On a leafy street in Ranelagh in south Dublin, members of a residence for retired members of the Congregation of the Sacred Hearts, a Catholic order, are renting out rooms in the period property via Airbnb. According to one resident, Fr Eamon Aylward, the income helps the four members who live there support themselves.
“We couldn’t afford to live here otherwise,” he says.
The property has two self contained studios/bedsits – “they’re not really suitable for the long-term market” – let at a nightly rate of between €60 and €65 each, as well as two larger units suitable for two people, let at a rate of about €90 a night.
While the members may put some limits on residents, asking those who stay to “respect the spirit and the values of the gospel”, it shows just how broad the reach of the accommodation sharing platform has become.
“I’ve had really no bad experience since I started,” Aylward says, noting that about two-thirds of his bookings come from Airbnb.
And he is far from the only fan of the site.
John Maher – founder of companies such as HostAngel, Bmyguest and Key Buddy, which offer a variety of services to Airbnb "hosts" – says the current focus on Airbnb is "shortsighted" given the "huge value" that tourism brings to the economy.
“All in all, Airbnb is a very very positive thing; otherwise it wouldn’t exist,” he says.
It’s a sentiment that will be echoed by thousands of Irish Airbnb users. But where does legitimate appreciation for the way Airbnb has changed how we travel – and how we can earn our money – stop, and where should genuine concern about the impact it might be having on the wider property market begin?
It’s the big question; is Airbnb a nefarious force, sucking up supply from the long-term rental market and exacerbating the already frightening shortage of property,or is it really just as the company itself proclaims, a service for “regular people”? Vampire squid or benign bunny?
The truth, perhaps, lies somewhere between the two.
“When you stay in an Airbnb, you’re staying in someone’s home,” the company says, and yes, the platform continues to advertise many such properties. In Ranelagh for example, “Mary” offers a single room in her Edwardian house for between €50 and €58 a night while, in the city centre, “Aoife” has a double room for €75 a night in her home with “comfy Victorian charm”.
It is these type of hosts, offering a room in their house or the entire property while they are away themselves, that has made Airbnb what it is. And, according to the company, it’s still mostly about them.
“The vast majority of hosts on Airbnb are regular people who share their homes – typically their greatest expense – to boost their income and support their families,” a spokesman for the company says, adding that even when entire properties are listed on the site, “the vast majority of these homes are places where Dubliners already live”.
But is this really the case?
After all, in recent years the number of listings of properties for sale on sites such as Myhome.ie and Daft.ie, has been steadily declining. Contrast this with Airbnb, where, according to figures from US data analysis site AirDNA, the number of listings has rocketed from 2,511 in August 2015 to more than 5,500 in October of this year. It’s easy to draw a conclusion isn’t it? if supply is dwindling in the long-term sector and growing in another, isn’t it reasonable to assume that a switch is occurring from one to the other?
Drawing conclusions
While Airbnb says that there is “no simple conclusion” to be drawn about the availability or affordability of long-term housing in Dublin from Airbnb figures, perhaps it is simple.
"Is it having an impact on the normal rental market down here? Yes," says docklands agent Owen Reilly of the move to short-term lets, adding, "unquestionably, in most districts, there's more short-term properties available than long term".
According to Daft.ie, there are currently about 1,335 properties available for rent across Dublin city. AirDNA says that, of the 5,500 or so properties listed on Airbnb, some 55 per cent are for “entire properties”. That’s around 3,025 properties. And even of those on Daft.ie, many (353 or a quarter) are for short-term lets. In Grand Canal Dock for example, there are 28 properties to rent on Daft.ie but 15 of them are short-term lets.
Airbnb says, “the vast majority of these homes are places where Dubliners already live” but 3,000 or so properties means a lot of Dubliners going on holidays or crashing with their friends for the weekend.
And even if it is their primary residence, these rooms may otherwise have been made available for the long-term letting market via the rent-a-room scheme. Moreover, while Airbnb says that 85 per cent of hosts in Dublin only have one entire-home listing, AirDNA says that 58 per cent of active rentals are managed by multi-listing hosts.
