To heck with the concerns of local citizens and city councils.
By Don Quijones, Spain, UK, & Mexico, editor at WOLF STREET.
Across many of the world’s most popular tourist destinations, from New York to Paris, to Tokyo and Barcelona, Airbnb is suffering a regulatory backlash. In its number-one destination, Paris, authorities have filed a lawsuit against the company for failing to respect local laws regulating holiday rental properties. It has lost thousands of hosts in its home city of San Francisco after the City Council decided to enforce existing accommodation laws more strictly. In New York, its bookings could be decimated by new rules requiring it to hand over the names and addresses of its hosts in the city. All over the world, local authorities are taking aim at Airbnb and its ilk.
But in Spain, Airbnb’s fourth largest market in terms of listings, the National Commission on Markets and Competition (CNMC) has announced that it intends to challenge any attempt by city councils to limit the activity of accommodation websites.
The market regulator also published a report defending the accommodation platform’s model. Across multiple pages the report’s authors laud the copious benefits of short-term holiday rentals, including:
- A broader range of tourist accommodation;
- The opportunity to earn more money for property owners;
- Better information for consumers;
- Enhanced competition in the tourist accommodation market, leading to lower prices (for tourists);
- The empowerment of the consumer.
By contrast, in a solitary one-page section on the “possible” downsides of short-term holiday rentals, the report only mentions a “potential” increase in noise and other disturbances for neighbors. As El País reports, even these elements are played down.
Not a word is said about the effects of the short-term rental boom, resulting in the displacement of local residents from their neighborhoods. Nor is any mention made of the overcrowding and “theme park-isation” of city centers, or the blatantly unfair competition platforms like Airbnb and their hosts engage in by paying a tiny fraction of the direct and indirect taxes hotels and hostels have to pay. As the FT reports, the tax differences are worth tens of millions of pounds in London alone.
Most controversial of all, the report even disputes claims that Airbnb and other holiday rental operators have pushed up the price of accommodation for locals in popular tourist destinations, whether in terms of rents or purchases. “There is no conclusive evidence,” states the text, “although if there has been a general rise of house prices in Spain in recent years, this is due to a confluence of economic factors. […] No evidence exists of a direct and exclusive relationship between the supply of tourist housing and property prices.”
This claim is spurious at best. Thanks to the much juicier money-making opportunities available in the short-term rental market — opportunities the report itself highlights as a benefit — more and more real estate developers, landlords and property speculators are pouring into the market, resulting in a dwindling stock of long-term rental properties. The result: fewer houses for locals and soaring prices for those that do still exist.
That is not to say that the holiday rental boom is the only cause of soaring rents in Spain’s hottest housing markets. Clearly, the rise in rental demand following the burst of Spain’s last real estate bubble has played an important part. So, too, has rampant property speculation, much of it coming from overseas. But to suggest that the increased demand for holiday accommodation isn’t an important factor is exceedingly disingenuous.
Contrary to the CNMC’s claims, three studies from the U.S. and Canada have found direct links between the short-term housing rental boom and surging property prices in New York, Boston and Los Angeles, as well as the expulsion of local residents from popular neighborhoods. It is this trend that has spurred many city councils in Spain to pass laws to regulate the tourist rental sector. But according to the CNMC, these regulations have “restricted the supply of holiday rental units and their ability to compete. As a result, they hurt consumers, local residents and the economy as a whole.”
The CNMC claims to be defending local residents, but in many of Spain’s tourist-saturated cities, as in many tourist-saturated cities in other parts of the world, local residents have already had their fill of “over-tourism.” The streets of Barcelona, Palma de Mallorca and other cities are awash in graffiti and stickers exhorting tourists to “go home.”
Last week, a new poster cropped up in Barcelona informing tourists (in English) that “balconing” — the act of climbing, or throwing oneself off, balconies for fun, as some inebriated foreign tourists are wont to do — is not just fun, but “prevents gentrification and improves the quality of life of local residents.” They even set up a Twitter account — @balconingIsFun — that Twitter has since suspended. The message may be darkly ironic, but the underlying sentiment is unequivocal: tourists are no longer welcome in such huge numbers.
