Clamping down on Airbnb should be scrapped

In its desperate search for someone other than itself to blame for the housing shortage, the Government has made a scapegoat of Airbnb and other short-term lettings websites.

It seems to have got the idea from other countries that have clamped down on such lettings in response to public discontent.

The Short Term Letting and Tourism Bill, which the Government says will result in roughly 10,000 out of 32,000 short-term letting properties returning or shifting to the long-term rental market, is making its way through the Oireachtas, and is expected to come into effect in May next year. It may be something of a drop in the ocean in terms of the overall housing crisis, but it plays well with an increasingly irritated public.

Once the legislation comes into effect Airbnb and other short-term letting providers will only be able to list properties that are on a new register of short-term lets operated by Fáilte Ireland, which will in turn allow local authorities to determine whether the property has the necessary planning permission. The presumption is that many properties in cities and larger urban areas will not have – and can’t get – planning permission to operate as a short-term rental.

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Unfortunately – for the Government at least – the Economic and Social Research Institute (ESRI) has thrown a spanner in the works. Last week the government-funded independent think tank published research which challenges both the efficacy and the necessity of the legislation.

The first of several problems it raises is that many rural Airbnbs are originally holiday homes, according to the 2016 census. It points out that there is no guarantee that driving their owners out of the short-term letting market – because they don’t have planning permission - will result in properties being put on the long-term rental market. Owners might just keep them as holiday homes. Presumably many owners are still using them as holidays homes in between short-term lets.

The ESRI also points out that international experience shows the sort of regulatory approach being contemplated here only works if it is rigorously implemented. “Only the stricter forms of regulation appear to lead to a decrease in long-term housing market prices,” it warns.

The decision to push the responsibility for policing whether Airbnbs are registered on to the platforms may be smart but it will not be sufficient. For the approach to work it will require the local authorities to do the hard work of matching properties to planning permissions and bringing enforcement actions where they do not comply.

It is a reasonable question to ask – although the ESRI doesn’t do so – if local authorities have the will and wherewithal to do so at a pace which will be effective given the demands already placed on their planning departments by other Government policies aimed at getting more houses built.

Many Airbnb landlords will be aware of this and tempted to keep going until they are told to stop as any fines are likely to be at the lower end of the scale. Summary convictions for breach of planning attract a €5,000 fine.

But even assuming both of these obstacles can be overcome and the Government achieves its target of adding 10,000 properties to the long-term rental market the question remains as to whether it will make any recognisable dent in the housing shortage.

The ESRI points out that the increase in Airbnb rentals between 2019 and 2023 cannot be linked to falls in new tenancies. “This does not mean that Airbnb activity has not had a detrimental impact on the PRS (private rental sector) in specific local markets, but it does not appear to be the root cause of the observed falls in available PRS accommodation nationwide,” it says.

It extrapolates that this means that even if Airbnb landlords are forced back into the long-term rental market there is no guarantee it will lead to any significant impact on rents.

Taken in the round the ESRI report amounts to a lot of cold water to be poured over any one piece of proposed legislation. But will it be enough to force the Government to rethink? Perhaps limited resources – and Oireachtas time – could be better deployed addressing a real cause of the housing shortage?

One area – which the ESRI report indirectly lends support to – is a review of the current rent cap regime which is already identified as a barrier to institutional and private investment in the rental market. The single biggest reason that owners opt for short-term leases over long-term ones is the discrepancy between the rent that can be earned. On average properties in coastal areas need to be let for only six to eight days per month, and in Dublin city for eight to 10 days per month, to match long-term rents, says the ESRI.

There is potentially an opportunity here to kill two birds with the one stone, but this level of joined up thinking when it comes to addressing the housing market seems to have escaped the current Government and its predecessors to date.

There is some opposition in Government to the legislation, but it is clientilist in nature rather than fundamental. It seems unlikely then that the ESRI research will lead to the abandoning of a careless piece of legislation which would seem to have popular and cross-party support.