Airbnb tackles backlash among residential neighbours
The Australian
Samantha Hutchinson
17 December 2016

Chris Lehane had his work cut out for him. The strategic Mr Fix-It for accommodation giant Airbnb arrived in Sydney this week in the middle of a heatwave and at the start of a holiday season in which tempers are expected to flare between residents and tourists using the accommodation platform.

But the head of global policy for Airbnb came prepared. Lehane had recently unveiled a gentler, more collaborative approach to working with city officials in New York, London, Amsterdam and New Orleans. In Sydney, too, his tone was similarly co-operative.

what sort of light-touch regulatory frameworks

“It’s pretty straight forward,” he told a collection of media and policymakers assembled around the table in Airbnb’s inner-Sydney office. “Allow people to use their primary home however they want to use it and then figure out what sort of light-touch regulatory frameworks ... you want around how you want to deal with the secondary homes.”

Lehane was addressing the claim that Airbnb is now big business. Far from its humble beginning as the occasional room in an established home, the platform is now commonly used by commercial landlords operating strings of properties. While the former Bill Clinton aide is cognisant of the challenges for city planners, he believes homeowners should be free to do as they please with their primary residences, while property ­investments and secondary prop­erties should be more closely regulated.

He also spoke in support of the right of councils to cap the number of nights a year an entire home or apartment could be rented out, and Airbnb’s new willingness to share data with authorities.

But when it came to the more contentious claims that Airbnb and other short-term rental providers were disturbing neighbourhoods, pushing traditional renters out of the city and lifting property prices, he was more equivocal. “Part of that is up to the government to balance,” he said. “How much is it benefiting from a tourist economy versus making sure you’re not impacting long-term house markets?”

had also come to put out the fires

If Lehane had come to blow the company’s trumpet, it soon became clear he had also come to put out the fires among residents ­reacting to an expanding passing parade of tourists flocking to homes in the suburbs for their holidays.

Sydney resident Michael Hean­ey knows the feeling all too well. The violinist lives with his wife and young son in a penthouse at the top of Sydney’s Maestri Towers. He has faced dwindling security in the building, queues for the lift, overcrowded foyers and carparks and excessive noise as neighbour after neighbour in the up-market tower put their apartments up for short-term rentals.

204 of the 384 apartments were in play

In the end, up to 204 of the 384 apartments were in play. “I wanted to live in an inner-city apartment, not a hotel,” Heaney says. “But this new state of affairs means the one thing can be both.”

This experience is becoming increasingly common as the digital revolution in short-term accommodation reverberates around the world. Online rental platforms are converting established houses and apartments into marketable commodities for owners, in some cases delivering serious incomes.

Welcome to the new world of the shared economy. Allowed to flourish under relatively benign policy settings, Airbnb has amassed 87,000 listings across Australia and more than 3.5 million users since its launch here in 2008. Local competitor Stayz.com.au, a division of Fairfax Media, rents out entire homes and has more than 40,000 listings, including beachfront homes charging thousands of dollars a night. Meanwhile, upstarts including HomeAway and FlipKey are making significant inroads.

the pay-off can be substantial

For property owners prepared to get on board, the pay-off can be substantial. Bondi resident Vanessa Vartto and husband Jason can net almost $5,500 a week letting out their three-bedrom oceanfront apartment on Airbnb, which is enough for the young couple to cover mortgage repayments, rental on their Paddington home and then some.

Melbourne couple Laura Walters and husband Alex are also using the platform to shore up financial security. With a young son and another one on the way, they have shaved 10 per cent off their mortgage during the past two years by decamping every month to in-laws so they can rent out their South Melbourne apartment. They tipped the proceeds into renovating the apartment and used the uplift in value as equity to buy a second home in Geelong.

The Geelong move means they will now be able to net about $60,000 a year in income through Airbnb, paying off their 30-year mortgage in half the time.

“We originally saw it as a way to make a bit of extra cash to do bits and pieces around the home, but it’s become a lot more than that,” investment manager Walters tells Inquirer. “If you’re prepared to approach it like a business, it becomes this revenue stream that makes a huge difference.”

residents at Maestri Towers were subsidising short-term rentals to the tune of about $170,000 a year

But just as advocates wax lyrical about the convenient new income stream unlocking value in their homes, critics and disgruntled neighbours are mobilising against the practice. Quality of life is not their only complaint. Their strata levies are also suffering. Heaney calculates that at its peak, residents at Maestri Towers were subsidising short-term rentals to the tune of about $170,000 a year.

