Is Asia ready for Airbnb?

Having rented my first Airbnb stay on a vacation, I have started looking into monthly sublets on the site and imagined making extra income from a spare room. It’s easy to appreciate how companies like Airbnb empower individuals to generate income on their own terms.

But the downsides of the short-term rental economy has gotten far less attention. By participating, we are putting job security and affordable housing at risk. Asia’s infrastructure and governments are also ill-prepared to enforce regulations. For instance, neither the Hong Kong, Japanese, Singaporean, nor any Asian government have proposed viable solutions to regulate short-term rentals.

For the inexperienced, the online platform connects people who have space to spare with those looking for a short stay at a competitive price. Services like Airbnb and Uber are driving the so-called “gig economy.” Their platform enables people to become freelance service providers without the inspections and legal oversight traditional lodging and cab industries are subject to.

With the rapid success of gig economies, governments in places where Airbnb have gained substantial foothold are scrambling to catch up with new regulations and proper enforcement—mainly in the U.S. and Europe. Therefore, governments, industry professionals and users should learn about the alarming side effects likely to conquer Asia in the next few years.

In Hong Kong, leasing agreement does not have clauses allowing short-term rentals. These properties are also unregistered, which makes enforcing regulations nearly impossible. A lawyer who rented out a spare room in his apartment revealed to Marketing magazine, that the government’s inability to reform fast enough is a sign that “laws are often too conservative and behind the times.”

Like Hong Kong, the Singaporean government have also yet to announce when new regulations, if any, will be implemented despite growing concerns. In the meantime, they have reverted back to their iron fist governance evicting those who rent out their public housing homes—a punishment many believe is too harsh. Over in Japan, citizens are caught in a tug of war between Prime Minister Shinzo Abe’s push to relax strict rules imposed on short-term rentals as part of his economic growth strategy and ultra-conservative lawmakers at the city level. According to Reuters, Osaka legislators voted down a bill in September to loosen regulations citing noise and safety concerns.

Prohibiting short-term rentals altogether is avoiding a new reality that’s here to stay. Rather, it’s more effective to design policies that evens the playing field for all. David Kong, CEO of American hotel chain Best Western International, raised valid concerns in his first blog series urging industry professionals to speak up on the topic.

“We pay hotel taxes, state, local and tourism taxes… there’s income, liquor and rental taxes, amongst others,” writes Kong. “And then there’s a whole host of insurance, health and safety obligations that come with considerable oversight…In addition, these laws are not being adequately enforced. Also, there remain tremendous gaps in regard to health, safety and disability compliance standards.”

These concerns are often enough to send small businesses over the edge. A group of 10 licensed bed and breakfast operators in Canada penned a letter to city council claiming some in their community have closed. The group also noted only 15 percent of businesses on Airbnb follows city bylaws and operate with permits, which can cost over US$1,500. Contrary to Airbnb hosts, these licensed operators conform to a variety of health and fire safety regulations including inspections involving public health officials.

Relative to Europe and America, the Asian Airbnb market is still young. In 2013, there were roughly 50,000 properties listed in cities like Taipei, Hong Kong, Seoul and Singapore. It’s a small fraction compared to about 100,000 in the U.S. and 250,000 in Europe. However, Airbnb co-founder and chief technology officer, Nathan Blecharczyk acknowledged “sustained growth” in the region. The company’s ambitious goals of reaching two million properties in Asia became one step closer to reality in June after acquiring capital from at least four Asian investors raising US$1.5 billion.

As Hillary Clinton reiterated in New York City during her campaign, the gig economy will raise “hard questions” about what a good job will look like in the digital age. While old-fashioned secure jobs and affordable housing are quickly becoming obsolete or unattainable for a growing number of the population, governments in Asia needs to start creating innovative solutions that will ease its transition to the new economy.

This article first appeared in South China Morning Post.

First Editor: Olivia Yang
Second Editor: Joey Chung

Sources and related articles:
“Airbnb sets its sights on the Chinese tourism boom" (Quartz)
“Airbnb explains how it’s going to win in China and the rest of Asia" (Venture Beat)
“Increasing use of AirBnB may be cutting into Vancouver’s rental stock" (Global News) 
“Can shared consumption pick up locally?" (Marketing)
“Amid reform talk, hopes grow for short-term home rental market" (The Japan Times)
“Asian investors jump in on Airbnb’s US$1.5 billion funding round" (e27)