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How Countries Are Handling Airbnb’s Disruption

11 Jul 2018

With 35 million international arrivals to Bangkok in 2017, it has become a major challenge for the Thai government to regulate Airbnb.

Many Airbnb listings compete against hotel industry offerings, yet hosts that operate through Airbnb do not pay taxes nor do they have the necessary safety standards that are required from hotels and serviced apartments.

The core of Airbnb’s problem in Thailand, a tech company created only less than 10 years ago, is that there are currently no laws that specifically address Airbnb’s disruptive business model innovation.

However, in 2018, two Airbnb hosts were each fined THB 5,000 over their roles in providing unauthorized short-term stays by the Hua Hin Provincial Court, each with varying daily fines for the duration of the offense.

Different countries are taking different approaches in dealing with Airbnb’s disruption.

In Singapore, all short-term rental of private and public housing posted on Airbnb is strictly prohibited, the permitted length of lease is a minimum of three months and six months, respectively. The Singaporean government’s intention is clearly to protect the hotel industry.

Japan is attempting to gradually legitimize Airbnb by recently implementing the Minpaku “Home-Sharing” Law, which has been in effect since 15 June 2018 onwards.

Eighty percent of Japan’s Airbnb listings had been removed prior to the new law’s implementation; this law states that all Airbnb hosts are required to register for authorities to inspect their premises and issue official fire and safety permits. Properties can only be rented out through Airbnb for no more than 180 days per year and failure to comply with the law can result in fines of up to 1 million yen (300,000 baht).

France often prohibits Airbnb in crowded urban areas because of concerns related to inadequate housing supply. Hosts are not permitted to rent out primary residences for a period of more than 120 days per year unless a special permit is obtained.

In cases where a landlord authorizes a tenant to sublet through Airbnb, the tenant’s monthly revenue from subletting must not surpass the monthly rent paid to the landlord. Italy addressed Airbnb’s situation by giving landlords an option to apply a flat 21% tax on short-term rental income instead of the traditional personal income tax bracket that ranges from 23% to 43%. It is Airbnb’s duty to transfer the 21% tax on gross rent to the Italian Revenue Agency and transfer the remainder to the landlord.

In Thailand, there are two ambiguous laws related to Airbnb’s case. The first being, the 2004 Hotel Act which prohibits landlords of properties from providing short-term rentals for a period of less than 30 days without a hotel license. The second law however, the 2008 Ministerial Regulation, which governs hotel operations, contains clauses that would exclude short-term rental properties, specifically guesthouses or properties with 4 rooms or less and/or can accommodate no more than 20 guests, from being considered as a hotel.

To some extent, renting out private houses on Airbnb is comparable to operating a guest house because these properties operate in a small scale, whereby single guests / groups are easily monitored.

However, problems tend to happen when condominium owners start renting out their units through Airbnb. Condominium buildings have many different owners some of whom are owner occupiers and others who rent out properties to medium- to long-term tenants, who make these condos their home and thus would not approve of any disturbance and potential safety issue often caused by short-term transient guests who rent rooms on a daily or weekly basis.

This explains why many condominium juristic entities are putting up notices prohibiting Airbnb in their buildings and often refer to the 2004 Hotel Act. It remains to be seen what the standardized penalty will be and how severely it will be enforced on lawbreakers as compared to other Asian countries.

An article written by Aaron Aerni Kuvanun, senior analyst, CBRE Research & Consulting, CBRE Thailand for Bangkok Post dated 11 July 2018.