Sometimes the impact of Airbnb can be conflated to represent the entire wider short-term letting market. But, while the move towards short-term lettings may be facilitated particularly well by the platform, it’s far from the only operator in town. Booking.com is also targeting this market, while other short-term operators, such as Canbe, which is owned by a number of investors from around the State including the Birr-based Garry family, run a number of short-term let properties, including the 24 one-bedroom suites at Broc House in Donnybrook’s Nutley Lane. And the prices are steep with a one-bedroom apartment for two guests in Donnybrook costing up to €199 a night.
The Key Collection is another operator, with hotels and short-term apartments across the city, including in the IFSC and Temple Bar. It grew out of the hotel consultancy RoomYield, founded in 2011 by Sheila O'Riordan and Nina Gillett. Yet another is Scandik, which offers serviced apartments in a number of locations including Adelaide Square and Grand Canal Square.
Increasingly professional
And even the smaller hosts are becoming increasingly professional; a typical Airbnb host today may be keeping a close eye on a nearby hotel’s yield management strategy to try and price their property as best as they can.
Others will hand them over to management companies to handle, with a proliferation of businesses offering their services – for everything from answering emails to cleaning and hosting properties – on the web.
While AirDNA puts a global figure of 35 per cent of operators on Airbnb actually being professional landlords, one local landlord we spoke to suggests that that the figure is actually closer to 50:50 for Dublin.
This can lead some to wonder whether their friendly host “Seán” actually owns the property they’re staying in, or is he simply an employee of a management company, paid between 10 per cent and 20 per cent of the revenue from the property, hired to let and manage the space. If this is the case, it may be a reason why Airbnb insists that the number of multiple hosts is so low, even though it concedes that some hosts “manage the listing process on behalf of others”.
But why would landlords resort to the logistical nightmare of short-term lets – all the cleaning, the arrangement of keys, the emails and requests – when the rental market is so clearly booming? Not to mind the fact that those looking to share a room in their house can do so tax free (up to earnings of €14,000) under the rent-a-room scheme.
The answer seems simple enough.
“The returns are better,” says Reilly. “When the new regulations and rent caps came in, some landlords got into the more lucrative, and less regulated, short-term let market.”
This was borne out by figures from AirDNA which indicate that more than 10 Airbnb hosts are earning more than ¤100,000 a year, with the top earner raking in ¤163,000 from a six-bedroom property near Trinity College.
And as our example (below) shows, even with the extra costs involved, the short-term sector simply pays better. And, while it might be a seasonal business, landlords can offer longer lets, of three-six months, over the winter, to keep them ticking over.
Rent controls
There are other key attractions. According to the Residential Tenancies Board (RTB), landlords operating short-term lets can neatly side step the twin impact of registering with the board – which opens them up to having to deal with tenant disputes – as well as rent controls. As no tenancy is created for a short-term let, rent controls don’t apply, the RTB says.
There’s also the small issue of tax – and whether or not Airbnb landlords are paying it. While there was some confusion in the early days, Revenue has since categorically stated that income earned via short-term lets is subject to income tax at the marginal rate. The rent-a-room allowance does not apply.
Of course there are tax deductible expenses allowed to offset the tax bill, including service fees, cleaning bills, etc, but this will be dependent on whether or not your claim your income as Case I or Case V.
According to Barry Flanagan, senior tax manager with Taxback.com, only deductions that are “wholly and exclusively incurred” in giving the trade, such as cleaning costs and meals, are allowable.
With Case I – which treats Airbnb as a commercial operation rather than an income earner while you’re on holiday – a far wider range of deductions are liable, although this can cause issues when it comes to capital gains tax (CGT).
As Flanagan notes, if you’re letting a room via Airbnb and claiming a deduction for light and heating on it, you may be “inadvertently raising CGT issues” as it is a change of use from your PPR (principal private residence) , and could then be liable to a certain amount of CGT when you sell your property. How much is unclear however.
“Until we get a test case through we have no way of knowing,” says Flanagan.
More significant perhaps, is Flanagan’s assertion that if you’re earning Case I trading income, you could have a legitimate case for paying no tax on your Airbnb earnings, if you acquired the property specifically for the purposes of your short-term letting business.
“In my mind there is a big question of whether you could write off the cost of that,” he says. It’s a concept worth considering.
Down in the docklands, Reilly has seen investors come in, acquire blocks, renovate them, and specifically target the short-term market. Could they be paying no taxes on income earned in these properties by offsetting acquisition costs against profits on trading income?
