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Commentary: Looks like Singapore's tough stance on Airbnb-style short stays is justified

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SINGAPORE: Those planning their next holiday are no strangers to popular platforms like Airbnb or VRBO for affordable alternatives to hotels overseas. But every once in a while, we are reminded that such short-term rentals are not accepted everywhere.

A total of 86 people have been fined or taken to court since 2019 for providing illegal short stays in Singapore, according to authorities in July. This came after a CNA report in June found illegal Airbnb listings, which were subsequently taken down.

The law does not allow rentals of less than three months in private properties and less than six months in Housing and Development Board (HDB) flats. But clearly, some choose to take their chances.

The Urban Redevelopment Authority (URA) takes strong enforcement action, with hefty fines of up to S$200,000 per charge on first-time offenders as deterrence. Two cases, in particular, have grabbed headlines with their eye-watering fines.

In November 2023, a man was fined S$1.43 million (US$1.06 million) for providing short-term rentals at 19 properties, while two former real estate agents were fined S$1.16 million and S$84,000 respectively, for doing so in 14 private condominium units in prime areas like Orchard Road and Keppel Bay.

But it looks like Singapore's firm stance on short-term rentals from the start is justified.

MORE CITIES TIGHTENING SHORT-TERM STAY RULES​


Many European and American cities are cracking down on Airbnb and similar platforms.

Thousands of listings in New York disappeared in September 2023 when the city started enforcing rules such as requiring hosts to be registered and rental periods of at least 30 days (unless the host was present during the stay). Airbnb called it a "de facto ban".

Italian tourist hotspot Florence passed a law in October 2023 banning new short-term rentals in the city centre. In June, Barcelona's mayor announced plans to ban all short-term rentals in the Spanish city by 2028.

Their motivations are similar: Local housing woes and overtourism.

The supply of rental housing units declined sharply when more landlords pivoted to short-term accommodation for better revenue. Rents and home prices have skyrocketed, and locals are priced out of big cities.

Accessibility to more Airbnb-type short-term stays has also contributed to overtourism in popular tourist destinations.

Local authorities have concerns about overloaded infrastructure and the deterioration of the environment. Local residents are concerned about disruptions to quiet neighbourhoods and inflated costs of living caused by tourist-induced inflation.

Some hotel operators have complained about unfair competition. Revenues lost by hotels could mean lower tax revenues for local governments, especially in areas where they do not levy taxes on hosts and guests.

Many apartments used for short-term stays are not well-designed for large groups of transient visitors and guests, causing nuisance to other residents. Unlike hotels, short-term rental locations are also not as strictly regulated in terms of safety and health codes against fire and other building-related risks.

Related:​


RENTS WERE RISING EVEN WITHOUT AIRBNB​


Even without such Airbnb-type pressures, Singapore has experienced a steep rise in housing rents since the pandemic, driven by construction delays and strong rental demand.

Foreign workers and students returned as border restrictions gradually eased, coupled with a strong influx of new tech firms and family offices. Rental options became more attractive for locals who needed private space because of work-from-home arrangements during the pandemic or to wait out the completion of delayed projects.

The URA non-landed private property rental index increased quarter-on-quarter by 45.2 per cent over 11 consecutive quarters from the first quarter of 2021 to the third quarter of 2023.

Private residential rents dropped for the first time in the fourth quarter of 2023, as more supply became available. More than 40,000 new private and public homes were completed in 2023, and the government eased the rules temporarily for two years, from January 2024 to December 2026, by allowing landlords to rent out larger units to a higher cap of eight unrelated people. The rental index has continued to ease in the first quarter of 2024.

Singapore's firm stance on short-term stays prevented the worsening of the rental housing market crunch. It will not have to face the dilemma other countries now face in making U-turns on the rules.

Related:​


TAKING A CHANCE ON SHARING ECONOMY?​


The strong rebound in tourist arrivals to Singapore may tempt some homeowners to try their luck with short-term rental despite the risk of infringing the law.

According to Singapore Tourism Board statistics, the average hotel room rate jumped by nearly 37 per cent from the pre-COVID level of S$235.36 in September 2019 to the peak of S$323.10 in September 2023. The average occupancy rate hit a peak of 90 per cent in July 2023.

Singapore also cemented its reputation as an entertainment hub in March when it secured the exclusive rights to host the megastar Taylor Swift's concerts in Southeast Asia. Hotels were booked out despite soaring nightly rates as regional fans flew in for the Eras Tour.

While platforms offering short-term homestays are allowed to operate in Singapore, homeowners are subject to strict renting rules under the Planning Act. HDB also imposes eligibility rules: Only Singapore citizens are allowed to rent out their flats, while tenants must be citizens, permanent residents or non-citizens with valid passes (such as employment and student passes). Airbnb does not permit hosting in HDB flats in Singapore.

The sharing economy works well when we use technology to match excess supply with unmet demand without the need for new resources. Singapore's initial concerns remain valid: Rent-seekers who divert resources to new demand could cause price spillover in the market and crowd out local residents from the housing market.

Related:​



So, it makes sense for Singapore regulators to continue tightening the rules through regular inspections and enforcement to crack down harder on errant hosts. This is necessary to protect the formal market for short-term stays, such as serviced apartments and hotels, against unfair competition.

It will help create a fairer market with a steady housing supply for people looking for mid-to-long-term rentals and, in the long run, those looking to buy a home.

Sing Tien Foo is the Provost's Chair Professor at the Department of Real Estate, NUS Business School, National University of Singapore. Views are those of the author and do not represent those of NUS and its affiliates.

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