Regulating a Largely Unregulated Market: What Amsterdam has Done to Control Airbnb Rentals
By Emily Bauer
Background
It has been ten years since Airbnb emerged in the hospitality industry providing budget-conscious travelers with an alternative to pricey hotels.[1] Airbnb describes itself as “a trusted community marketplace for people to list, discover, and book unique accommodations around the world.”[2] Though initially utilized as budget-friendly travel, Airbnb has taken over the hospitality industry at every price point; “[w]hether an apartment for a night, castle for a week, or a villa for a month, Airbnb connects people to unique travel experiences . . . in more than 33,000 cities and 192 countries.[3] The Airbnb platform has also proven to be financially prosperous for those individuals renting their extra rooms, apartments, and even full homes via the Airbnb marketplace.[4] Airbnb has consumed the hospitality and short-term rental market and has even transcended into the residential rental market.[5] Due to the breadth of its business, Airbnb has landed in unchartered waters in terms of regulation.[6] Further, because cities and municipalities govern zoning regulations, there has been local outcry and a wide variety of attempts to control problems associated with the emergence of the Airbnb empire.[7] Since the emergence of Airbnb, cities, including Amsterdam, have struggled to respond to Airbnb’s incompatibility with zoning, landlord-tenant relations, and other traditional regulations.[8]
In recent years, the Netherlands has seen a great increase in Airbnb use.[9] The country went from 75,000 Airbnb guests in 2012 to 1.6 million Airbnb guests in 2017.[10] Since Amsterdam is home to “almost half of the total number of rental opportunities listed for all of the Netherlands,” it has especially felt the effects of increased tourism.[11] More specifically, the city has taken the brunt of noise nuisance complaints, illegal rentals, housing shortages, and reports of changing neighborhoods.[12] Amsterdam responded by becoming the first city in the world to, with the cooperation of Airbnb, enact “private vacation rental” laws designed to combat issues surrounding Airbnb services.[13] As outlined below, Amsterdam’s private vacation rental rules addressed many issues relating to Airbnb rentals; however, the enforcement mechanisms still need refinement. Nevertheless, Amsterdam may have just started an international trend toward regulation in a largely unregulated market.
Problems and Responses
I. Nuisance Complaints and Zoning
Zoning seeks to minimize conflict among potentially incompatible uses of property.[14] Municipalities zone areas of a town “strictly for residential use not only [to] create space for citizens to live but . . . also [to] limit heavy traffic and noise pollution in that part of town.”[15] With an increasing number of individuals renting out their homes in districts zoned for single-family use, neighborhoods are being commercialized to accommodate tourists.[16] Without a restriction on how long residences can be rented, the fear is that these places will be permanently rented and “housing for residents [will be] eaten away to cater tourists.”[17] These concerns were realized in Amsterdam prior to new private vacation rental regulations.[18] Owners in areas zoned strictly for residential use reported “never-ending noise”[19] and that the city became “overrun by disorderly, drunken, [and] noisy visitors.”[20]
In response to these grievances, Airbnb and Amsterdam struck a deal to implement new regulations.[21] The regulations provide that hosts may only rent their homes “up to two months per year, to up to four people at a time.”[22] This provision will ensure that homes are consistent with zoning regulations and are not being exploited as loud, commercial businesses in traditionally quiet neighborhoods.[23] Airbnb will “automatically delist any [full-apartment and full-home rentals] that have already hosted 60 overnight stays until the next calendar year.”[24] Airbnb’s enforcement of this provision has proven to be somewhat successful, but not perfect.[25] In 2016, when the regulation did not apply, 18 percent of Amsterdam homes were rented out for more than 60 days.[26] In 2017, after the regulation was implemented, “about 5 percent of the Amsterdam homes on the site had been rented out for more than 60 days [in violation of the new rule].”[27] Even though the regulation has reduced the frequency of rentals, Amsterdam decided it needed to take further action.[28] Starting in 2019, the maximum period for rentals will be cut in half; homeowners will only be able to rent out their homes for a maximum of thirty days per year.[29] It will be interesting to see whether this new reduction will further reduce nuisance and zoning concerns.
Amsterdam’s new regulations further provide that in order to rent out a home, the individual “must be registered as living at that address.”[30] This prevents individuals from buying neighborhood homes for commercial purposes and improperly transforming neighborhoods from residential to commercial, in conflict with zoning districts.[31] Moreover, the rules provide that “if renters act in ways that generate noise–or nuisance complaints from neighbors, authorities may [prohibit] the owners from further rentals.”[32] This provision makes homeowners accountable for their unruly renters, thus incentivizing hosts to screen potential renters.[33]
II. Exploiting Residence as a Business
Amsterdam took further action to prevent exploitation of residences by investors, which has become all too common worldwide.[34] First, the requirement that individuals “must be registered as living at that address” prevents investors from purchasing and renting out several properties.[35] Pursuant to the Amsterdam and Airbnb agreement, Airbnb monitors illegal rentals by looking for renters “who present themselves as private individuals, but in fact, rent out properties that are uninhabited.”[36] Unfortunately, it is difficult to enforce this regulation because it often requires someone clicking on the advertiser’s fictitious name and discovering that the individual has multiple properties listed.[37] Amsterdam’s housing alderman, Laurence Ivens, stated recently that Airbnb is “not doing enough to combat illegal letting.”[38] Ivens is looking to renegotiate the agreement with Airbnb to tighten up the enforcement mechanisms.[39]
Additionally, it is illegal for rent-controlled property owned by housing corporations to be rented and renters must obtain permission from their landlords before renting.[40] Unfortunately, Amsterdam and Airbnb have struggled to enforce this regulation as well.[41] A local broadcaster showed in a YouTube video that it is still easy for people living in rent-control properties to list their properties on Airbnb, even though it is illegal.[42] One of the only ways to enforce this regulation is to send out inspectors.[43] This is both costly and time-consuming because it must be repeated every day.[44] In an attempt to strengthen enforcement, Ivens plans to increase the number of inspectors to 80.[45] These regulations are just the beginning for Amsterdam; it will continue to improve its Airbnb regulations and enforcement.[46] As the city emphasized, “Amsterdam is a city to live and work in - it’s only a tourist destination in the second place.”[47]
Conclusion
With the dramatic increase in Airbnb use in the Netherlands, Amsterdam and Airbnb headed down unchartered waters and created regulations to combat nuisance, zoning, and landlord conflicts in Amsterdam. Although the enforcement of these regulations needs improvement, Amsterdam has started to address concerns arising from Airbnb rentals that all cities and municipalities utilizing Airbnb have been facing. Accordingly, Amsterdam may have started an international trend toward regulation in a largely unregulated market.
