As Airbnb sets to go public in December, one lingering concern is whether tightening regulations would slow its growth.

An article in The New York Times this week reiterated this concern and how critical it is for Airbnb to stay on top of community relations. Otherwise, it risks more severe regulations “if communities or cities believe Airbnb rentals contribute to unwanted tourist influxes or rising housing prices. In some cases Airbnb may be a scapegoat for gentrification or other neighborhood problems.”

Certainly, regulation remains a risk for the company, but has the risk been managed?

Airbnb has been working with local governments, including the recent roll-out of City Portal, a dashboard that lets cities monitor and enforce listings. It has instituted policies to curtail house parties, including a global ban on all parties and events at Airbnb listings with a cap on occupancy at 16, restrictions on guests under the age of 25 from booking entire-home listings locally, manual screening of high-risk reservations, and recently, it prohibited one-night reservations over Halloween weekend in entire home listings throughout the US.

Cooperation exists, but the PR war persists.

Most of the major cities that Airbnb operates in already have some form of regulation. Those regulations haven’t impeded earnings. Airbnb’s revenue risk exposure appears to be low given that no one city accounted for more than 2.5% of revenue or 1.5% of listings according to Airbnb’s IPO filing.

We operate in approximately 100,000 cities across more than 220 countries and regions, and we are subject to various local laws and restrictions at the city, state, and country level. These laws and restrictions are dynamic. Many were instituted decades ago and did not envision Airbnb. We seek to work with governments to establish clear, fair, and workable home sharing rules to create clarity for our hosts. As of October 2019, approximately 70% of our top 200 cities by revenue before adjustments for incentives and refunds have some form of regulation.

In 2019 and the first nine months of 2020, no single city accounted for more than 1.5% of our listings or 2.5% of our revenue before adjustments for incentives and refunds. Additionally, in 2019 and in the first nine months of 2020, 11.9% and 6.8%, respectively, of our revenue before adjustments for incentives and refunds came from our top 10 cities. We do not believe that the current regulations in our top 10 cities, in the aggregate, have had or are expected to have a material adverse impact on our results of operations and financial condition.

Airbnb S-1
Current Regulatory Environment in Airbnb’s Top 10 Cities

London, United Kingdom: Since 2015, regulations have permitted residential properties, both primary and non-primary residences, in Greater London to be used for short-term rentals, without planning permission, for up to 90 nights per year. We were the first platform to voluntarily apply this 90-day limit, and in 2019 we publicly backed the Mayor’s proposal to introduce a simple host registration system in Greater London.

New York City, United States: In New York City, non-owner occupied short-term rentals are permitted in single and double family homes if the property is compliant with applicable safety and building codes. Short-term rentals are also permitted in multi-family buildings when a host is present, there are fewer than 3 guests, the guests have unobstructed access to every room and each exit, which includes no internal locks on doors, and the property is compliant with applicable safety and building codes.

In June 2018, New York City enacted a law requiring short-term rental platforms to disclose detailed data on hosts and listings to the city on a monthly basis for any unhosted stay in excess of four nights in a quarter. In August 2018, we and another industry participant filed a lawsuit against the city contending this law to be unconstitutional. In January 2019, a judge granted a preliminary injunction stopping the law from going into effect. We settled our lawsuit with New York City in June 2020 and under the terms of the settlement, the city ordinance was amended to reduce the number of listings subject to data sharing (only upon the consent of the host) and to provide for the confidentiality of data. The revised ordinance will go into effect in January 2021.

Paris, France: France has national legislation on short-term rentals with a limit of 120 days per year on primary residences, but that limit does not apply to rooms in a home. For short-term rentals of investment properties in Paris, a “change of use” permit is required if they were not previously rented out as a commercial activity. Two property owners challenged that requirement and there is a decision pending before the courts to determine the suitability of the permit system; a decision is expected in 2021.

Paris also introduced registration obligations in December 2017 requiring short-term rental platforms to exclude listings without registration numbers, which we believe is not compliant with EU law. The city of Paris commenced two cases against us relating to this obligation: the first was dismissed in March 2019 and the second is pending. We continue to engage with the city of Paris and the national government to find a workable solution for the regulation of short-term rentals.

Los Angeles, United States: Los Angeles requires permits for short-term rentals of primary residences. Hosts of short-term rentals are required to register with the city and are required to obtain an extended home sharing permit to host more than 120 days per year. We are actively engaged with the city to craft a Vacation Rental Ordinance. The City Planning Commission approved the ordinance in December 2019 and the ordinance is pending at the City Council, that would allow for short-term rental of non-primary residences subject to registration and night cap restrictions.

City regulations also require short-rental platforms to ensure that listings are compliant. In November 2019, we entered into an agreement with Los Angeles, which provides for an automated process to verify listing registrations, with the aim of achieving a stable regulatory environment for hosts and guests.

Rome, Italy: In 2017, Rome introduced online registration requirements for short-term rentals, but no distinction is made between primary and secondary homes nor are there any caps or zoning restrictions. In June 2020, we signed a voluntary tax collection agreement with the Municipality of Rome to collect and remit local tourist tax. On a national level, since 2018, the government has been working to introduce further short-term rental registration and host income tax requirements and has been considering requiring platforms to display registration numbers. We continue to engage with the government and support a national online registration scheme.

Barcelona, Spain: In 2002, Barcelona introduced regulations requiring lessors renting out entire homes for under 31 days to file a responsibility statement with the municipality prior to listing their home, and to display the registration number on their listing page. Zoning law limits total listings to just over 9,000 after a recent rescission of licenses by the Barcelona City Hall. Working to support the city’s objectives, we have voluntarily introduced a requirement on new hosts to include a registration number or claim an exemption.

Tokyo, Japan: In June 2018, a new national law in Japan went into effect to legalize the short-term rental of primary and secondary residences for up to 180 nights per fiscal year. Under the law, hosts are required to register their listing with the local government. We are also required to register with the Japanese Tourism Agency, as an intermediary, and the law prohibits any registered intermediary from intermediating an illegal listing, including unregistered listings. We are required to remove listings that do not post a valid registration or license number in the listing. At the time of the law’s implementation, there was a steep decline in listings as we took down non-compliant listings, and we canceled associated reservations. The rate of listings has since recovered as of December 31, 2019. We will continue to work closely with the Japanese authorities on supporting the Tokyo Olympics in 2021 and on reviewing the national law starting in 2021.

Toronto, Canada: In December 2017, short-term rental regulations were enacted in Toronto. Among the main requirements, hosts must register with the city, the listing must be the host’s primary residence, hosts can rent up to three rooms or their entire home, and there is a 180-night cap per year on entire home listings. The regulations became effective in September 2020, and the city indicated that all hosts will need to be registered as short-term rental operators by late fall 2020. In addition, short-term rental platforms will be required to obtain a license from the city and ensure that all listings have valid registration numbers and provide a process for removal of non-compliant listings.

San Diego, United States: San Diego does not currently impose any restrictions on short-term rentals other than a prohibition on the short-term rental of accessory companion units. San Diego is considering a new short-term rental law that would require registration of short-term rentals in both primary residences and non-primary residences, and the number of dedicated rentals may be limited.

Lisbon, Portugal: Short-term rentals in Portugal are restricted through the registration of certain new listings. Hosts must obtain a registration number and display this on their listing page. We have voluntarily introduced a requirement on new hosts to include a registration number or claim an exemption to support the city’s objectives.

Airbnb S-1

Want More Industry Updates?

Get our newsletter for the latest news, insights & analysis  

Invalid email address
You can unsubscribe at any time.
Categories: Stays