Unlicensed Airbnbs: Lessons for Scotland from a global crisis

America’s biggest city starting today (September 5) is insisting that hosts register with its mayor’s office. It is deadline day.

The Big Apple is just the latest local or national authority to try and regulate an industry that has boomed ever since Airbnb and similar online platforms made it easy for owners to turn homes in to unlicensed hotels.

New York - one of the most visited destinations in the world - has more than 40,000 properties listed for short-term rent to tourists, business people and others.

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As in Scotland, lobbies representing the sector say regulation will mean thousands of these little businesses will shut down, perhaps creating a shortage of holiday accommodation in the city.

New York has said that platforms like Airbnb or booking.com will be breaking the law if they process payments from unregistered hosts. 

Yet there is no rush from business owners to comply with the scheme…and a backlog of paperwork for municipal clerks to work through.

“It seems clear to me, based upon the current speed at which the city is processing applications for hosts, that a lot of supply will drop out of what's currently available,” Sean Hennessey, an associate professor at the New York University School of Professional Studies Jonathan M. Tisch Center of Hospitality, told The Herald’s American sister paper US Today last week. 

Other US outlets this weekend suggested only a quarter of hosts had registered. Some may never be able to do so. 

Edinburgh

Research firm AirDNA reckons that 7500 of the stays offered on the Airbnb platform do not comply with new rules - and will eventually disappear. The firm said this included some of the most rented properties - such as whole, empty apartments - and could cost airbnb 40% of its income in one of its biggest markets.

Under the New York rules the owners or managers of apartment blocks can ban tenants from offering short-term lets. 

The website Gothamist using freedom of information laws calculated that 8,700 had already done so. And that includes everything from midtown skyscrapers to bijou buildings in the Greenwich village.

Earlier this year industry figures predicted that 10,000 properties would be unlisted in New York. 

Holiday experts have advised that this could mean the city becomes more expensive for tourists.

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Airbnb and some of its hosts fought and lost a legal battle to stop the New York’s new rules, which stem from January 2022 legislation. A judge said the regulations proposed were “entirely rational”.

The new local law was passed after 12,000 formal complaints were made between 2017 and 2021 about short-term rentals in the city.

As in Scotland and many other jurisdictions New York’s regulation was also provoked by concerns over housing supply. 

Short-term lets attract visitors and generate tourism income. But they also put a drag on the wider economy by making it harder for workers to get accommodation.

Airbnb and the hosts it supports argue, in America as much as anywhere else, that the former outweighs the latter.

New York

“New York City’s new short-term rental rules are a blow to its tourism economy and the thousands of New Yorkers and small businesses in the outer boroughs who rely on home sharing and tourism dollars to help make ends meet,” Theo Yedinsky, Global Policy Director for Airbnb. “The city is sending a clear message to millions of potential visitors who will now have fewer accommodation options when they visit New York City: you are not welcome.”

Other stakeholders, including the leaders of major cities and regions, are not so sure. 

Scotland’s licensing regime for short-term lets is due to come in to force a few weeks later than New York’s, on October 1. Some politicians and business interests are lobbying for a delay. 

As in New York, there are concerns of red tape. As The Herald reported last week only 2.2% of Edinburgh hosts who have applied for planning permission have so far been approved. And without planning permission they cannot get a licence.

Government officials in Scotland stressed they have already extended the period for applications and that no application, as yet, had been refused.

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It is not clear what will happen in New York or Scotland if regulatory regimes are imposed with low compliance.

However, attempts to impose a legal framework on short-term lets elsewhere have previously failed to be fully effective.

Some operators around the world have just shrugged off restrictions, regulation, licensing or even safety checks.

And this has been the case in even in the most developed countries with strong rule-of-law traditions.

An investigation by Bloomberg, the wire agency, last month cited Copenhagen as an example of where short-term holiday lets are still on offer despite a crackdown.

Copenhagen

The Danish capital banned landlords and landladies from renting out properties for more than 70 days a year. 

Bloomberg spoke to tenants in Nørrebro, the formerly working-class neighbourhood north of the centre that is increasingly chic and multicultural.  

One, who declined to be named because he feared landlord reprisals, said he was leaving the area.

“My building is half a hotel now,” the tenant said.

The Copenhagen rules are tougher than Scotland’s. So are those in Berlin. The German capital initially banned short-term lets in apartments but found this impossible to enforce. It has since eased its regulations and insisted on licensing. 

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Barcelona has possibly had the most high profile battle with short-term lets: its Mayor Ada Colau was elected on a pledge to battle Airbnb taking thousands of homes out of the market for locals. 

The city has a well-funded enforcement arm for its regulations.  Yet even now just under half of all listings on airbnb in the Catalan capital are for unlicensed properties, according to the data site insideairbnb.com.

Airbnb is not the only site offering such rentals. But its data is easiest to harvest. In Edinburgh alone insideairbnb.com has identified 7698 listing with an average estimated annual income of more than £15,000 each. That is £116m a year in total. 

Will New York follow the global pattern of mass non-compliance or under compliance with regulation? Will Scotland? Only D-Day will tell.