Organized criminals from Russia are subletting apartments to tourists, as locals struggle with soaring rents.
By Don Quijones, Spain & Mexico, editor at WOLF STREET.
Relations between the ultimate disruptor of global tourism, Airbnb, and Barcelona City Council just took another turn for the worse following news that organized criminals from Russia are making massive profits by subletting apartments in Barcelona to tourists through the online site.
For the San Francisco-based company, any further damage to its Barcelona market could be very costly. With over 23,000 registered dwellings, the city is far and away the most important Spanish destination for the platform’s users and the sixth biggest in the world, behind Paris (1), London (2), New York (3), Rio (4) and Los Angeles (5), five cities that are significantly larger than Barcelona.
Last year the council slapped the company with a €30,000 fine for advertising lodgings that did not have permits to host tourists. The fine was later annulled by court order on the grounds that “sharing economy” regulation is currently in a legal vacuum. That hasn’t stopped the Council from imposing a 20-fold hike in the maximum fine that can be levied on home rental sites, to €600,000.
In September 2016 it sent out a blanket letter to local residents warning them that any apartment rented to visitors must be logged in the province’s Tourism Registry and have a permit. Otherwise, owners could face fines of up to €30,000. The letter also urged residents to snitch on any neighbors who they believe are running illegal tourist accommodation operations in their buildings. Given the volume of noise and scale of disruption tourist apartments tend to produce, many locals are more than happy to oblige.
Airbnb responded by offering to limit the number of rentals available via non-professional landlords in Barcelona’s central Ciutat Vella district. It also promised that professional landlords would provide business information on the site in order to facilitate the collection of tourist tax. The proposal fell short of appeasing the local government which continues to insist that Airbnb take concrete steps to ensure that all of its affiliated apartments have tourist accommodation licenses.
In the meantime, the public backlash against Barcelona’s crazy tourist boom continues to grow. For the first time since the Council launched an annual public opinion barometer, respondents have identified tourism as the biggest problem the city faces: worse than poverty, crime, and even unemployment and general work conditions, which have topped the ranking every year since 2009.
That doesn’t mean that unemployment is no longer a big problem — at close to 10%, it’s still high (though much lower than the Spanish average). It’s just that tourism is now considered a bigger problem.
Tourism may provide buckets of money to the city’s coffers — over €12 billion a year at last count. It also generates plenty of jobs, albeit largely of the casual, low-paid variety. But it also brings with it a toxic mix of externalities, including sky-high prices and rents, overcrowding, noise, overstretched public services and infrastructure, the erosion of the city’s distinctive character, and the gradual formation of a mono-dimensional economy.
Now it’s generating another problem: criminality. As the latest scandal implicating Airbnb reveals, the potential returns in Barcelona’s tourist accommodation rental market are so lucrative that even organized criminal gangs from Russia are getting in on the action.
The scandal came to light when Montse, the owner of an apartment in the popular tourist neighborhood of Barceloneta, discovered that Timur, the young, respectable-looking tenant to whom she had rented her flat was in turn renting it to tourists through Airbnb, in direct breach of a clause in the rental contract forbidding tenants from subletting to visiting tourists.
Unable to track down the tenant, she repeatedly asked Airbnb to remove the listing of her apartment from its site, but to no avail.According to the Catalan daily La Vanguardia, the only way she had of seizing back control of her apartment was to book a night in it on the online platform, move in, and then change the locks. Since then, she has refused to leave out of fear that the tenant will come back.
As soon as Montse’s story was published in La Vanguardia, Airbnb removed her flat from its listings with sudden newfound haste. But the newspaper has since revealed the existence of other cases, with readers writing in to say they had been the victims of similar fraud. Some reported facing the threat of violence for confronting the fraudsters. It also turns out that Timur, of Russian-Chilean descent, is subletting “at least” three other apartments through Airbnb, none of which had been pulled down from the website.
“In fact, he [Timor] is simply the visible face of a Russian band that brings profitability to third-party flats through platforms like Airbnb,” according to La Vanguardia.
It’s easy to see the appeal of such a scheme: Montse was renting her apartment to Timur for a modest €950 a month, who in turn rented it out for €200 a night. If he and the Russian gang he fronts for rented it out every night (not an impossible task in a city like Barcelona, where it apparently takes just three hours to book out a half-decent flat for the entire month of July), he would have made roughly €6,000 in revenues on a monthly outlay of less than €1,000 — tax free, of course!
