You may grind your teeth at the thought of regulations, or any constraints on your business. But the rapid growth of the holiday rentals market in recent years, driven by online marketplaces like Airbnb, Holiday Lettings and HomeAway, has created a world where protections for customers, property owners and often local communities are thin on the ground
While lettings platforms allow you to generate income by easily renting out rooms or a whole property to temporary guests, the door is open for less-scrupulous property owners to buy up residences with the sole intent of renting them out to holidaymakers without due care, and for internet scammers to take advantage of honest travellers.
As our founder, Chris Maughan, says:
“Short-term rental owners and agencies have no one to answer to. While many do self-regulate, far too many don’t, and far too many properties are not fit for purpose.”
Here, we take a look at the positive impact regulation can have on the holiday rental sector, and think ahead to a future where our industry can expand with confidence.
Why is there a lack of regulation?
Apartment and villa rentals have been around for thirty years, but growth in the industry has rocketed in the last decade due to the explosion of online platforms and the ease of doing business digitally. Regulators and authorities are still playing ‘catch-up’ in a constantly-evolving world.
To their credit, many rental platforms do carry out some checks on providers, but these are not very thorough. Without document checks or account verification, fraudsters are still able to create fake profiles and populate listings with false information and attractive images hijacked from other websites to fool unsuspecting holidaymakers… Until now.
Regulations are starting to emerge for the holiday rental industry. Certain countries like Spain and Japan have introduced rules to ensure property owners are properly registered before being able to advertise their houses or apartments with holiday rental platforms or agencies, making it more difficult for fraudsters. Local authorities may also place limits on how many properties can become holiday lets, or for how long a period of time, in order to maintain the fabric of the community and stop the wholesale takeover of attractive districts and towns by holiday homes.
Cities like London, Amsterdam and Paris have introduced ‘day limits’ – regulations specifying how many days a property owner may rent out their accommodation per calendar year. Amsterdam has introduced a 30-day limit, while in Paris hosts can only list their properties as available for 120 days of the year.
In London, property owners cannot rent out their accommodation for more than 90 days annually, unless they get a planning permit from the local borough council. Airbnb ensured their London-based hosts were acting within the law by introducing the same limit.
A closer look at regulations in effect
Case Study: Spain
In Spain, if you want to rent out a property for longer than two months, you have to register with the local authority and obtain a ‘Touristic Rental License’ before you can list it anywhere.
The regulations were introduced after hotel associations and legitimate operators in popular destinations like Barcelona, Mallorca and Madrid put pressure on the government to respond to the unfair situation where they had to comply with rules on hygiene, safety and taxation, while private holiday property owners did not.
These regulations ensure that property owners are accountable and have the appropriate insurance for holiday rentals. This goes some way to offering peace of mind and protection for holidaymakers, as well as protecting the local community and housing stock.
Holiday rental properties are regulated on a regional basis, so owners need to understand the rules in the area where their property is based. Some regions have far tighter regulations than others – especially Barcelona and the Canary Islands, where renting out homes is banned outright in certain seasons or circumstances – and some requirements can be complex.
Property owners need to visit the local town hall (or ‘Ayuntamiento’) to find out what requirements are in place for holiday properties, and if a property meets those requirements, then the owner can then apply for a license. The process can take months, at the end of which the authorities will issue the property owner with a license number they must include in all advertisements, online or off.
Don’t be tempted to skip this and hope you’ll somehow slip under the radar. Several Spanish regions have increased the number of inspectors to combat unlicensed renting, and the Barcelona authorities fined Airbnb €600,000 euro for allowing listings for unlicensed properties on their platform.
Case Study: Japan
Japan introduced new ‘minpaku’ laws for short-term holiday rentals and lodgings in 2018, in effect making it easier for property owners to rent out their private accommodation but at the same time imposing more requirements similar to those in Spain. Owners no longer have to comply with rules on room sizes, nor ensure they or a representative are on site at all times. But they do now need to register their property with the land ministry and obtain a license number to display on any listings pages.
Additionally, owners can only rent out their property for a maximum of 180 days each year, and some cities like Kyoto will only allow rentals during the tourism low season, between mid-January and mid-March.
These regulations were introduced as a response to general cultural changes and the clear disregard for older standards. Individuals had been renting out rooms or whole homes for some time without adhering to the previous laws regarding location, room sizes or physical presence. Non-enforcement allowed Airbnb to develop the market there, even though at the time such rentals were technically not legal.
There are currently no set rules for where or what type of properties can be used as holiday rentals, but after complaints from some neighbours in apartment blocks about residencies being turned into holiday homes, block associations have the power to ban holiday rentals in their building. Local governments can also apply their own conditions and restrictions.
Again, by making property owners more accountable, these measures offer a degree of protection for holidaymakers as well as local neighbourhoods, and go some way to ensuring properties are fit for purpose. Enforcement is very strict, and the Japanese authorities forced the cancellation of all Airbnb rental agreements where owners had not applied for a license in time.
What is I-PRAC’s view?
Measures taken by countries like Spain and Japan are positive, but they don’t solve the problems of legitimacy and property standards. We’re certain that proper regulation would have a huge positive impact by stamping out rental fraud and guaranteeing customer safety.
As Chris Maughan, I-PRAC Founder, says:
“Regulation has to cover health and safety in terms of fire, gas and electrical, along with owner legitimacy to avoid fraud. There is no one-stop logo that covers this, although I-PRAC are working to bring insurance cover and regulation for all the above by 2020.”
We have seen that hotels welcome competition from the private holiday rental market, but they rightly point out that it is currently an unfair playing field. Hotels have to abide by a host of regulations to protect their customers, but none of the same applies to the short-stay holiday rental sector.
The issue with greater regulation will always be enforcement, which requires industry-wide recognition and acceptance of agreed standards. As Chris continues: “The only way to make a huge impact is if the booking platforms deny listings unless they have an approved status such as that from I-PRAC.”
The rapid growth of the holiday rental market means that authorities are still trying to catch up and, while governments are trying, it’s still a difficult process to get to grips with the whole sector.
What are we doing?
Ultimately, as it stands, there is no regulation, and I-PRAC is here to solve that. The I-PRAC approval process is both robust and rigorous, and can take up to three weeks. We check a property owner’s passport, utility bills, company incorporation certificate, and also verify bank statements and the account details of where travellers send money – all to prove they legitimately are who they say they are.
This may sound onerous, but it’s a necessary step to further expand the market. The quicker we get regulation, the faster the industry will grow because of improved confidence from travellers, families and individuals who want to rent private homes for holidays and short stays. And we’re so confident in our process that we’ll refund your money if you are defrauded by an I-PRAC member.
Want to know more about how we’re changing the holiday rental industry for the better?