His penthouse strata fees peaked at $22,000 a year in 2010 before he and a dozen residents wrested control of the body corporate, changed the strata rules to prohibit short-term rentals and dumped the building managers. Today, strata fees are 15% lower than that 2010 figure, against an industry average that has risen 15% in the same amount of time.

“You can make all these rules to make sure guests don’t make noise so that they don’t disturb other residents, but they’re still wearing down the building every time they drag their suitcase across the foyer or use the lifts,” Heaney tells Inquirer.

Heavy traffic throughout the building from such short-term rentals shaved 25% off the life expectancy of the tower’s lifts, and also forced residents to replace 20 floors of foyer tiling when the practice was stamped out.

the safety implications

The data hasn’t been tested across the industry, but Heaney’s calculations have found support throughout other resident networks fed up with short-term rentals, including the Owners Corp­oration Network, which repre­sents strata owners Australia-wide. The group is calling for tenancies of fewer than three months to be stamped out in residential buildings, while also raising awareness of the safety implications associated with short-term rentals.

“Hotels are equipped with maps, sirens and extra exit signs to assist strangers to escape the building safely in the event of an emergency ... What will happen when you have a high-rise building with 1,000 extra occupants who don’t know the building, trying to escape a raging fire?” chief executive Karen Stiles says.

The impact of their calls is forcing policymakers over the wall to give the issue another look.

New York in 2010 outlawed renting out entire homes or apartments for stays of less than 30 days, and tightened the rules in June by levelling fines of $US7,500 for breaches of these rules.

Berlin established an international high-water mark in May when it outlawed short-term rentals of entire apartments in a move to curb ballooning rents and concerns short-term rentals were sucking stock out of the market for renters, and driving house prices higher.

It is now illegal in Berlin for residents to let out more than 50% of their flat on a short-term basis without a permit. Rents rose 56% in Berlin between 2009 and 2014.

Against the tide of international concern, Airbnb kicked off an about-turn in June when it announced it would work with New York City officials and share data to boost enforcement.

It followed last week’s announcement Airbnb would take responsibility for the enforcement of caps in London and Amsterdam, limiting the number of nights entire homes can be let out each year to 90 days in London and 60 days in Amsterdam.

The move coincided with an agreement struck with New Orleans city officials in which it committed to sharing host data with the city, and agreed that its hosts must operate with a permit. The company also agreed to ban almost all listings in the city’s historic French Quarter and set a 90-day annual cap for hosts who rent out entire homes.

“Airbnb recognised that it would have to change the way they were interacting with cities and change the way things were going for them across the country,” Ryan Berni, a New Orleans deputy mayor who negotiated the regulations with Airbnb, told The New York Times.

And as the platform’s annual high season approaches in Australia, all eyes are on the company to see if it adopts the same conciliatory approach over here.

To be fair, there is a lot at stake. As of this month, more than 3.5 million Australians had an Airbnb account; according to the company, that is a 200% rise on this time last year. Sydney now sits firmly within the top-five users of the platform worldwide and Melbourne is quickly advancing up the ranks into its top 15 worldwide.

Already a slew of rulings has tipped the scales in favour of the short-term rental market. A Victorian Civil Administration Tribunal ruled that tenants renting out their entire home on Airbnb were not subletting and were not in breach of their rental contract.

Another Victorian ruling in July, in the Supreme Court, found owners corporations such as body corporates could not make rules to ban short-stay operators.

But voices such as Heaney’s are growing louder, as are those of well-co-ordinated lobbies including the hotels industry, which argue that the boom in short-term rentals is putting Australia’s hotel room sector and investment prospects at risk.

Regulation is under the microscope in NSW, where the state’s Planning Minister Rob Stokes is midway through a six-month review of the rules governing short-term letting.

The review follows on from a government committee on the issue that attracted 212 submissions; more than a quarter came from residents wearied by the impacts of short-term letting near their homes.

Stokes isn’t prepared to comment on which way legislation will go, but tells Inquirer the incidence of party houses is a primary concern he intends to address early next year.

Minister for Better Regulation Victor Dominello, who is partially responsible for the reform process, has indicated regulation could be strengthened. “This issue has generated a range of competing interests and our job is to navigate an outcome,” he says.

serious missteps have been made in the reform program

Already, the hotels industry says serious missteps have been made in the reform program.