A few years ago, Airbnb claimed that three quarters of its Barcelona hosts have incomes below the national average. If true, it’s a trend that is rapidly changing as the allure of fast, easy money attracts more professional operators. A recent study by Penn State University identified the rise of the “mega-operator” – people who rent out three or more Airbnb units. The report found that “a growing number of hosts were using the Airbnb platform to operate an unregulated, full-time business. Nearly 30% of Airbnb revenue is derived from this group of full-time hosts. They are becoming bigger and more prominent.”
If the recent experience of Barcelona is any indication, it’s not just professionals who are moving into the sector; so, too, are professional criminals, who are determined to take advantage of the irresistible money-making machine without having to actually buy the property. By Don Quijones.
This is how desperate the Italian Banking Crisis has become. Read… Contagion from the Two Friday-Night Bank Collapses in Italy?
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……. and this surprises anyone ?
Virtual Enterprises with little or no regulations such as AirBnB , Uber , Lyfte etc are ripe for abuse , corruption and illicit activities .. all while creating havoc for legitimate condo/homeowners taxi drivers etc . e.g. One more piece of the virtual economy gone stark raving mad to the detriment of everyone except the ‘ investors ‘ themselves .
Uber is a natural response to the completely artificial shortage of taxi ‘medallions’, which means it costs over a hundred thousand dollars for the right to operate a single taxi.
The medallion owner rarely drives a cab.
The resulting over- priced fares are a tax on the poor, the ‘rent’ flowing to the medallion owner.
In London so called ‘gypsy cabs’ have operated for decades, Uber is just organizing the business by taking it online.
Removing this insane barrier to entering the taxi business, but with criminal record check etc. would be the best antidote to Uber.
Nice try but not even remotely resembling the facts .
Because, of course everyone knows that there’s no abuse, corruption and illicit activity in govt controlled areas of the economy.
If you want to find the real cause of the growth of virtual enterprises, look no further than the central banks that produce inflation and practice outrageous cronyism. The economic effects of central banking are horrendous, and the moral effects are even worse. And that’s without including in the discussion repressive local zoning, licensing and labor laws.
We live in a world of rampant fraud and corruption. To think that some how more govt control with it’s concomitant abuse, corruption and illicit activity is the answer reveals enormous cognitive dissonance.
“We live in a world of rampant fraud and corruption.”
I believe that out corrupt government has inspired blatant corruption in the private sector.
“. . . ripe for abuse , corruption and illicit activities . . .”
And hence a hit on Wall St. Crooks go in for that sort of thing.
Just wondering: the survey says tourism is more a problem than unemployment.
If tourism was halted or reduced by 50 %, what are the chances that unemployment would replace it as concern one.
Venice has this problem probably more than Barcelona, but that’s what it does for a living.
Most Americans live in suburban communities that, however pleasant, are basically interchangeable. It’s hard for us to understand the fierce pride and possessiveness of people who live in a place so unique, so full of character and visible history as Barcelona. I admire their spirit in pushing back against the omnivorous money machine of big business tourism.
I was expecting this comment.
I am from Barcelona and from my point of view it would be positive to reduce tourism even if that meant to lose some jobs. Here is why:
1) low paid, precarious jobs.
2)Soaring rents do not allow local people to live anymore in the city. So any positive economic impact to working residents is more than offset.
3) Tourism crowds out other economic activities which are more valuable, sustainable and respectable. And which by the way could create better jobs.
4) massive cheap tourism does no good, We should learn from the french. By focusing on improving quality and attracting and reducing quantity, revenues could even go up.
5) dignity: I do not want to work as a servant for our wealthier northen neightbours. To make matters worse some of them come to drink, vandalize the city, and shit and pee on the streets. There are some places in barceloneta (beach) where you cannot even breath because drunken kids have urinated like no tomorrow.
I am 27 years old, engineer, I have a qualified, stable and well paid job (by spanish standards) and when I tried to find a flat in Barcelona I realized that there was no way on earth I could ever pay the rent. So I was expelled from my own city, where I had always lived. In the end I had to move 50 km away from Barcelona.
I just hope that this damn plague called tourism never reaches where I live now. For all I care: f*ck tourism. At least as long as we have this unsustainable model.