While Flanagan wouldn’t advise someone to adopt this approach, it is not to say that some investors may not be doing so.
“I would be surprised if there aren’t people who’ve taken that view and are preparing their defence already,” he says.
But for other Airbnb hosts, we know they are liable to income tax but are they paying it?
As a result of a data sharing agreement between Airbnb and Revenue dating back to 2015, Revenue has extensive information on the sector. However, this doesn’t mean that it’s actively pursuing hosts to pay up.
“We don’t have much empirical evidence ourselves that Revenue is going after Airbnb hosts,” says Flanagan.
Some hosts are receiving letters from Revenue either reminding them that they might have a potential tax liability, asking them to rectify their tax situation, or file a Form 12 – Revenue isn’t explicit in its request.
It’s not to say of course that this may not change.
“They have this information and it’s not like they’ll ignore it; they will get around to it at some point,” says Flanagan.
Short-term clampdown
But while the short-term letting market may be booming, a clampdown may be on the way from a different direction. In Dublin city centre, Finbar McDonnell and his colleagues at RF Property Management administer more than 8,000 residential and commercial units across the city, including 15-20 apartment blocks including ones at the Wintergarden on Pearse Street; Wyckham Point in Dundrum; and Bellevue in Islandbridge, Dublin 8.
And they are clamping down on residents looking to bulk up their income through short-term holiday lets.
“In general, from a property management perspective, it’s not something we’d be too supportive of,” says McDonnell, “because it causes extra wear and tear through people coming and coming, it can cause noise, and can be a security issue if keys are being left out . . . Some owners like it, as it can increase their individual incomes, but in general, most aren’t supportive of it”.
Indeed of the 15-20 blocks in RF Property Management’s portfolio, most will have been subject to action by the management company against tenants using Airbnb and requesting them to stop. Generally such an approach will work “although it may take a period of time before they stop doing it”, says McDonnell.
The difficulty is that most of these leases were written 15-20 years ago, in the days before Airbnb, although they may state that the property can’t be used for commercial property uses, “so it can be a bit of a grey area” he says.
The firm will also sometimes keep an eye on the Airbnb website to see if any of the properties they oversee are being listed.
“We do if it becomes an issue in a place,” he says.
Andrew Power, of Indigo Property Management, which manages about 30 buildings across the city, agrees that the use of apartments as short-term lets is a problem "across all blocks".
Last year, the company came to light when it issued cease and desist notices at Spencer Dock. Since then, the company has forwarded 43 complaints to Dublin City Council, 15 of which have been closed off, with the remaining under investigation.
“The vast majority are commercial operators,” he says, noting that planning in these developments doesn’t allow for such use.
And what’s driving it? “It’s the money to be made out of them,” he says
Potential obstacles
But it's not just about management companies. There are other potential obstacles up ahead. Jackie Buckley, head of property with Hayes Solicitors, foresees other problems coming down the road for Airbnb.
“It should be a good idea; lots of people use it and benefit from it, but I think the structures and paperwork need to be in place around it in a better way,” she says. “We’re probably waiting for something big to happen somewhere along the tracks, and then we’ll see everyone jumping on the bandwagon”.
For Buckley, the concerns are myriad. Management companies have an obligation to act in the best interest of the estate but are they doing so if they allow short-term lets? Do property owners tell their lender what they’re doing – and if not, are they in breach of their mortgage contract? And what about insurance? Are they adequately covered for the use of their premises in a commercial fashion and what will happen if there is an accident?
Dublin City Council is also stepping up its oversight of the short-term letting market, following the publication of guidelines from the Department of Housing last month.
But some fear that the clampdown might go too far. As HostAngel founder Maher says, the “issue isn’t Airbnb or short-term rental – it’s a lack of supply”.
Reilly agrees. “The fact is that there’s a shortfall of other different types of accommodation; there aren’t enough hotel rooms, there aren’t enough apartments . . . and [short lets] are providing a very important option for people coming in on short-term contracts in the area.”
Short term versus long term: Which is the most lucrative?
Property: Two-bedroom city centre apartment, Grand Canal Dock
Short-term average nightly rate: €286 (note: price can range from €150-€400 at weekends)
Short-term occupancy rate: 77 per cent
Annual revenue: €72,914
Long-term monthly rent: €2,500
Annual revenue: €30,000
Source: Daft.ie/AirDNA