“The inquiry recommendations are based on some fundamental mistakes,” Tourism Accommodation Australia chief executive Carol Giuseppi says.

“These operators hide behind the ‘sharing’ notion to disguise what is quite plainly a $US30 billion enterprise that increasingly provides a platform for commercial property investors.

“What started out as air mattresses in a lounge room has morphed into a massive and disruptive commercial business that is stripping cities of housing stock for long-term renters.”

More tellingly, a submission from NSW Premier Mike Baird and his cabinet to the inquiry made no mention of the impact of the practice on rental availability or affordability. Critics of short-term rentals argue its real threat is far more sinister than party houses causing residents to lose sleep or vague insurance guidelines that leave strata bodies liable.

A report compiled by the City and County of San Francisco’s ­office of the controller found that although short-term rental platforms had boosted the city’s hotel tax revenue and visitor spending, the practice also had the potential to take conventional rental stock out of the market for good. Why lease to long-term tenants when you can make exponentially more with short-term rentals?

Economists have calculated that for every apartment taken out of the market for full-time short-term rental, the city would lose $US250,000 to $US300,000 ($340,000-$400,000) a year, exceeding the annual total economic benefit from visitor spending, host income and hotel tax.

a new class of professional landlords

At its worst, there is evidence that short-term rental platforms are spawning a new class of professional landlords who are squeezing genuine permanent renters out of the inner city.

A 2014 report by the New York Attorney-General found one Airbnb host in Manhattan was making more than $US6.8m a year on 272 listings. The report also estimated the city was owed about $US33m in unpaid hotel taxes from undeclared short-term rentals.

Australian economist Saul Eslake believes our cities could suffer the same effects. Rental stock hasn’t increased at the same pace as demand, he says, so every apartment taken out of the rental market for full-time short-term letting is likely to contribute to a rental squeeze.

Affordability issues in Sydney and Melbourne mean more home buyers are renting for longer. If more landlords buy investment properties specifically for short-term tenants, existing tenants will face higher prices.

“I have no evidence in either way, but I believe the possibility of renting out houses and apartments via something like Airbnb may be encouraging some people to think about property investment in a different way from how they did in the past, and it could be increasing demand for housing as an investment,” Eslake tells ­Inquirer.

“And landlords buying apartments to rent out to tourists is no doubt adding to the pressure that renters face; it’s an exacerbating factor in terms of affordability — but precisely by how much, I have no idea. It’s something that someone needs to seriously look at.”

A glance at listings in Sydney’s Bondi Beach reveals an average nightly rate of $333 for a private home or apartment with two bedrooms or a weekly rate of $2,333. This compares to an average across the suburb of $1,000 a week.

The same startling disparity is evident across other popular destinations. Two-bedroom apartments in St Kilda average $217 a night on the platform or $1,519 a week, compared with a weekly average on the rental market of $515.

But a six-month total reveals the serious inroads short-term rental could make on a mortgage compared with conventional tenants. In Bondi, an apartment let every day for six months with Airbnb would generate $60,824, compared with $26,071. In St Kilda, the difference blows out to three times as much, with an Airbnb rental generating $39,602 compared with $13,426 on the average rental.

Full occupancy every day for six months may not be realistic, but three-quarter occupancy still puts homeowners using Airbnb substantially ahead.

Airbnb’s Lehane is aware of concerns that the premiums available on the platform could compel landlords to make a permanent switch to short-term rentals, leaving genuine residents priced out of the inner city. He says the concerns have prompted other jurisdictions to act decisively.

“What they’re trying to optimise for is people who are engaged in commercial activity not taking long-term housing to short term … And that’s what I would just do in a place like Bondi,” he said.

Comments
Wayne
If a Lot in a strata scheme is permitted to be used for residential purposes then there should be no restriction on the type or duration of the residential use ..... even short term residential use.

Lisle
@Wayne You should look up your Council's Local Environment Plan (LEP) and read all the definitions.

There are residential, industrial, light industrial, tourist, retail, etc.

Residential means precisely that - when you are paying for accommodation it becomes commercial.

Then being commercial it must reach the same standards of Approved Holiday Apartment blocks, hotels and motels which must meet certain standards to be approved by local councils in order to have DA consent.  For instance, there must be a manager on site 24/7.  It must meet additional fire, health & safety regulations including parking and accommodation for those with disabilities.