[1] Zaw Thiha Tun, Top Cities Where Airbnb is Legal or Illegal, Investopedia (Oct. 22, 2018), https://www.investopedia.com/articles/investing/083115/top-cities-where-airbnb-legal-or-illegal.asp. Airbnb was founded in August 2008. Id.
[2]Linkedin, https://www.linkedin.com/company/airbnb/ (last visited Nov.13, 2018).
[3] Id. See also Leigh Gallager, How Airbnb Found a Mission–and a Brand, Fortune (Dec. 22, 2016), http://fortune.com/airbnb-travel-mission-brand/.
[4] Nick Wallace, Where Do Airbnb Hosts Make the Most Money?, SmartAsset (Feb. 20, 2018), https://smartasset.com/mortgage/where-do-airbnb-hosts-make-the-most-money.
[5] Id. See generally Earn money as an Airbnb host, Airbnb (outlining how to host Airbnb and what can be rented), https://www.airbnb.com/host/homes.
[6] Tun, supra note 1; see also Daniel Guttentag, Regulating Innovation in the Collaborative Economy: An Examination of Airbnb’s Early Legal Issues 97, 99-101, https://www.dg-research.com/Papers/Guttentag%20(2017)%20Airbnb%27s%20early%20legal%20issues.pdf.
[7] Tun, supra note 1.
[8] Id.
[9] Id.
[10] Netherlands, airbnbcitizen (2018), https://www.airbnbcitizen.com/netherlands/. The number of Airbnb rentals will likely increase due to the fact that the Netherlands expects to receive 18 million tourists in 2018. Cecilia Rodriguez, Fed Up With Tourists, Amsterdam Gets Tough on Airbnb, Tourist Taxes And Too Much Partying, Forbes (May 17, 2018), https://www.forbes.com/sites/ceciliarodriguez/2018/05/17/amsterdam-overwhelmed-by-tourists-gets-tough-on-airbnb-tourists-taxes-too-much-partying/#6b3ac0742be5.
[11] Airbnb in Amsterdam, DutchAmsterdam (Aug. 4, 2018), http://www.dutchamsterdam.nl/3326-airbnb-amsterdam.
[12] Id.
[13] Id. See also O’Sullivan, supra note 17.
[14] A Practical Guide to Understanding Zoning Laws, PropertyMetrics (2018), https://www.propertymetrics.com/blog/2017/01/06/zoning-laws/.
[15] Zoning Ordinance, Investopedia (2018), https://www.investopedia.com/terms/z/zoning-ordinance.asp.
[16] See generally Rodriguez, supra note 10.
[17] Feargus O’Sullivan, Now London and Amsterdam Are Capping Airbnb Apartment Rentals, CityLab (Dec. 2, 2016), https://www.citylab.com/equity/2016/12/airbnb-london-amsterdam-vacation-apartment-rental-regulations/509396/.
[18] See Rodriguez, supra note 10; see also Airbnb in Amsterdam, supra note 11.
[19] Airbnb in Amsterdam, supra note 11.
[20] See Rodriguez, supra note 10.
[21] Airbnb in Amsterdam, supra note 11.
[22] Id. See also O’Sullivan, supra note 17.
[23] Id.
[24] Id.
[25] O’Sullivan, supra note 17. See also Airbnb in Amsterdam: What is Allowed and What is Not Allowed? ThomaPost (May 22, 2018), https://thomapost.amsterdam/en/2018/05/22/airbnb-in-amsterdam-what-is-allowed-and-what-is-not-allowed/.
[26] Id.
[27] Id.
[28] Id.
[29] Id. See also Amsterdam wants Airbnb to get tough on Illegal Rentals, DutchNews.nl (Sept. 18, 2018), https://www.dutchnews.nl/news/2018/09/amsterdam-wants-airbnb-to-get-tough-on-illegal-rentals/.
[30] Airbnb in Amsterdam, supra note 11.
[31] Id. See also Airbnb in Amsterdam: What is Allowed and What is Not Allowed?, supra note 24.
[32] Airbnb in Amsterdam, supra note 11.
[33] Id.
[34] See Scott Shatford, The Best Places to Buy an Airbnb Investment Property in America, Airdna (Aug. 11, 2015), https://www.airdna.co/blog/most-profitable-airbnb-cities-in-america; see also The Best Cities to make an Airbnb Investment, Cash Flow Diary (2017), https://cashflowdiary.com/cashflow/best-cities-make-airbnb-investment/.
[35] Airbnb in Amsterdam, supra note 11.
[36] Id.
[37] Id.
[38] Amsterdam wants Airbnb to get tough on Illegal Rentals, supra note 29.
[39] Id.
[40] Id.
[41] Id.
[42] Id.
[43] Id.
[44] Id.
[45] Id.
[46] Id.
[47] Rodriguez, supra note 10.