Airbnb, one of the pioneers of the On Demand business model has run into headwinds with the authorities. The startup was last valued at US$30B when it raised US$1B in debt. It is no small feat given that it is barely ten years since its founding in 2008.
Unlike the big hoteliers like Hilton and Hyatt; Airbnb does not own any property. It built a business based on resources that it does not own. Not too long ago, analyst were excited at the limitless possibility for hyper-growth. The company has run into a chasm with the latest rounds of crackdown.
Singapore will crackdown on Airbnb rentals after legislation was passed to put a final end to short-term home subletting in the city reported The Stack magazine in the United Kingdom.
Under current rulings outlined by the Urban Redevelopment Authority (URA) home-owners in the city-state could be banned from renting out their homes for rentals shorter than six months. Violators could be fined up to S$200,000 or sent to jail for up to a year.
Enforcement officers will also be given more teeth. They will now be permitted to demand relevant documents from home-owners, record on-site video evidence and conduct forced entry into suspected homes.
‘Allowing residences to be used for short stays leads to high turnovers of occupants, and gives rise to nuisance and safety concerns. Most of us do prefer some familiarity with the people who live around our homes…’ the URA wrote in a statement. ‘We have repeatedly offered our support to relevant agencies to develop a framework that promotes responsible home-sharing. Nearly two years since the URA’s public consultation, it’s disappointing that the discussion has not moved forward.
‘More than 50 per cent of hosts in Singapore are sharing their primary residence – the home in which they live. For a lot of Singaporeans, the opportunity to list their home on Airbnb – for an average of S$5,000 per year – makes a real difference paying off the mortgage, electricity bills and other daily expenses.’
National Development Minister Lawrence Wong said in parliament that the government was considering a new type of private residence for which short-term rentals would be approved. But a glimpse of just what the new changes amounted to, was explained by Wong as “New residential sites can be sold with such an approved use, allowing flexibility for short-term rentals. For existing residential buildings, they would then require planning permission for change of use, and this would be subject to a set of guidelines which URA is looking into.”
Channel News Asia in a report quoting Airbnb said,”More than 50 per cent of hosts in Singapore are sharing their primary residence – the home in which they live. For a lot of Singaporeans, the opportunity to list their home on Airbnb – for an average of S$5,000 per year – makes a real difference paying off the mortgage, electricity bills and other daily expenses.”
Again in an interview with Channel NewsAsia in October 2015, Airbnb co-founder Nathan Blecharczyk said he hoped there would be a policy change in Singapore that would allow public and private homeowners to become Airbnb hosts. Mr Blecharczyk said then that his company democratises travel accommodation for both travellers and hosts.
Airbnb has faced its fair share of controversy globally. Those who support the platform believe that the service allows travellers to rent more affordable accommodation, while others accuse the company of hurting housing markets and threatening safety in residential areas.
In Santa Monica, U.S., Airbnb was dealt a huge blow in 2015, with tough regulations responsible for an 80% cut to short-term rentals in the area. The rulings stipulate that hosts in the Los Angeles suburb have to remain on the property during the visitor’s stay, register for a business licence, and collect a 14% occupancy tax.
Other cities around the world, including San Francisco, New York and Berlin, are also dealing with the service in a similar fashion, handing out penalties and even evictions.