It is normal in a residential block of apartments that the majority of occupants go off to work or school/university each day or night.  Now that becomes a problem when there are some holiday apartments partying all night.

The minimum stay has been deemed to be 90 days.

I used to get sick of knocks on my door asking how to use the air conditioner, where is the janitor, how do I get into the city, where's the best hairdresser?  It just went on and on, not once but everyone who arrived.  You see there was no manager on site.

Wayne
The argument that Airbnb clients increase the usage of lifts, recreation facilities etc in the strata buildings is an absolute nonsense.

The residents who are complaining about crowded lifts etc are probably living in buildings where, prior to the advent of the sharing economy,  less than half the building had full time residents i.e. these whining residents have lived in a half occupied building.

These same whingers have had the benefit of other lot owners paying their levies for services which they do not use as they do not reside there.

However, have these same whingers stopped to consider what would happen if every single non resident owner lived in these apartments? Surprise surprise ... the lifts would be more full,the building would be noisier, the foyer would be more crowded, the pool would be more crowded, the carpets in the common property would be more worn! That's what happens when a building is fully occupied!

If a non resident lot owner wants to rent out their apartment via Airbnb then they should be permitted to do so.

There are by-laws in place in every strata scheme which cover issues such as noise and nuisance, damage to common property etc.

Lot Owners who have had all of the benefits from living in a half occupied building need to realise that they cannot have it their own way all of the time. They must be REASONABLE!

Peter
Whining NIMBYs. Hotel lobbies. Vastly exaggerated claims. What decently-run body corp does not have security, signs in place? If not replace the committee. 25% extra wear-and-tear. This is just ridiculous. In fact short-term renters who are out sight-seeing may well reduce wear. Party noise? We'll have you never heard of noisy neighbors in standard property settings? If you have them, call the police. Higher body corp fees? Replace the committee and institute proper financial management instead of whipping up imaginary causes. Contemporary economies are moving to work and income based on household capital. The old economy of offices and hotels doesn't like this. Well tough. It is clear where the future economy is going and property owners are entitled to participate fully in the new economy rather than go down with the old economy.

Lisle
@Peter What a pity there are council planning regulations which have to be met which rather spoil your story.

With luggage cases being carted and dragged over the carpet on a daily basis, that was an enormous big item wear and tear on the carpet.

From my experience there is triple the amount of rubbish in service rooms, because the refrigerator is being cleaned out daily.

Above all when I was on the Manly Council Working Party on Holiday Letting in 2004, within half an hour of the first meeting commencing, it was quite clear it was illegal in our apartment block under council regulations without obtaining a Development Consent.

Incidentally, our apartment block is completely occupied with owners and tenants - a one bedroom apartment recently sold for $1,265,000.

Peter
Short-term tenants eat more than long-term tenants? Short-term tenants move more heavy-duty goods in and out of apartments than owners do? I am an owner in an apartment block with AirBnB short-stayers. None of these things happen. The short-stayers on the other hand add to the vibrancy of the neighborhood and the building, and to the local municipal small-business economy which is thriving which makes my locality even nicer than it already is. NIMBY and Council carrying-on threatens the nascent new economy as it develops. Look around at how the old economy is limping along. Regulation and hysteria will kill the new economy and the collective damage will be felt in neighborhoods that otherwise could boom.

Chris
Sydney has now lost 23,165 homes to Airbnb.  It's just one short-term letting website. 

CBD:  5,527 homes for rent this week on Airbnb, 1,529 homes available on Domain.com.au.

Waverley Council:  4,087 homes for rent on Airbnb and just 350 homes for rent this week on Domain.

Byroy Shire:  1,483 homes for rent on Airbnb and just 36 homes available through Domain.

Residential Housing is for the housing of RESIDENTS - just ask our NSW Land and Environment Court of their judgements on mixing the two uses - it's "fundamentally incompatible". Think of the tenant evictions, the displacement of essential workers, the upward pressure on rents in suburbs close to employment. Our NSW Parliament wants to make this 'complying development' state wide? Please! See www.neighboursnotstrangers.com and sign their petition to parliament:  https://www.communityrun.org/petitions/stop-short-term-lets-neighbours-not-strangers-2

Peter
AirBnB properties are rented mainly in the outer ring of the inner city. It does not compete in the larger rental market. In that larger market the number of rental properties available is a function of the number of properties being built which is determined by local government regulations and approval processes. If you want more rental properties across the totality of the city then you have to cut meddlesome regulations.

