Changing the way we holiday

In just over 10 years, Airbnb has grown from a modest home-share site into one of the biggest disruptors in travel.  Airbnb experiences are generally considered excellent, in many cases rival hotel experiences and its popularity is dramatically changing how and where we choose to spend our holidays.

While Airbnb is perhaps unfairly blamed for many ills, we should not ignore the fact that it’s property listings aren’t regulated like private rented accommodation.  A difficult question facing building officials around the globe is how to classify these properties; are they hotels, guesthouses or are they residential properties?

According to Brian Chesky, its founder, Airbnb took root in a very simple idea.  He and his two co-founders started with an air mattress in their apartment in San Francisco to earn extra money.  Founded in 2008, Airbnb has experienced dramatic growth, going from just a few hundred hosts to more than six million rooms, flats and houses in more than 81,000 cities across the globe. On average, two million people rest their heads in an Airbnb property each night – half a billion since 2008. Airbnb claims its host and guest spending is worth €86 billion to economies in 30 countries.

Its positive impacts are undeniable but Airbnb’s exponential growth has begun to highlight certain issues around housing supply, regulation and safety.

The sharing economy is generally defined as people sharing intangible assets and underutilised tangible assets for money with the help of the Internet which results in a new business model.

Peer-to-peer markets, also referred to as the sharing economy, are online marketplaces that facilitate matching between demanders and suppliers of various goods and services.

Airbnb is a peer-to-peer marketplace for short-term rentals, where suppliers (hosts) offer different kinds of accommodations (i.e. shared rooms, entire homes, yurts and treehouses) to prospective renters (guests).

The sudden emergence of this sharing economy has introduced many unforeseen challenges for consumers, incumbent businesses, regulators and policy makers.

Critics argue that much of the growth in the sharing economy comes from skirting regulations.  Internet companies that exist solely online are subject to one set of regulations, while traditional businesses are subject to another. Online platforms therefore benefit from ambiguity about how they should be regulated.

Consumer safety is one of the major concerns that companies face with sharing economy business models. Traditional firms are subjected to regulations that are often not applicable to the emerging sharing economy business models. This leads to a larger question of who takes responsibility if anything goes wrong.

Home-sharing has been the subject of criticism with many of its critics arguing that home-sharing platforms like Airbnb have come at a huge cost.

Researchers (Zervas et al., 2017) have found that home-sharing raises local rental rates by causing a reallocation of the housing stock and raises house prices through the capitalisation of rents and the increased ability to use excess capacity.

Additionally, increased taxation on buy-to-let properties means it’s not so attractive to let properties over a longer term and many landlords have realised they can make more money out of short lets to Airbnb users than from renting to conventional tenants.

Because the total supply of housing is fixed in the short-term, concerns for the negative consequences of Airbnb on the housing market has garnered significant attention and motivated many policymakers around the world to review regulations.

Airbnb is now fighting claims, from cities around the world, that its services are changing the face of neighbourhoods and therefore its use needs to be capped, it should require permits and it must be better regulated.

Amsterdam limits listings to 30 nights per year while London hosts are restricted to renting out entire homes to 90 days a year. In Paris homes in the centre of the city can only be rented out for a maximum of 120 days a year and in New York a whole host of rules and restrictions make Airbnb rentals illegal in many cases.

In Ireland, Minister for Housing Eoghan Murphy introduced new rules in The Residential Tenancies (Amendment) Act 2019 aimed at curbing the loss of properties from the long-term rental market.

Under the Housing (Standards for Rented Houses) Regulations 2017 landlords have a legal duty to ensure their properties are fully compliant with fire and minimum safety standards.  The safety standards are basic and include smoke, heat and carbon monoxide detectors, fire blankets, window restrictors for windows above 1.4m above ground level to prevent falls and emergency evacuation plans for apartments.  Additionally, landlords have a responsibility to comply with the Fire Services Acts 1981 and 2003.  Our Local Authorities enforce these standards and proactive inspections are carried out.

Rental websites like Airbnb, do not have to enforce basic safety standards like carbon monoxide detectors, smoke detectors, or fire escape access. Their homeowners do not have to prove their properties are safe before letting them out and renters (unwittingly) are ultimately responsible for safety.

Airbnb will offer safety recommendations for its listed properties but it does not inspect them unless it is an Airbnb Plus home.  In this category, a thorough, in-person quality inspection including opening drawers, cabinets, and according to Airbnb “even the oven” will be carried out.  They look for thoughtful design and double-check that a space is clean and comfortable but not safety.

This year, Airbnb has taken a step closer to avoiding onerous national regulations after an adviser to the European Court of Justice said the company should be regarded as a digital service provider and not a real estate provider.

As officials haven’t come up with clear answers to the property type classification of short-term rentals, educating consumers and hosts who choose to rent units on sites like Airbnb as to their safety responsibilities and liabilities is increasingly important.