Short-term Rentals — The Good, The Bad and the Ugly

As the shared economy makes its mark on the real estate industry, Lukman Hajje, Chief Commercial Officer at Property Finder, discusses both the opportunities and the downsides.

Short-term Rentals The Good, The Bad And The Ugly

The shared economy is thriving in the real estate sector. The allure is simple: the exchange of your underutilised asset for monetary gain. Aided, of course, and simplified by, technology.

The short-term rental industry existed long before the market moved online, but the rise of digital platforms like Airbnb has seen the industry soar.

Online platforms connect hosts looking to make a quick buck to guests who can enjoy competitive rates on accommodation options ranging from a couch to a room share, entire penthouses, chateaus and even private islands. Sounds like a win-win – and often it is. But for anyone living within a community being over-run with short-term renters, there’s a big downside.

Like many disruptive digital platforms, regulatory frameworks and the law are playing catch-up.

Airbnb has been in a widely publicised near eight-year feud with the city of New York. The marketplace, along with other short-term rental companies, will soon be required to disclose the name, address and other data on all New York hosts each month in a bid to police illegal listings. State law stipulates rentals must be for thirty days or more, unless the host also lives in the property at the time of the rental, effectively rendering every “entire apartment” listing in New York, illegal.

Even stricter legislation was passed in San Francisco requiring hosts to hold a city-issued registration number clearly advertised on their listings. A move which saw Airbnb listings drop by 50 percent.

In Paris, hosts must register with the city government and may only rent their homes for 120 days per year. Amsterdam permitted short-term rentals of up to 60
days per year, but new laws will restrict this to just thirty nights annually from 2019.

So, why the drastic regulatory stance? Raging parties ending in brawls, police arrests, unsavoury and illegal activities taking place behind closed doors have made headlines, but these laws are not just aimed at security issues and curbing the rise of the ‘party house’. More specifically they are designed to protect the residential nature and spirit of neighbourhoods.

The push for the short-term rental dollar has also reduced supply and driven up rents for local residents in some parts of the world, particularly in tourist hotspots.

Dubai, a highly transient city full of the world’s best hotels is well accustomed to short-term tenants. The Dubai government was ahead of the curve when it introduced clear short-term leasing regulations way back in early 2015.

For Khadija El Otmani, Managing Partner of Driven Homes: Dubai is a short-term rental friendly city. Licenses have been specifically created to enable real estate investors to generate income whilst dramatically reducing fraudulent subletting and illegal renting.

The Department of Tourism and Commerce Marketing (DTCM) governs short-term leasing in Dubai. A regulation decree exists to enable short-term leasing to operate alongside hotels. Before property can be advertised online, it must be registered as a ‘Holiday Home’. Upon registration, personal details as well as identification documents, and title deeds are collected. For tenants, a No Objection Certificate (NOC) from the landlord is required in an initiative to combat illegal subletting.

Guests are also registered with the DTCM prior to their stay. Booking details, payment transactions and copies of identification are captured. In the event of a complaint, full details of the complainant, nature, action and outcome must also be fully recorded.

Social problems generally arise with short-term rentals when the market isn’t policed closely,” noted Simon Kennedy, Co-Founder & CEO of Kennedy Towers. “Dubai is different. The market is highly regulated and the fines for unlicensed activity are high. Detailed minimum furnishing standards for properties, quick and simple unit licensing processes, clear guest registration procedures and regular DTCM inspections maintain the standards set.

The DTCM clearly states that: “a holiday home may be an apartment in a residential or mixed-use building, a townhouse or independent villa but must be a complete unit and not part of a unit.”

A quick scan of Airbnb and other popular online platforms offering short-term accommodation in Dubai will return search results for ‘private rooms’, ‘shared rooms’ and even caravans for rent! Whilst Airbnb does outline the DTCM’s legal requirements for short-term leasing in Dubai in their terms and conditions, it appears that these regulations are not adhered to by at least some of their advertisers.

At the end of the day, their role is merely to generate bookings. They are not regulators themselves,” added Simon Kennedy.

True, but critics would argue that international publishers who generate revenues and profits have at least some responsibility to ensure that local laws and standards are enforced.

At Property Finder we check that our short-term advertisers have a valid DTCM license and trade license before granting access to list on our platform. We do not allow private advertisers and don’t offer shared accommodation. But we are a paid B2C platform for industry professionals. We know our clients and it’s feasible for us to provide these checks and balances.

It’s more difficult for global C2C platforms like Airbnb. Difficult, but far from impossible.

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By Lukman Hajje

Chief Commercial Officer, Property Finder Group

This article was originally published in Prestige Magazine, Issue 37.

Browse short-term rentals on propertyfinder.ae. 

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