Peter
X thousand advertised for high-churn short stays is the equivalent of Y hundreds advertised for 3 year renewable long-term rental contracts. Let's not confuse chalk and cheese.

Lisle
In October 2000 we moved into our brand new apartment in a block of 162 nearby to the great Manly ocean beach.

Come January, we started asking the question "who are all these people" using our homes as a holiday resort?

I then commenced a study of who these holiday makers were, and discovered organized by five holiday agents, they had taken over our brand new complex.

What's wrong with that you may ask? The problems are enormous.

Imagine our foyer on a Saturday morning, loaded with suitcases of holiday makers leaving and holiday makers arriving.  We have a photo of my husband, an EDA Veteran with sight problems trying to manouvre himself through a foyer which looked more like an airport.

These were early days for the internet, but I quickly discovered that there were hundreds of entries for our apartments.

Fortunately we became aware of a Land & Environment Court case which stated that you needed a Development Consent from local council.

On the election of a new Manly Mayor, Dr Peter Macdonald, he called for a Working Party to established into short term and holiday letting of which I became a member.

This report in November 2004 confirmed that it was illegal, and that a minimum tenancy of three months was required.  As the day progresses I will comment further on this.

We quickly passed a new by-law which was savagely campaigned against by the holiday agents.

Then in May 2012, a NSW Liberal Minister Hazzard communication was tabled at a Manly council meeting.  This rang alarm bells, so I gave a public address at council.

Airbnb may be a smart business concept, but it must not be permitted in residential apartment blocks, unless the building has the necessary Development Consent.

As the Premier Mike Baird is our local member, he has no idea what he has unleashed.

Debra L
@Lisle  We had the same experience but in a quiet residential suburb in Airlie Beach. One day a large group of people descended on the house behind us and made their presence well and truly felt with childrens' screaming and shouting, crying and tantrums around the pool, in the back yard and on their back deck.

The noise carried across our pool and onto our deck and living area. All we could do was shut ourselves in or put up with, as I describe it, living between a child care centre and the public pool on school holidays. The parents were just as noisy, and if we were really lucky they would party on the deck at night and take midnight swims.

The council now requires a development application but it is too late for us. I have fought for a year with the council, the real estate, community residents associations but they have the law on their side. The owners are in hiding and their greed is all consuming.

I have now decided that if they want to holiday in a residential suburb (while there are hundreds of properties in tourism zones), I am going to give them residential noise and it's all legal.

Bring on the whipper snipper, mower, and every power tool I can lay my hands on. We are renovating...

Les
The problem I see here is that it is not the fact that people rent out their home or units. It's the people who use the place as a party house and don't have any consideration for others. You know the age group that I mean.

Neville
The same old protectionist arguments from established players looking to stifle competition. Other than light touch rules on safety why should this be any different to a hotel. Yes it undercuts the hotel industry but to bring arguments about driving up rents and costs is a red herring. How people use thier property should be far less of the governments business

Debra L
@Neville. A noble attitude until the party house from hell moves in next door.

Tanya
For the same reason hotels are not allowed in residential neighbourhoods. We having zoning laws for a reason. People can't use their property to run a business unless it's zoned for mixed use and they have the appropriate permits. This should be no different.

Wayne
@Debra L The house from hell could easily be a permanent tenant with a 12 month lease. At least a noisy short term tenant is just that .... short term!

Peter
Same old economy-crushing protectionism. All zoning does is drive up housing costs by establishing elaborate local government procedures that add mightly to housing costs to satisfy a vocal minority of unhappy whiny complaining people with an overly sensitive dislike of mixed uses.

Adrian
@Peter Good call Peter. There's absolutely no reason why a slaughterhouse, a crematorium or a chemicals warehouse shouldn't be right next door to an apartment block.

Peter
@Wayne @Debra L That's a non-argument

Debra L
@Wayne. The odds of a holiday rental disturbing the peace are much higher than a long term rental with people going of to work school etc every other day. We are surrounded by 10 children whose parents work and the neighbourhood is peaceful except for 1/2 hour of daily play. The holiday rental is occupied 7 days a week and it is not unusual for them to spend all day around the pool shouting and screaming. Working families don't have this luxury, even on weekends when they have sport, visiting etc.

And short term means one leaves and another arrives a few days later. So far, 80% have been noisy and obnoxious with a sense of entitlement to have fun regardless of the locals.

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