Hi Hiho hope you’re well.
Has Barcelona still got big problems with pick pocketing?
Went 7 years ago to the football and I’ve never seen anything like it, ruined what was a great trip.
Yes, I am afraid that it might have got even worse.
You have to be very careful, especially in the metro or in centric crowded streets such as las ramblas.
A very common trick that rumanian gangs use is to try to distract you with some kind of poll or just asking for help while another one of them steals your wallet.
Also, never ever let your bag ot whatever unattended when you are in a bar/restaurant. Always on your lap, never on the floor.
We the locals are already used to these kinds of things and have become really aware of it. But for some foreigners such as the japanese this is just a shock, it is like they are not used to people trying to cheat and pickpocket them so they are somewhat naive.
Thanks Hiho for the reply.
Romanians now. The joys of open borders within the Eurozone. You can’t even deport them as it will infringe their human rights.
Its a massive shame-shadow on your city as Barcelona aside of that is a fantastic city.
Dito for San Francisco!
Russians. It’s always the Russians, unless it’s the Chechens, which is worse, because they’re Muslims. And some of them blow stuff up in Syria.
Just testing scare tactics to slow down evil AirBnB.
You have to admit, it’s entertaining to contemplate Russian mobsters leeching onto the new sharing economy.
hahaha It’s the New Communism with a capitalist twist.
Actually the guy was Russian-Chilean, so maybe it could be the Chilean mafia. Chile’s on the scary/hate list, just a little further down.
A guy named Timur is as much Chilean as is Vladimir. Timur is a common tatarian name in Russia and Northern Caucasus, which includes Chechnya; although the name has become somewhat common in some other regions as well.
Wolf from your article.
>In the meantime, the public backlash against Barcelona’s crazy tourist boom continues to grown. <
Should that read continues to groan …….. or continues to grow. ??
Yes, “grow,” thanks.
Not “groan” though that would have been even better :-]
Bu, but… free markets!
I’m just waiting for some AirBnB guests to start filing lawsuits. Have there been any major instances yet?
AirBnB will claim it isn’t culpable. When it comes to dancing around any kind of liability, these guys are real Fred Astaires.
(Ginger Rogers was actually better. She did all the same steps, and she did them backwards.)
All the profiteers of the Disruptive Gig Economy (DGE) will claim they’re not culpable, just like every shackledragger in Sing Sing is perfectly innocent and a Born-Again Xtian besides.
How to get rid of slippery snakes when they infest your home and/or land, rendering it unsafe?
I can definitely understand citizens feeling overwhelmed by tourists (of which I am a frequent one).
AirBNB happens to be a great solution to crappy tiny & overpriced European hotels.
Not quite sure how I come down on this topic (other than Russian gang = bad). Full disclosure: frequent AirBNB user in London.
Barcelona doesn’t want to become another Benidorm.
Cannes is lousy with tourists too, like the whole Riviera. Crowd city, paved with people. That’s why nobody goes there.
I’m torn on this one myself. On the one hand, I love the idea of people having an outlet through which they can make money on their own residence. And the risk should really be their own.
On the other, no one wants their neighborhood to turn into the Best Western. Zoning originated for a reason.
You’re more of a ‘free markets’ guy and I support a stronger state. With that said, I like free markets a lot more for the little guy trying to jump into a market than for the big players who take advantage to crush the competition and monopolize.
“AirBNB happens to be a great solution to crappy tiny & overpriced European hotels.”
If you confined yourself to lovely, moderately-priced accomodations you wouldn’t have cause to resort to shysters like AirBnB.
There are any number of truly fine gîtes available when visiting Paris, par example, and delightful agriturismos everywhere when in Italy. It’s really no effort to avoid being suckered like an American if you stop being a tourist and become something of a Frenchman or Italian instead. Cheating gullible American tourists is a major industry in Europe, so don’t be such a fudgie.
I have used homestays and temporary apartments in Europe decades before there was Airbnb. I loved them. You made friends instantly, had to speak the language, and were part of the community. They were nothing fancy. But I’m not into fancy, so that was OK. Have the fondest memories.
But living in a touristy part of San Francisco, I can see how tourists can overwhelm a city (not to speak of the trash on the sidewalks).
