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The ‘home sharing economy’ has grown rapidly in recent years and regulations have failed to keep up.

The term ‘home sharing’ is misleading, as in many cases neither home owner nor home are involved but rather ‘landlords’ with multiple properties, operating as businesses, often illegally.
The British Hospitality Association is leading the campaign for a fair playing field in terms of regulatory compliance and taxation. The BHA has consistently confronted the difficulties arising from the role of home sharing platforms as 'intermediaries' - operating a huge sharing economy without responsibility for the services they facilitate or obligation to provide data to relevant authorities to enforce the law, without which rogue landlords can ignore fire, health and food safety laws and avoid paying taxes.

The BHA has led effective lobbying in Parliament, the Greater London Authority and other local authorities. We welcomed proposals in March 2017 by London MPs that would place greater notification requirements on Airbnb hosts and will encourage the government to legislate to do this.
In December 2016 this continued effort resulted in one online platform, Airbnb, agreeing to block hosts from renting entire homes for more than the 90 days a year permitted in London, unless they have planning permission to do so.

It is essential that all accommodation providers in the United Kingdom comply with regulations designed to protect consumers and neighbourhoods and maintain standards.
New York, Paris, Berlin and many other destinations have developed different solutions to manage both the challenges and opportunities that have emerged from online platforms, and the British Hospitality Association is leading the way in ensuring that UK government, at both and local and national level, can understand the full economic and social impact and respond accordingly.

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The ‘home sharing economy’ has grown rapidly into a huge global business. The term ‘home sharing’ is misleading, since in many cases neither home owner nor home are involved but rather ‘landlords’ with multiple properties, operating as businesses, often illegally.

Meanwhile, online platforms regularly expand their offering to include such things as flights, travel and package holidays and ‘business ready’ accommodation. The largest platform, Airbnb, is now valued at $30 billion, operates in 200 countries and has an estimated 49,000 listings in London alone. Recently Airbnb acquired another successful platform ‘Luxury Retreats’, further consolidating its position.

The ‘intermediary’ status of home sharing platforms allows for rapid growth. The platforms have no responsibility for the services they facilitate and no obligation to provide data to local authorities to enable enforcement of the law. This business model creates an invisible economy, running in parallel with traditional business, in which there is a stark contrast between the rigorous enforcement of regulation in ‘traditional’ hospitality and the inability to enforce in the sharing sector, even when business hosts are providing the same services.

Cities across the world are feeling the effects. Issues range from the immediate need to keep visitors safe and local communities intact, to broader concerns that the hospitality and tourism industry, responsible for many jobs and vital to local economies, is at risk in an anti-competitive market place.[1]

Whilst many British towns and cities are feeling negative impacts from the sharing economy, problems are most acute in London. Hospitality and tourism employs 500,000 people in London, providing 10% of regional employment. Hospitality contributes half of this employing 244,000 people and in economic terms contributing £11bn to Gross Value Added to GDP. [2]

Safety

In the UK, well-developed gas, fire and food safety and planning regulations often apply to properties in the sharing economy but cannot be enforced as inspectors do not have databases of such properties.

Visitors and communities are at put at risk when legal safety requirements are reliant on the goodwill and compliance of hosts rather than independent checks and enforcement.

In contrast, safety and planning laws are rigorously controlled in the ‘traditional’ hospitality and tourism, providing a safe and attractive accommodation for tourists.

Housing

Housing shortage is also of great concern, especially in London, where short lettings are allowed for 90 days a year without planning permission.[3]  Many ‘hosts’ are not owner-occupiers but rather ‘landlords’ using sharing platforms to let multiple properties short-term to visitors, exacerbating the housing shortage and increasing costs for residents. Research from London Councils has shown short term rentals attract 3 or 4 times the rental income of residential lettings.

Airbnb recently agreed to block hosts from letting entire homes for more than 90 days but on their platform, but this would not stop the landlord from using competitor platform. Whilst this move was welcome, it is limited in its efficacy.

The BHA welcomes legislative proposals by London MP Karen Buck which would require hosts to notify the local council of all their lettings bookings each year, a vital information gathering step that could re-introduce residential properties to the housing supply.

Taxation

Another key issue is fiscal responsibility and contribution from all hospitality providers to support a safe industry and contribute to the country’s economy.

Many online platforms are headquartered abroad, for example, Airbnb is based in Ireland and pays comparatively little UK Corporation Tax, VAT only on platform commission (around 13% of room price) and owning few physical assets, low business rates.

Businesses in the traditional hospitality industry, on the other hand, pay corporation tax, business rates and VAT at 20% on the room price (the latter two estimated to account for 17% of room price after recovery of VAT).

HMRC considers sharing economy activities a significant part of the hidden economy and it is hoped that its new powers to require bulk data from intermediaries (Finance Act 2016), will be used in the home sharing economy. The upcoming consultation on the rent-a- room £7,500 tax relief, is also welcome.

Solutions

The solutions to some of these concerns seem self-evident – such as notification of all lettings each year to local authorities across the UK. While independent management by local authorities of safety and planning is crucial and should apply across the UK, with hosts subject to sanctions if they fail to notify. Annual host notification fees could provide the extra resources needed to regulate the many thousands of new listings on home sharing platforms. Transparency for the consumer is also important - clarification of host status should be apparent and included on the platform website as either host (home owner) or professional (landlord/business).

