Too Slow To Legislate: Rentals

Javi López is an MEP from the PSOE socialist party in Catalonia. Via the European Parliament, López has called on the EU to act against websites such as Airbnb. He says that these websites - or more accurately the availability of rented accommodation for visitors - are driving residents out of large cities such as Barcelona. He recognises that the so-called collaborative economy constitutes a market revolution and does offer new opportunities for consumer. However, this comes at costs - unfair competition, the "gentrification" of urban centres, threats to labour rights, exorbitant increases in prices, loss of trade for small businesses, the creation of "ghost" urban centres deprived of life because residents have been expelled.

In order to address these issues, López wants the EU to regulate websites at a European community level in similar ways to which cities or governments have done in order to ensure the "equitable" availability of housing. The chances of the EU doing this are, you would think, pretty slim. In June 2016 the European Commission presented its recommendations for member states with regard to the collaborative economy in its different guises, so therefore the likes of Uber as well as Airbnb.

These recommendations included one which stated that restrictions or bans could only be permitted if they were "proportional", which did rather beg a question as to what proportional means. “Absolute bans and quantitative restrictions should only be used as a measure of last resort,” said the commission, a vice-president of which stated that stricter regulations on sharing economy companies could cost Europe. What also is a "last resort"?

While not seeking to be restrictive, the commission nevertheless accepted that the collaborative economy does raise questions related to employment and consumer protection, social security, tax issues and safety standards. Since then, there does seem to have been a shift in European thinking. While remaining steadfast to a principle of non-restriction, there has been a growing appreciation of difficulties surrounding matters that had been identified in June 2016, not least the payment of tax.

The European Commission is in the process of analysing guidelines for the holiday rental industry, but it would still seem most unlikely that it would go as far as politicians such as López would like. Meanwhile, and despite the recommendations that were made some eighteen months ago, there are all manner of local regulations that are designed to be restrictive.

In Amsterdam, as an example, the town hall has announced that from the start of 2019 owners of apartments that promote via Airbnb or similar will only be able to rent out for a maximum of thirty days per annum. At present, there is a limit of sixty days. The decision has been taken in order to "limit the negative influence of holiday rental apartments". According to the town hall, the numbers of apartments marketed on websites went up from 4,500 in 2013 to 22,000 in 2017. This increase has "unwished-for repercussions in various neighbourhoods of Amsterdam".

The situation has of course been mirrored elsewhere - Palma, for instance - and it has cascaded downwards from the big cities to the resorts, and not only in Mallorca. The Amsterdam figures, with a fivefold increase in the space of five years, speaks volumes for the spectacular rise of the collaborative economy holiday rental industry, but the term collaborative economy has now been shown to stand for speculation and for abuse. What was once a good idea has been turned into a monster of greed with its demands of complete freedom of market, often with little consideration for labour and tax standards, that is breeding social discontent.

I will continue to maintain that had there been legislation in 2012 or 2013 that would have permitted the legalisation of at least a proportion of apartments (if not all of them) so that these could have been openly marketed as tourist lets, we would not now be in the situation that we find ourselves. Much of the stock of holiday rental apartments that has surfaced since then is purely because of speculation that has been created by the websites. Had there been legislation, effective and clear legislation, anything coming onto the market after, say, 2013 or 2014, would have been illegal and would remain illegal. Unfortunately, the Partido Popular chose to sit on their hands and did nothing.

As a consequence we have the broad brush approach of the current government allied to the absurdities that are bound to emerge from zoning. And this approach, meanwhile, seems to run counter to what the European Commission recommended. Or is it a justifiable and proportional "last resort"? Who knows, but the Aptur holiday rentals association would like to get an answer; hence why it intends a challenge to the Balearic legislation in Brussels. But a challenge based on what? The EU now seems unsure. The collaborative economy has created a legislative minefield that is being plotted with slowness and uncertainties.