But I’m always nice to tourists. I help them when they get lost (holding the map upside down, for example). If I speak their language, I do it in their language, which always stuns them. Sometimes I give them a little tour of something they’d never see otherwise, and they love it. It feels good to make strangers feel welcome.
I don’t see an issue here. Does Spain need the inflows or are they already awash with capital. I bet the women who formerly rented the apartment for 950 considers renting it out herself.
Sure it’ll cause a housing bubble, and a building boom. But that bubble will burst at some point and people will be able to afford housing at a much more reasonable price.
Been to Europe many times …for business
Never find it attractive in anyway…
Feels like a shit hole to me..
People differ with me on this but I am different and.contrarian anyway
A lot of my friends went to Europe this summer for vacation.. difficult to sway sheeple away from msm propaganda…
Going to Europe has become a fashion
“Never find it attractive in anyway…”
Ah, but you have never canoed on the Dordogne at La Roque-Gageac in the spring, or rode the wild white horses of the Camargue, or supped with the vintner priests in the secret places under Damary, or tasted the oysters of Cancale they never sell, or picnicked with the women of Rocher in the lavender fields at midnight, for these sensations are necessarily reserved for the developed soul, and it’s unlikely you speak a word of Valdôtain anyway.
Vouz avez plein de merde, donc ce ne sont pas pour vous.
More for me. Thanks!
“Vouz avez plein de merde, donc ce ne sont pas pour vous.”
May I dare correct your French here?
Vous êtes plein de merde, donc ce n’est pas pour vous.
I went to Europe for the first time over 30 years ago and for me, it never went of fashion.
One of the nicest things about the French is that they’re almost always stolidly determined to help you with your French. Mine has gotten very, very lame over the years from lack of practice.
As for the Dutch, well, they just laugh at me, which is about as much as I deserve.
Typo police: maybe… “Vous êtes plein de merde, donc ce n’est pas pour vous.”???
You sound like you’re trying to talk down to people. I don’t like your insolent undertones.
Jon You need to get out more bud
The “gig economy” is a legal gray area, so abuse does happen quite easily.
Spain is quite bad at following the law, as shown by the constant legal escandals. I would be here all day if I started to list them all but basically despite the fact is a member of the Euro zone, Spain behaves like a third world country when it comes to government, corruption and letting the big thiefs get away with it.
Are we sure is the Russian mafia? It could be the mafia of any former soviet union country. Or just a local one and the media used the word Russia because it sells well.
Russian gangs, Romanian gangs and others from the former eastern bloc countries really have become a plague since the opening of the EU’s internal borders under the Schengen Agreement and of course the collapse of the communist regimes, and not just in Spain. With so many visitors coming and going, a country like Spain is a perfect place for them to operate.
Did I miss the organized crime connection? Or we’re just going to believe that a scary sounding name is connected to this ubiquitous Russian evil
that we’re supposed to fear? He dared violate a subletting clause in the lease… get the authorities!
To me, it sounds like a young entrepreneur looked at the lowest initial capital investment he could make and was–actually–doing pretty well. 6k/month and all he was out was his security deposit? That’s free market efficiency! For people with little to no pay, can you blame them?
Are we just going to gloss over the 10% unemployment? Has anyone considered that this WAS young Timur’s job? That he could be one in ten that had to earn a living via alternative means?
The proclivity of AirBnB hosts operating in this manner is simply a symptom of our have-and-have-not economy. We need to worry less about the symptoms and find a way to treat the disease of growing inequality.
You should probably read the linked article. It’s in Spanish. It gets into a lot more detail on this, the threats of violence, the other guys involved, the whole bit.
Enterpreneur? What a joke.
From the point of view of economics that is technically correct.
Were any posters around 50 years ago when the “population bomb” was a hot topic? Well, it’s here now, so get used to the crowds (global population has about doubled, I believe, in that period. ;^)
But, according to Martin Armstrong’s prediction, the “plague cycle” is due to turn up on 2019, so some population reduction may be in the cards.
(Martin predicted the current war cycle that started with the Arab Spring in 2011 long before there was any hint of it. Lasts 8.6 years according to him, which will put it at just about 2020. We’ll see. ;^)
Good luck & best regards to all!
Yes, and right now you cannot pick a newspaper without being breathlessly told we face a “depopulation bomb”. I kid you not.
