by Conor Brennan on 09 Jun 2014

The last number of months have seen a swathe of new legislation regulating short-term rental across the globe. There are varying reasons for this and, consequently, many different approaches are being taken by policy-makers.  

Europe is in the early stages of defining how it will accommodate short-term rentals and the major cities are taking the lead. New regulation impacting short-term rentals in Berlin came into effect in May. It is now unlawful for an apartment to be subletted regularly for tourist or commercial purposes, unless an exemption is granted by the district authority.

Amsterdam has also officially legalised the occasional rental of property by principal occupiers. However, those renting out their property will be allowed to do this for a maximum of four persons at a time and for a maximum of two months per year in total.

In France, in cities with over 200,000 inhabitants, such as Paris, renting a residence for the short term will require a change of use authorisation, which will be defined by the City Council. Councils will set the conditions for temporary authorisation, which may include the limits on the duration of the lease and also consider the physical characteristics of the location and residence. In Spain, Barcelona authorities have stopped awarding licenses for short-term rental in the predominantly tourist areas ahead of possible new regulation later this year.

These examples paint a picture of authorities that are unsure of how best to approach this growing phenomenon. There are a number of reasons authorities are acting now. Berlin authorities fear the effect short-term rentals may have on the housing supply; Paris is keen to strengthen the control of tourists in order to preserve residential premises; and Amsterdam has endeavoured to promote short-term rentals, whilst adding social protections that are burdensome for hosts. In Spain and Portugal, tax collection has been the main driver of regulation.

US continues to introduce patchwork regulation

This approach is being mirrored across the Atlantic. In states like California, Florida and Oregon, towns and cities are bringing forward new legislation effecting short-term rentals.

Portland City Commissioners will vote on plans to introduce permits for hosts of short-term rentals in the very near future. The permit will enable authorities to inspect the property, and clarify the current status over short-term rentals in the city.

Another reason we are seeing regulation being introduced, particularly in smaller cities across the US, is that local residents are pressing for restrictions due to perceived social nuisance associated with short-term rentals. Cities such as Monterey and Indian Wells in California are clamping down on short-term rentals after prolonged local pressure.

Finally, the hospitality sector has been quick to criticise the rise the short-term rental. The American Hotel and Lodging Association (AHLA) has stepped up its campaign against the growth of short-term rental companies, highlighting the lack of parity between safety, security, tax, and other requirements for hotels and short-term online rentals.

We have seen the influence of hotels contribute to proceedings in New York, where short-term rental platform, Airbnb, was subpoenaed by the State Attorney General for not handing over user information. Airbnb recently settled the case and agreed to hand over aggregate data – a landmark move from a sector, which had previously prided itself on protecting user data.

Where next for London?

With all of these factors playing a part in the how policy-makers regulate short-term rentals it is no wonder that regulation has been uneven and at times reactionary. London will soon introduce regulation regarding this practice. For a city which prides itself on facilitating growth and innovation, regulators should be keen to foster the sector where possible. Secretary of State for Communities and Local Government, Eric Pickles, today channelled this sentiment when he announces new legislation to accommodate short-term rentals in London. 

Pickles announced plans to end rules that prevent London residents from renting out their own homes on a short-term basis to visitors. Londoners who want to rent out their homes for less than 3 months currently have to apply for planning permission from the council - something that doesn’t apply anywhere else in the country.

Ministers intend to amend the current provisions, which are set out under section 25 of the Greater London Council (General Powers) Act 1973, through an amendment measure in the Deregulation Bill. The amendment will be designed to give home owners greater freedom, while “retaining the protection that ensure homes built for Londoners are not used solely for short term letting.”

Read the Department for Communities and Local Government press release here.

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Topics: UK politics, UK business

Conor Brennan

Written by Conor Brennan

Conor is an experienced consultant who advises clients in the data economy, insur-tech, and energy sectors.

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