Short-term rental regulation could lead to fragmentation and legal uncertainty for platforms
by Gabriel Kobus on 31 Jan 2023
Sweden assumed the Presidency of the Council of the EU on 1 January and presented its policy programme on Tuesday 17 January to the European Parliament. The programme focuses on competitiveness, security, rule of law and sustainability. In this article, we examine the digital and sustainable priorities outlined in the programme. The Swedish Presidency is expected to drive progress in areas such as cyber security, data sharing, digital identity, and sustainability.
With nearly one in four tourist accommodations in the EU coming from short-term rentals (typically rentals of two-weeks or less and generally referred to as ‘STR’), the rapid rise of this sector has become a contentious issue in some European cities. On the one hand, cities complain about STRs’ impact on local communities, driving out long-term rental capacity, pushing house prices upwards and engendering complaints about noise and nuisance. On the other hand, STR hosts (the property owners or managers) and platforms offering STR rentals complain that local rules are complex and fragmented across Europe. The European Commission wants to address these issues by providing cities with more data.
The argument goes that, if authorities have more 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. 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 European Commission’s proposal for a Regulation on data collection and sharing relating to STR rental services (“the Regulation”) aims to address these issues and increase transparency in the STR market by providing more data. The proposed Regulation would establish a framework to share data between online platforms, hosts and public authorities and facilitate the registration of hosts.
Overall, the proposed Regulation would help harmonise the STR market further. In this article we look at the two most pertinent parts of the proposed Regulation; identify the aspects that may cause friction; and how this friction could be addressed by policymakers.
Opt-in registration schemes and random checks
There is a myriad of registration schemes across the EU with some countries, such as Portugal having country-wide registration schemes and others, such as Netherlands, having a registration scheme specifically for the city of Amsterdam. The European Commission has proposed an opt-in registration scheme which means that national, regional or local authorities have the option to establish and maintain a registration scheme for STRs. If the authorities already have or choose to implement a registration scheme, they must adhere to the rules on registration in the Regulation (Article 4-6). The proposed Regulation is unlikely to provide much harmonisation as it only sets out minimum requirements for registration schemes meaning local authorities are free to add further requirements to registrations for STR platforms and hosts.
Hosts must provide information and relevant documentation on the type of unit rented out as well as the number of guests (Article 5). When registering, they assume liability for the information provided in the registration. Non-compliant hosts must be delisted by platforms upon request from public authorities (Article 6).
STR platforms must design and organise their online interfaces in a way that enables hosts to provide a registration number (Article 7) before offering short-term rental services. They must also make reasonable efforts to randomly check the registration declarations of hosts and the validity of their registration number (Article 7(1)(c).
The allocation of liability for the information provided is important as a recent judgment from the Paris Court of Appeals confirmed Airbnb's responsibility for the illegal subletting of an apartment by one of its hosts. In a ruling issued in early 2023, the court upheld a June 2020 judgement that found that Airbnb was an "editor" and not just a "host" and was therefore responsible for ensuring the legality of the listings on its platform. Online short-term rental platforms must inform the competent authorities, such as government agencies responsible for STRs, if they discover incorrect registration declarations or invalid registration numbers as a result of their random checks (Article 7).
The new obligations acknowledge that hosts and platforms may be subject to many different registration schemes across the EU and that platforms will have to determine how often and when to randomly check host registrations.
Data sharing and the single digital entry points
STR platforms would be required to transmit activity data, registration numbers, and the URL of listings to public authorities monthly through national "single digital entry points" (Article 9). These data will be used to inform local policies on STRs and to compile tourism statistics at the national, regional, and municipal levels (Article 11). Public authorities are responsible for the confidentiality of the data transmitted by STR platforms and may share it in an aggregated and anonymised format for the purposes of developing laws, or administrative provisions, and for research (article 12).
The implementation of these data sharing requirements could have significant implications for the STR ecosystem. First, it could increase the compliance burden and related costs for hosts and platforms. Secondly, the proposal's provisions on sharing data might raise concerns among hosts and guests about data privacy and the potential misuse of personal data by public authorities.
What are the obstacles and how will they be addressed?
The proposal gives Member States the discretion to establish their own registration procedures and to decide which units are subject to these procedures. This could lead to a situation where Member States have different requirements and standards for registering STRs, resulting in a patchwork of different rules and procedures across the EU. Further, this could complicate the provision of STR services across national borders and may discourage the development of a more harmonised market for STRs in the EU in general.
In addition to the uncertainty surrounding the multiple registration schemes, the obligation to randomly check the declarations of hosts may leave STR platforms in an uncertain legal situation, as it is not clear how the random checks should be conducted. The uncertainty means that STR platforms may face liability for failing to adequately check the declarations of hosts. MEPs may want to address this by proposing language that requires STR platforms to check host declarations on a more frequent and clearly defined basis. However, such language could be at odds with the prohibition on general monitoring in Article 15 of the e-Commerce Directive.
Members of the European Parliament may want to clarify the confusion surrounding the requirement for STR platforms to conduct random checks by proposing changes that would create a single registration scheme, to minimize confusion and complexity for hosts as well as STR platforms operating in multiple Member States. This could involve establishing a set of common guidelines or requirements that all Member States would need to follow when setting up their registration schemes or creating a central database or platform that could be used by all Member States to store and access registration information.
The proposal will be reviewed and discussed by the European Parliament's Committee on Internal Market and Consumer Protection (IMCO), the Committee on Civil Liberties, Justice and Home Affairs (LIBE), and the Committee on Transport and Tourism (TRAN). Each of these committees will hold hearings and invite experts to testify, and they can suggest amendments to the proposal. The committees will then draft their own reports on the proposal, which will be voted on by the full European Parliament.
Simultaneously, the Swedish Presidency of the Council of the EU has circulated its amendments to the proposal which will be subject to discussions in the tourism subgroup of the Council of the EU in the coming month(s). Unsurprisingly, the Swedish Presidency’s amendments grants further power to the Member States to ensure compliance with national, local or regional rules.
If you would like to know more about the EU’s STR Regulation, please contact us at firstname.lastname@example.org.
Topics: European Politics, Sharing economy, Collaborative economy, EU, Regulation, Europe, Politics, News, Short-term rentals sector