A Legislative Revolt Is Taking Place Against Airbnb All Over Europe

Airbnb Inc. is living out the old saying that if a hero lives long enough, he will eventually become a villain.

The platform took Europe by storm in much the same way it did America, and its runaway success quickly became a double-edged sword. Now, European legislators are beginning a pushback as firm and organized as anything the platform ever experienced in the U.S.

New Destination, Same Old Problem

When Airbnb came to Europe, it received a warm welcome similar to the one it received in the United States. Remember that Airbnb was originally a house-sharing site where like-minded vacationers around the world could spend time in unique spaces without being in a tiny hotel room. And for a while, that's what it was, until people realized that they could turn Airbnb into their own small business.   

Suddenly, you had investors buying properties in America's most in-demand rental markets to turn them into passive income-generating Airbnb suites. Entire investment funds were getting in on the action. While they were making a lot of money, they were also dramatically shrinking available rental inventory and driving prices for even long-term rentals through the roof.

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It wasn't long before would-be renters in cities like Los Angeles, New York and San Francisco were priced out of the rental market. This is to say nothing of neighbors living next to short-term rentals that quickly became all-night party spots preventing them from sleeping. The same thing has happened in Europe, but the problems are felt even more acutely. That's why European governments are beginning to push back harder.

European Cities With Housing Shortages

Most of Europe's top tourist destinations, such as Barcelona and Paris get their character from the locals who have lived there for multiple generations. It's not uncommon to meet people in these cities who live in the same neighborhood they grew up in and still have extended family in the immediate area. The rapid expansion of Airbnb suites has threatened that continuity.

Rents have skyrocketed, and more locals are being priced out every day. Young adults are finding themselves unable to compete with well-heeled foreign investors when it comes to buying properties. This disparity is exacerbated when the people buying the real estate are out-of-town investors who will only occupy the space for several months at a time and then rent it out short term for the rest of the year.

It has created a situation where many landlords make more money renting their properties through Airbnb for three or four months than they do by renting them long term. Add that to the stress that many European cities were feeling from being overburdened by tourists, and you have the perfect recipe for a legislative pushback.  It seems as if the entire European Union is taking or considering measures to curtail further growth by short-term rentals.

This Is The Second Phase Of Anti-Airbnb Regulations

The issues Europe's most popular vacation destinations are experiencing with Airbnb are not new. When the problem first manifested itself, cities such as Barcelona and Lisbon initiated a licensing process. Landlords were required to apply for and receive a license from the local government to operate an Airbnb or short-term rental that housed tenants for less than 30 days at a time.

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But the cat was out of the bag by then. At the same time these restrictions were proposed, Golden Visa laws in Spain and Portugal made it possible for anyone who could invest 500,000 euros ($527,387) cash into one or more properties to qualify for an automatic residency visa.

For tens of thousands of Americans, the easiest way to do that was to purchase properties for use as short-term rentals. When this problem first manifested itself, it was possible to buy properties in prime Barcelona or Lisbon locations for 250,000 euros or less. Many Americans, who were sitting on huge amounts of equity or profits from having sold their homes dove in head first, causing governments to crack down harder.

A Look At The Rules In Existence And Under Consideration

The second wave of restrictions is even more severe. Portugal has suspended its Golden Visa program and stopped issuing licenses for short-term rentals in urban cities — Lisbon and Porto are off the list entirely. Barcelona banned the issuance of any new tourist flat licenses, meaning there will be no more authorized short-term rentals in the city.

The ban extends to both landlords and tenants, with fines of up to 10,000 euros levied for violations. New apartment leases have clauses advising tenants of the prohibition and fines to put them off the idea of renting a flat and generating cash with Airbnb. The city also authorized inspectors who verify that short-term rentals have licenses or long-term rentals are not being converted to Airbnb suites by unscrupulous tenants.

Other restrictions by nation include:

London/UK: London has capped the number of days any person may do short-term leasing at 90 per calendar year. Any person seeking to rent out a property on a short-term basis for more than 90 days must apply for a change-of-use permit and gain council approval.

Scotland and Northern Ireland have initiated their licensing requirements. Edinburgh property owners who want to rent out second homes for short-term leases must gain approval from the City Council, which can deny the application if it believes it would negatively impact local housing stock or city planning. Northern Irish landlords must obtain an official tourist certificate from the country's tourism board to do short-term rentals.

Italy: Rome has a registration requirement and taxes the income generated by short-term leases between 21% and 43% on an annual basis. The amount of taxes depends on the annual income of the property owner. All short-term rental landlords also must report the identities of their visitors to the local police. A tourism tax of 3.50 euros per night for each tenant over 18 also is imposed. Florence, Venice and Milan have adopted similar restrictions.

At the national level, requiring short-term rental owners to comply with the same licensing and regulatory requirements as hotels is proposed. There is also a proposal to enforce minimum two-day stays on short-term rentals in tourist hot spots and old cities. The idea is that this would curb the turnover in some buildings, where many of the units are owned by various short-term landlords.

Netherlands: Amsterdam already has a law on the books limiting property owners to an annual maximum of 30 days of short-term rentals. Anyone seeking to go longer must apply for a short-term license.

Airbnb And Short-Term Rentals Will Survive

Despite the pushback short-term rentals are feeling across Europe, the industry is there to stay. Businesses that disrupt existing industries the way Airbnb has tend to operate for a few years in front of the regulatory curve. This period can seem like a free-for-all and tremendous sums are made by well-positioned investors.

But the pendulum always swings back, and that is what's happening to the short-term rental business in Europe. The sector has generated too much money for any government, even the EU, to legislate it out of existence. In the meantime, Airbnb and similar services will continue to experience growing pains. If you're an investor looking to get into this field, you may be better off letting professionals handle the management by getting into fractional ownership or buying into offerings with third-party management. Leave the heavy lifting to the people who train for it, and you can still do very well with short-term rental investments.

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