🔒 WORLDVIEW: Government is probably right to regulate Airbnb

By Felicity Duncan

South Africans who have taken advantage of Airbnb to generate revenue from their homes and holiday homes are fretting about the government’s move to regulate the home-rental market. They say that the Tourism Amendment Bill will devastate the home-rental industry, artificially raise prices, and infringe on ownership rights. They also say that the changes will hurt employment and small business development.

From their perspective, this is probably true. But the government is not just obliged to consider the interests of property owners with a side hustle. It must consider the broad interests of the country as a whole and everyone in it. And from that perspective, there is a good case for regulation.

Indeed, governments around the world see a case for regulation and there are multiple initiatives to regulate services like Airbnb at the national, state, and city levels, some of which are quite draconian.

In London, short-term rentals of whole homes cannot exceed 90 days. In Berlin, hosts need a permit to rent 50% or more of their primary residence for a short time. Barcelona allows only licensed homes to be rented and has stopped issuing new licenses. New York doesn’t allow apartments to be rented for 30 or fewer consecutive days unless the host is physically present and living in the flat. Many countries require Airbnb to report hosts income to tax authorities to ensure they pay the required taxes.

So, why should the government regulate short-term home rentals?

First, the government is a bulwark against unfair markets. Markets operate best when the law does not favour one group over another and when all groups have equal access to the market and the structures of the law.

Right now, SA’s hotels are competing against Airbnb with both hands tied behind their backs. They are subject to extensive health and safety rules, they pay taxes, and they adhere to various codes of conduct. Airbnb hosts do not.

Note, I am not saying that hosts are malevolent evildoers who murder all their guests and evade taxes. But they are free from the rules that apply to actual hotels. This is unfair. It makes hospitality into an unfair market with unfair barriers in place. Regulation – if done right – will level the playing field. If a person buys a second home and uses it as an Airbnb 300 days a year, that home is a commercial property and should be treated as such.

Second, the evidence suggests that online reputation systems are not enough to protect hosts and guests from safety issues. Many Airbnb rooms/homes do not have basic safety equipment. A review of Airbnb horror stories found common complaints included sudden cancellations by hosts, scams, safety and hygiene issues, and discrimination.

Hotels and other hospitality providers are regulated to deal with precisely these issues. The goal of safety regulations is to prevent disasters before they happen. A safety check may have, for example, saved the life of a four-year-old who died when the swing set at his family’s Airbnb collapsed. It may have helped the man who lost his father to an unsafe rope swing at an Airbnb. It may have saved the American woman who was murdered by the security guard at the complex her Airbnb was in or the couple that died of carbon monoxide poisoning in an Airbnb in Mexico.

Accidents happen, of course, but regular safety audits can help prevent problems hosts may not even be aware of. Regulation is good at forcing such audits. Hotels are subject to more stringent safety rules than people’s houses for a good reason – because strangers entrust them with their lives. If you use your house as a hotel, you should follow the same rules.

Right now, Airbnb hosts are operating a lot like the fake bottled water plant in Crown Mines. They are offering something that looks like the “real thing” but is produced without the safety standards and oversight that make the real thing safe. And while Airbnb has certainly created a welcome revenue stream for property-owning South Africans, it’s not clear that it’s doing much good for the rest of us.

For example, there is evidence that Airbnb can raise rents and reduce the availability of rental stock, which is something SA – with its enormous and complex housing and land problems – should consider carefully. There is also little evidence that Airbnb creates jobs. Hotels create jobs for cleaners, administrators, security personnel, accountants, managers and the rest. But if a person throws their spare bedroom up on Airbnb, well, the job creation factor is pretty low. Especially if that person already has another job (which is likely, since they own property).

Airbnb can increase the diversity and availability of hospitality stock, generate income for homeowners, and offer tourists a unique experience. However, none of this means that short-term home rentals should be exempt from the rules that apply to short-term hotel rentals.

The government must take care to ensure that regulations level the playing field and protect guests without placing undue burdens on hosts or creating new, unfair barriers. And hosts should lobby the government hard during the public comment period to ensure that the regulatory process is transparent and fair. But, bottom line, the state is well within its purview to regulate home rentals.