The Spanish Problem Of Rentals

"We have an obligation to put order into the tourist offer, the sector and coexistence. These concepts are very clear in, for example, municipality's urban plans."

This quote, translated pretty much literally, disguises - thanks to Spanish usage - the target for this "order". The tourist offer means accommodation, and specifically rented accommodation. The sector is the business of this accommodation. The coexistence is the balance between tourists and residents. The words were spoken not by a Balearic politician but by the director-general for tourism in Extremadura, a region hardly noted for its mass tourism and one without any "sun and beach". There's plenty of sun, very hot sun at that, but Extremadura's tourism is predicated on beach alternatives - the reason why it doesn't have mass tourism.

Francisco Martín Simón, the director-general, explains that the obligation extends to fighting unfair competition that undermines businesses which pay taxes and create jobs. In the region of Castile and León, likewise without any beach tourism, his counterpart speaks of tackling the problem through inspection, agreements with town halls, information and a "register of transgressors". She, Blanca Arévalo, was participating in a conference on interior tourism along with other regional representatives. The messages were basically the same in fighting illegal accommodation.

In Extremadura there are said to be 608 illegal holiday rentals. This is for a region which covers almost 42,000 square kilometres. Mallorca's land size is less than one tenth of this - 3,640 square kilometres. The total land area of the Balearics only barely manages to be above one tenth (it's just under 5,000 square kilometres). The islands' official resident population is almost identical to that of Extremadura.

In terms of tourism, one isn't by any stretch of the imagination comparing like with like. But in population terms one is. The density of population in the Balearics is massive even without tourists adding to it. The 608 illegal rentals in Extremadura are a drop in the Balearic Sea by comparison. You could count that many just by spending an afternoon walking around parts of resorts in Mallorca.

The exact number for Mallorca and the Balearics is hard to know, given the conflicting figures that are issued; or at least were before the rentals' legislation began to have a real impact. Earlier this year, though, the number of properties in the Balearics on Airbnb was 22,000. On HomeAway it was 24,000. Many of these will probably have been duplicates and certainly not all will have been illegal, but even Aptur, the association for holiday rentals, was recognising the scale - more than 40,000 apartments being rented out in an illegal manner, it reported in May this year. Extremadura is roughly ten times the size of the Balearics; the number of illegal rentals in the Balearics wasn't ten times the number in Extremadura, it was heading towards one hundred times as many.

In Castile and León, more than twice the size of Extremadura and with a regular population just over 100% greater, they haven't been able to come up with an exact figure of illegal rentals, but an estimate offered in May this year suggested some 2,000: one for every 1,200 people in the region. In the Balearics the ratio was around one for every 27. The regional government there has introduced fines of up to 90,000 euros, and that is the maximum for individuals, more than twice the Balearic maximum.

Andalusia was also represented at the conference. It does of course have very significant sun-and-beach tourism. It also has a vast interior. The approach in that region has been to enable legal registration. More than 20,000 properties were registered within the first ten months of the law coming into force in 2016. It is reckoned that there were at least 80,000 illegal properties, but even having introduced a relatively permissive regime (not totally unlike Catalonia), the number isn't going down markedly. In Andalusia, where the maximum fine can be as high as 150,000 euros, they want the state to step in, convinced that only national law, and a harmonised one at that, can really get to the bottom of the matter.

Whatever one thinks about the Balearic legislation, the fact is that the Balearics most certainly isn't alone in addressing the rentals' question. Whatever the motive for adopting legislation - to deal with tax fraud, the underground economy, unfair competition, pressures on housing, "saturation" and coexistence - the regions of Spain are all confronted with the issues. When one makes a comparison between two extremes (tourism in the Balearics and Extremadura), one can see how just much pressure there is in the Balearics. But Extremadura, as with Castile and León, Andalusia and other regions, share one undeniable factor in common - the Airbnb effect.

The Balearic government, rightly or wrongly, is castigated for its legislation, but the government, like other regions, is legislating against symptoms. It isn't the cause.