In Japan, new rules may leave short-term lodging industry out in the cold

by Junko Fujita

Reuters

Japan’s new law on short-term lodging services was meant to ease a shortage of hotel rooms, bring order to an unregulated market, and offer more options for foreign visitors ahead of next year’s Rugby World Cup and the 2020 Tokyo Olympics.

Instead, the law is likely to stifle Airbnb Inc. when it is enacted in June, along with other businesses based on vacation-rental websites, and force many homeowners to stop offering their services, renters and experts say.

The law on minpaku (private lodging services), the first national legal framework for short-term room rentals in Asia, limits provision of the services to 180 days a year — a cap some hosts say makes it difficult to turn a profit.

More important, municipal governments, which have final authority to regulate services in their areas, are imposing even more severe restrictions, citing security or noise concerns.

For example, Tokyo’s Chuo Ward, home to the tony Ginza shopping district, has banned weekday rentals on the grounds that allowing strangers into apartment buildings during the week could be unsafe.

That’s a huge disappointment for Airbnb “superhost” Mika, who asked that her last name not be used because home-based rental is now officially allowed only in certain zones.

She has enjoyed hosting international visitors in her spare two-bedroom apartment but will stop because her building’s management has decided to ban the service ahead of the law’s enactment.

“I was able to meet many different people I would have not met otherwise,” said Mika, 53, who started renting out her apartment after she used a short-term lodging service overseas. “I may sell my condo.”

Mika added that if she were to rent the apartment out on a monthly basis, she would only make one-third of what she does from short-term rentals.

The ancient capital of Kyoto, which draws more than 50 million tourists a year, will allow private lodging in residential areas only between Jan. 15 and March 16, avoiding the popular spring and fall tourist seasons.

Similarly, Tokyo’s trendy Shibuya Ward will permit short-term lodging services in residential areas only during school holidays, with certain exceptions, so children won’t meet strangers on their way to class.

In short, renters and experts say, the new law is doing more to hurt than help, even as a record 28.7 million tourists flocked to Japan last year — up 19 percent from the year before. Japan aims to host 40 million a year by 2020.

Yasuhiro Inaoka, who manages about 15 properties for Airbnb hosts in Tokyo, says the net effect of the law is “banning individuals from offering home lodging.”

Central government officials say that excessive local limits could defeat the law’s objectives, but that they cannot force local governments to loosen their policies.

“Restricting home rental due to vague concerns that foreigners are unsafe or that it is a strange practice goes against the concept of the new law,” said Soichi Taguchi, an official at the government’s Tourism Agency.

The annual cap of 180 days for short-term lodging and stricter rules set by municipal governments is a victory for the hotel industry, which opposes private properties being used as tourist accommodations.

“While each city and town is unique, we believe that by following the national recommendations, all Japanese cities and communities will be able to benefit from the growing economic opportunity provided by home sharing and short-term rentals,” said Jake Wilczynski, spokesman for Airbnb in the Asia-Pacific.

About 62,000 Airbnb listings have sprung up in Japan, far smaller than other major tourist destinations such as Italy, which has 354,400 listings, or France, with 490,000.

Elsewhere in Asia, Singapore allows short-term lodging but requires a minimum period of three months. Two Airbnb hosts were each fined 60,000 Singapore dollars ($45,800) by a local court in April for unauthorized short-term letting.

Hyakusenrenma Inc., a Japanese rival to Airbnb, has 2,000 listings for its “Stay Japan” service, and online travel agency Booking Holdings’s Booking.com and Chinese agents have also entered the Japanese market.

The new law requires home owners to register rental properties for short-term stays with the relevant government authorities, undergo fire safety checks, and submit proof that the owner is not mentally disturbed.

San Francisco-based Airbnb said it would obey the new law and remove all noncompliant listings from its site by June. But the company is also confident the number of listings will bounce back and eventually exceed the current level because Japan still has a great deal of potential to expand, said country manager Yasuyuki Tanabe.

“We will have clear rules for home lodging, which will encourage more people to list their properties,” Tanabe said.

One alternative for home renters is to apply for a hotel license. That process has been simplified to relax requirements for a reception area and no longer mandate a minimum number of rooms.

One 42-year-old man who asked not to be named has already taken this route. He stopped renting out Airbnb apartments in Tokyo and instead obtained a license to run a five-room hotel out of a converted traditional machiya (wooden houses) in Kyoto.

He still advertises his property in Kyoto on Airbnb and the hotel license frees him from the 180-day limit.

“With the hotel license I can provide the service all year round,” he said.

But for many this isn’t an option because their buildings won’t allow short-term rental at all, regardless of licensing.

When the land ministry asked apartment management unions to decide whether to permit short-term rentals only 0.3 percent of them nationwide said they would, according to the Condominium Management Association.