The distinction between ‘sharing’ activity and ‘traditional’ hospitality is misleading, since many services provided within the sharing economy are businesses. Greater transparency, independently managed registration and resource would help to ensure a competitive tourist industry, in which all sectors contribute to support a safe and attractive tourist destination.

Annex:  International Position

Concerns are being expressed in cities all over the world, from Sydney to New York to Berlin, resulting in an interesting array of new regulations, a few of which are included below:

New York: a 2010 law prohibits lettings of less than one month if the landlord is not present. Designed to stop thousands of apartment buildings in New York being turned into de facto hotels and to prevent the takeover of buildings, zoned for residential use, by landlords wanting the short-term rental higher incomes. Legal battles over taxes and lettings are numerous.

In June 2016, the New York State introduced a law making it illegal to advertise short-term rentals (up to 30 days) for entire homes on Airbnb. Airbnb sued the State of New York but subsequently settled, provided only hosts, not the platform, could be sued for failure to comply with planning law.

San Francisco:  updated the existing home-sharing law, which required hosts renting for less than 30 days to register with the city and be the primary resident of the home.

However, 80% of hosts failed to comply with this law and new rules were introduced, requiring Airbnb to remove all landlords who do not register, or face penalties of up to $1,000 per day and six months in jail for each unregistered listing. Airbnb sued the city in federal court for introducing unconstitutional rules and lost.

Many other US cities have introduced regulation - similar limitations on rental periods, registration requirements and fines - introduced to protect housing and avoid community disruption.

Amsterdam: residents may rent out their homes for up to 60 days per year to not more than 4 guests.  The rules are designed to protect those living and working in the city. However, there have been many breaches (74% of lettings are said to breach the 60 days, whilst 25% of listings are from hosts with multiple properties and more than a tenth have more than 4 guests staying, both illegal). This year Airbnb has agreed to block listings beyond 60 days. A registration system was approved in parliament but has not been implemented, they are monitoring progress.

Brussels:  the city’s administrative court introduced a system for host registration and inspection of health and safety compliance. Under the ban, in effect since 1 May, people who let more than 50% of their apartment on a short-term basis without a permit from the city risk a fine of €100,000 (£78,000).

Paris: resident owners may let in Paris for 120 days. Legislation has been passed and the decrees (i.e. how to implement) will be published soon. Hosts must verify status as home owner or professional on the website, cities of more than 50,000 can choose to implement a registration system.

Berlin has introduced a law allowing only single rooms to be let by resident owners, in not more than half the property, with fines of euros 100,000 for breach, to safeguard housing for resident

[1] See annex for examples of regulation introduced in the US and Europe.

[2] PWC and London First

[3] Deregulation Act 2015

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Online Travel Agencies update:

The BHA recently discussed online booking with stakeholders at a roundtable meeting on digital issues. It was apparent that venues of all sizes continue to experience a market in which businesses, as well as consumers, are faced with a lack of competition and transparency.

Of key concern is the intermediary status and favourable tax position of OTAs, which has led to rapid expansion in their wealth and power. The largest platforms use their profits to buy  huge amounts of online advertising and to bid on AdWords, (such as the name of a hotel) so as  to appear on the first pages of customers' searches. They also have the resources to acquire successful start-up platforms, which might otherwise provide competition in the market.

This creates  an uneven playing field for hospitality businesses, which are responsible for employees, buildings and taxes and do not, in general, have the advertising budgets necessary to compete for online visibility. Furthermore, hospitality venues  rely  on OTAs for bookings, so have little bargaining power in negotiations, leading to  high commission rates, most favoured nations / parity clauses and tactics such as ‘dimming’, used against venues.

We are concerned that customers believe they are getting the 'best price', when prices are generally the same, due to MFN ( even when  'narrow parity' ) clauses and are generally  unaware of other key aspects of their booking, such as the inclusion of commission in room price and how rankings and ratings are awarded to venues.

At our roundtable it was universally agreed that a key focus for BHA lobbying should be the need for transparency and consumer awareness, as well as specific industry issues.

Competition and Markets Authority

 The BHA responded to the Competition and Market Authority’s (CMA) Digital Comparison Tools Market Study, answering a variety of questions on consumer use of DCTs and their expectations, as well as the effects on suppliers and competition.  The BHA response focussed on OTAs and the anti-competitive effects, as well as detriment to consumers.

At the end of March the CMA issued a press release and update on its findings and has asked for responses by 24 April, providing a second opportunity for evidence and comment. The final report is due in September this year.BHA evidence and CMA update can be found here https://www.gov.uk/cma-cases/digital-comparison-tools-market-studyyear.

Competition and Markets Authority European Study

The BHA has worked closely with the CMA on their study of the effects of  MFNs (Most Favoured Nation / narrow parity clauses), part of the European Commission 10 country study.

https://www.gov.uk/cma-cases/online-travel-agents-monitoring-of-pricing-practices

The Commission has issued a press release, indicating that it believes more time is needed to assess the impact of ‘narrow parity’ and will continue to monitor. The EC will publish its report soon. The CMA will continue to work with the CMA once the report is published http://ec.europa.eu/competition/antitrust/ECN_meeting_outcome_17022017.pdf

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