The local newspaper has just joined the crowd and I am thinking of asking them if we face a depopulation bomb why the meadow near to me is being bulldozed to make room for more absurdly overpriced tiny houses.
7 billion people is not a depopulation bomb. Just look at the numbers from the start of this century.
Stop calling it the sharing economy. It is actually the rent-extracting economy.
I have been always wondering why even 5S-hotel owners never use to live within their own hotels and here I have my answers!
A huge correlation can be drawn between Barcelona and Key West Fl. Presently the city is battling “illegal rentals” , overcrowding, and traffic congestion, especially between November – June. A quaint little “drinking town with a fishing problem” has become a place with a love-hate relation and dependent upon tourism. After 30 years living there , raising a family, I have seen 1st hand how tourism changes affect places with unique historical charm. A past lifelong resident, Wilhemina Harvey stood up for the rights of residents to rent out rooms to travelers , as her family always did, in order to make end meet. But now the Hotel/Motel Association has banded together political power and passed laws restricting such “short term rentals” to those privileged few with costly licenses.
On the other hand, The County registers approximately 15% of all residential properties as qualifying for “Homestead Exemptions” , meaning the other 85% do not reside there as their primary residence. This plays havoc with all sorts of the social and economic structure of the area, as rich people from the mainland buy up, renovate and remove properties from the list of possible rentals, drive up the market values to ridiculous levels, and force more development of affordable housing for the workers on an already crowded island, with postage stamp- sized building lots (50′ x 100′ is considered a big one)
Another result of all this “demand” and development is the extreme degradation of the environment. In this case being an island, the marine environment takes the hit. Water quality degrades from pollution runoff, silt stirred up by the many cruise ships coming into the shallow harbors, and overfishing. Of course much of these problems are just swept under the rug, because nobody wants to kill the golden goose of tourism that everybody, like it or not, has become dependent on.
Those are the current facts. What are the solutions? Nobody can identify one that maintains the current level of “prosperity” for everyone.
The result is – this will play out over time. Money and affluence seem to rule over ecological and quality of life concerns. Same thing on both sides of the ocean.
My mother lives in a nice area of single family homes in Palm Springs, CA. About a year ago, the house across the street and the one behind her went up for sale. They were purchased by different investors at market rate, and shortly thereafter listed on Airbnb. I was surprised, because the homes were not cheap. For the first six months there were not many rentals. Now both houses are occupied every weekend by large groups of 20-35 year olds that have big pool parties during the day with loud music. This has continued into summer, even though it is 100-122 degrees! There are often 5-6 cars at each house. But at night most of the time it is fairly quiet. And of course the cleaning services show up on Monday and the homes are unoccupied (total silence) until Friday.
Although the two houses are being used like very small hotels where “anything goes” — we have not called the City’s hotline once to complain. For the simple reason that listening to young children playing, or dogs barking SEVEN nights a week would be much worse.
So yes, there are impacts of Airbnb. But the world changes. I say just roll with it.
Pesky Russians are everywhere. That Putin stole my TV remote and a cheese and pickle sandwich from my ‘fridge or so CNNMSNBCFOXBBC informed me. TVNZ too.
Agent Smith: I’d like to share a revelation that I’ve had during my time here. It came to me when I tried to classify your species and I realized that you’re not actually mammals. Every mammal on this planet instinctively develops a natural equilibrium with the surrounding environment but you humans do not. You move to an area and you multiply and multiply until every natural resource is consumed and the only way you can survive is to spread to another area. There is another organism on this planet that follows the same pattern. Do you know what it is? A virus. Human beings are a disease, a cancer of this planet.
Ya, AirBnB is like a virus in cities like SF or Barcelona. They would save themselves a lot of headaches by simply following local/municipal/city law. But they are far to arrogant to do; combined with a overwhelming realization that by following local laws their business would tank.
I rented an AirBnB apartment 2 years ago from a Russian guy. The place was abysmal, but the ratings were excellent. Drilling down, 90% of all the excellent ratings were from other Russians. They all owned and rented other apartments through AirBnB, and gave each other excellent ratings.
They had all their places near the Maresme/ Forum subway station, and the area is distinctively lower class. I later found out that this is a fairly high crime area, and the apartments were dirt cheap after the Spanish economy spiraled down. Caveat Emptor with AirBnB.