In association with Aviva
  1. Economics
July 6, 2020

Is Airbnb’s model for short-term lets ruining cities, or breathing life into them?

By Steve Smethurst

Short-term lets are increasingly being blamed for urban ills. At one level, it’s the reduction in properties available for long-term rental and the not-so-small matter of tax avoidance. At another, it’s about the impact on local communities and noise disturbance from partying guests. Is the criticism justified? Airbnb is the company most often associated with this trend, but it’s doing more than most rivals to put things right.

Paris is typical of the reaction. Last year, its mayor warned of the risk it will become a “museum city”, and this despite a letting limit of 120 nights per property. “I have nothing against Parisians who rent their home a few days a year to put butter in the spinach,” said Mayor Anne Hidalgo in an interview with the Journal du Dimanche. “The problem is the multi-owners who rent apartments all year round to tourists without declaring them, and the platforms, accomplices, who welcome them.”

In London, short-term lets are capped at 90 nights per year – with Airbnb the first platform to introduce the limit – a move designed to protect long-term rented housing. However, the law is difficult for councils to enforce and it can be side-stepped by advertising on multiple platforms.

Mayor Sadiq Khan, who has praised Airbnb for working with City Hall, has called for a registration system to enforce the limit. He said: “Short-term lets are a benefit to visitors to London, and to Londoners themselves who want to earn a little extra money. But these benefits must be balanced with the need to protect long-term rented housing, and to make sure neighbours aren’t impacted by a high turnover of visitors.”

Crimes and misdemeanours

New problems continue to crop up for short-term lets, however. In October last year, Superintendent Mark Edgington, force lead for modern slavery at Avon and Somerset Police, released a statement that linked the proliferation of short-term lets to prostitution. He warned that pop-up brothels are increasingly being reported in short-term rental properties across the UK and were being connected to modern slavery and sexual exploitation. “Many hosts are completely unaware their properties could be used for this, or the signs they should be looking out for,” he said.

Interestingly, Airbnb goes to some lengths to avoid such problems. The platform employs sophisticated technologies and behavioural analysis to block potentially troublesome guests and forbids illegal activity. It even partners with Polaris, a leading anti-trafficking organisation and works with international agencies to prevent human trafficking.

Other problems for short-term let landlords were highlighted by the insurance company Aviva in its home-sharing survey*. For example, more than half of hosts have seen their homes or possessions damaged by guests, while just under half have had items stolen. What’s more, 38% had experienced a domestic disturbance involving neighbours or the police and 18% had properties left in an ‘unacceptable’ state by guests. Anyone considering letting a property should therefore ensure they have appropriate insurance that meets their specific needs and demands.

Airbnb, for its part, offers host guarantees and insurance that covers listings for up to USD$1m, which covers every booking. A spokesman defended the company: “In Great Britain in 2018, only one in every 12,000 trips resulted in a claim for significant property damage (claims reimbursed for more than $1,000) under our Host Guarantee. That represents a rate of only 0.009% of trips.”

Tools and hotlines

Airbnb is understandably keen to address the issues that are tarnishing its reputation. Later this year it will launch a dedicated hotline for city officials. A spokesman said: “As part of our ongoing commitment to work with cities around the world, we’re launching a dedicated line where mayors and city officials can connect with appropriate Airbnb representatives about our new policies.”

The company has already partnered with more than 500 local governments and organisations around the world to promote tourism, collect and remit taxes. So far, it says it has remitted more than $2bn in tourist and city taxes, including more than $100m in Los Angeles alone.

In cities like Edinburgh, however, the focus has been more on noise and parties, and a three-month trial has been held where hosts use a noise detector device to detect and act on potential noise and nuisance issues. A “good guest guide” has also been shared with the city’s hosts that has been developed in partnership with VisitScotland. This includes advice on carrying suitcases where possible, rather than rolling them noisily along the city’s cobbled streets.

Globally, there are new guest standards, a hotline for neighbours and a verification system for hosts is currently under way. Residents can report issues with guest parking, waste, noise or other issues directly to Airbnb via an online Neighbour Tool, while the hotline will enable “anyone, anytime, anywhere to reach a real person at Airbnb.”

In addition, large parties and events are now banned in Airbnb listings in multi-family residences, such as apartment buildings. Any type of unauthorised party remains prohibited in all listings.

Community benefits

So, is home sharing bad for cities? No, says Jag Herar, a self-employed IT consultant who, rather than ploughing money into private pension, put it into property in Bradford. He now has a mixed portfolio of approximately 50% long-term rentals and 50% short-term. With the latter, he’s specialised in meeting the needs of the theatre industry and has even launched his own “More than Digs” website.

“If you imagine a touring production of Mamma Mia, or Matthew Bourne’s Red Shoes, they’ll be touring the UK and will sit in a particular venue for up to four or five weeks. It’s everyone from actors to stage crews and make-up artists. They all need somewhere to live. With Airbnb you have to pay up front and if you’re booking 15 cities for a tour, you can’t afford to pay all that at once.”

Despite some horror stories with short-term lets – “yes, I’ve had ‘ladies of the night’ set up camp for a week in my apartment” – he does see many benefits for the West Yorkshire city.

“My voids for longer-term rentals in city centre apartments were quite high. People would stay six months and then it would be empty two months, before another six months let. It wasn’t very stable for me and I had to look at alternative revenue streams. Then I found this niche of satisfying the entertainment industry.”

Landlords under pressure

Jag called his website “More than Digs” because he wants to recommend local businesses and services as well as offer a bed for the night. “I get people staying whose cars have broken down or they need an MOT as they’re on the road the whole time – so I do a lot of recommendations, which is great for the local community,” he says.

“I’m also driving business from landlords to local tradesmen for gas safety checks, painting and plastering – more so with short-term lets as there’s more wear and tear. There’s also a lot of footfall going into city centres at a time when the high street is under pressure. Bradford is also the UK’s curry capital and guests usually ask for recommendations – if a big production wants to go, I can put them in touch with local restaurants who can accommodate larger parties.”

Jag also takes issue with those who feel home-share sites are reducing the amount of long-term rental properties and forcing poorer people out of city centres. “A far bigger issue is that it isn’t viable for landlords any more as new regulations come in. Letting agents are being hammered and there are new tax rules for landlords. A lot are leaving the industry and selling their buy-to-lets.”

As with many other issues, it seems harsh to blame Airbnb for that.

This is a sponsored post by our partner AvivaThe author is an Airbnb host.

*Research was carried out by Censuswide in August 2019, interviewing 1,000 UK adults who let out properties to guests as a short-term/holiday let, and 1,000 UK adults who have stayed in a home-share property.

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