Some of this is the work of Arran, the youth wing of the radical Catalan separatist CUP (Popular Unity Candidacy) party. Many local citizens, while wary of supporting Arran’s more extreme methods, are sympathetic to many of the group’s misgivings about today’s model of unfettered mass tourism. Yet if the CNMC gets its way and Spanish courts, on its recommendations, strike down any attempt by local authorities to control the boom in turning apartments into vacation rentals, local councils will be rendered virtually powerless to regulate the local housing market and city environment in the interest of the majority of people who actually live there. Airbnb could not have asked for more. By Don Quijones.
Bad habits die hard. Read… Consumer Debt Suddenly Surges in Spain, Banks Love it, But Regulators Begin to Fret
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Many of the owners of property on AirBnB are likely leveraged with mortgages, and these owners may own several properties. It seems clear people have been buying properties for the primary business purpose of listing them on AirBnB.
This will add fuel to the fire when a recession hits, tourism grinds to a halt, and mortgages go into default.
Apparently this is a problem in Hawaii also. All it takes is some variety of Asian flu, or some sort of terrorist even in the Pacific (many Mainland people think the volcanoes on the Big Island are about to engulf Honolulu, for instance) or just the next financial crash, and those probably highly leveraged houses will become foreclosures.
Isn’t it lovely when a higher level of government restrict lower level of government pass laws that suit them. Happened with the bent government close to home, and the rationale was equally bent, for-the-children kind.
This CNMC sound like a prime example of gov-for-hire hotbed of corruption, which should be investigated by – sigh, another gov-for-hire office.
That said, this AirBnB and air travel boom is a by-product of ZIRP and QE, and will only be truly resolved if interest rates normalize.
In US history, the Supreme Court routinely struck down all federal and state attempts to regulate the workplace in terms of minimum wages, maximum working hours, and so on.
It wasn’t until the threatened court-packing scheme of FDR that we were finally able to move beyond a laissez-faire system.
Higher government overturning popular local restrictions is somewhat similar in this case, benefitting the owners and banks over the local majority of renters.
So the Entire Spanish Hotel industry vs the Spanish government? Hohoho! This will be good!
An especially cynical person might be inclined to note that bribing a regulator at the national level might be a much more efficient use of graft than attempting to bribe dozens of different local regulators.
Problem is, If one does not leave some graft on the table for the locals, they will put their creative energy into finding ways to thwart one.
In Spain, there are literally endless “work-to-rule” opportunities for the local authorities to mess with “head office”.
If the locals really begins to check building codes, zoning laws, as-built drawings versus the planning permisions versions, gas supplies, water, sanitation, electrical installations and so on and so forth. Loss of rental business will accumulate up the value chain and “management” has to fix it, in an amicable way, or they get more.
This could soon get interesting given the authoritarian bent of spanish politicians.
So how much is the hotel tax in Spain and how much revenue does it provide? It always comes down to the money.
Spain taxes everything they can, hence why I expect some heavy protests from the Hotel Industry. Heck there is even a tax for listening to Music inside a business!
My own observation is that it’s mostly investors buying an apartment or house for the specific purpose of renting it out on AirBnB. The problem is that the rest of the people living in the apartment building, or in houses on the same street, must now cope with a de facto hotel in their midst, in a place never zoned for a hotel. It degrades the quality of life for residents. I think the problem could be easily solved with a ruling requiring the AirBnB host to live full-time in the same apartment or house he rents out.
I agree!
“The great Austrian economist Ludwig von Mises described the cycle this way: profit-seeking entrepreneurs respond to the incentives created by bottlenecks and shortages that prior interventions have artificially created. Political activists in turn respond with more regulations. It’s an almost endless cycle that history teaches us usually doesn’t end well. ”
Airbnb, Uber and similar companies just responded to the incentives created by bottlenecks and shortages that political regulation created before in taxi and accommodation industry.
– Sheer nonsense !!! AirBnB & Uber are so popular because for A LOT OF people wages haven’t gone up but costs have.
– And the reason why wages haven’t gone up is increased productivity (something the austrians love so much). Contrary to conventional wisdom, increased productivity actually reduces demand and therefore puts downward pressure on wages.
– In that regard, those “shortages & bottlenecks” are being/have been created by the “entrepreneurs” themselves !!!
I agree!
The bottleneck was cheap tourism which is not wanted. The world simply cannot handle the whole of the human population traveling everywhere. Regulation must be created and enforced lest the world collapse under the weight of the massively mobile flesh.
Don Quijones you should read CNMC without bias.
In Madrid, Airbn is no more responsible for the noise than the lifetime restaurants and bars wich close at 2:00 Am
The crowded center and the “theme parkisation” as you call it, is not the fault of Airbn but of the municipal regulations that prohibit the entrance of cars to the center and by the hotels or museums that are usually part of the tourist zones.
If airbn is responsible for the rent increase in the tourist areas then why the rents have risen in the neighborhoods of Madrid, as in the widening of Vallecas or Las Tablas, miles away from the city center(In 4-5 years has risen from 11 to 14 €/m2)?
You wrote that “landlords and property speculators are pouring into the market, resulting in a dwindling stock of long-term rental properties. The result: fewer houses for locals and soaring prices for those that do still exist.”
Too often the “speculators” are blamed when the market does not do what we want.
If prices are soaring is because there is more demand than supply.
With interest for bank deposits at cero more and more “speculators”,both persons and REIT have chosen to invest 200-300k buying properties to rent and get 3-4%(I am not agree with your “dwindling stock”) but there are more and more people who likes living in the city centers of big cities.Rising rents is not happening in whole Spain in cities without job prospects.
You can not compare Airbn with a Hotel but if owners which use that platform pay all due taxes:VAT,IRPF, Social Security etc story will be quite different.
If preventing cars from entering tourist sectors has always been done, why are these sectors just now exploding with visitors? Simple, because it is now much cheaper to visit so many more people are going than could afford to in the past.
Sure.Blame tv or hollywood because someone from North Carolina want to visit Thailand.
And what the hell have lost a spaniard visiting norway fjords?
Damned Ryanair and Easyjet!
I do not agree with your comments made in this article . In Tenerife there are two types of apartment complexes – a tourist complex and a residential complex . Residential complexes are not allowed to rent out short term to tourists , but many do . The Canarian goverment brought in a law about 6 years ago which made it illegal to rent out tourist apartments short term and the fine for the first offence was €18,000 Euros ( I kid you not !) This was eventually eradicated by the Supreme Court and people are now renting out short term to tourists . In the meantime what has happened to the hotel industry and those who had tourist rental licence given by the government ? Answer – a huge increase in the number of hotels ( one with 235 rooms has just been opened in Costa Adeje and two more huge hotels are being built in the same area . Also many huge apartment complexes have been built for tourism rentals . What does this mean ?? The greedy top financial 1% are making a fortune and others who invested money as an investment in property hereabouts ( an paid a 7% tax in doing so ) are being treated in a disgracwful and disgusting manner . I would mention that many hotels will only accept fully inclusive bookings thereby cheating on local bars and restaurants ! I read your articles on a regular basis , but this time you are totally in the wrong !!!
agreed.
I used to rent through Airbnb many times before but than found Tranio and just stick to it since then. I just like it more because here professionals do the work for me for free )))) literally! I just say what, where and for how much I want and I get it.
Donald Riggs knows his stuff. The Cararian government in league with the hotel sector, the appropriately named hoteliers association named Ashotel pulled off something far more sinister.
2 days before they were to leave government in 2015 they pushed through hastily put together law that effectively banned almost everything but hotels. They really hate competition. The law had ridiculous clauses that no one could comply with like banning short stays in tourist areas and rustic areas, i.e basically everywhere. Also bed and breakfast was banned.
I recently saw someone joke that the only way you could comply with the law is by being dropped out of the air by drone.
To enforce the law the politicians now employ local councils as their attack dogs, hiring ever more “inspectors” to hand out ridiculous fines of between 30,000 and 300,000 euros. They are putting fear into the small guys who need to eat too.
Thanks to associations like ASCAV who filed the report with the competition court the hotels are now smelling defeat. They have asked the government to justify their actions one by one, of course they have no real justification but they will try stuff like protecting the environment and society as a whole. The bottom line is that hotels cannot have a monopoly on accommodation. They will lose but they are taking their time ( and money) from the powerful hotel lobby to delay as much as possible.
The people who the politicians represent would be the first to exploit the coastline and environment if it meant them all feeding at the trough a bit more.
I am not one for larger government in general but you can see when dirty politicians need a body above them who can kick their ass when they stitch up too many people.
As for rising prices, I am starting to hear this everywhere and everyone blaming the short let sector. In New Zealand it is the Chinese https://www.scmp.com/news/asia/australasia/article/2159849/new-zealand-bars-foreigners-buying-homes-chinese-blocked but the real reason is artificially low interest rates worldwide and people looking more than a 0.25% return on their bank cash.