As a new law on minpaku (private lodging services) took effect this month, the number of rental properties registered with local governments, as required under the law, amounted to only about 2,700 across Japan — far fewer than the roughly 62,000 properties listed on the popular rental website Airbnb just months ago. While the low-cost lodging is popular with the rapidly growing number of inbound travelers, people offering their private houses and rooms up for rent had to either get a license to operate a simple service under the law regulating hotels and inns or to win permission to run minpaku in special government-designated deregulation zones. Under the new law, people can now offer their properties for rent for up to 180 days a year if they register with their local governments — including in residential areas where it was forbidden to operate hotels or inns.

However, the sluggish registration of the service suggests either that those property owners thought the minpaku business was no longer attractive enough under the new law’s regulations — which are complicated by additional restrictions imposed by municipalities on the service that can be provided in their areas — or that they will continue to run their businesses illegally. If that is the case, it would be ironic since the law was intended to promote the minpaku business and to crack down on illegal operators, which are said to be rampant particularly in big cities. It should be reviewed whether the regulations imposed under the law and by local governments serve the law’s intended purpose.

Private lodgings have grown popular as a cheap alternative to hotels, particularly among tourists visiting Japan on low-cost carriers — though many properties have presumably been offered for rent by unlicensed operators. The minpaku service is believed to have contributed to the sharp increase in inbound tourists in recent years, whose number reached a record 28.7 million in 2017. According to a think tank estimate, the minpaku market in Japan hit ¥125 billion last year, double the ¥62 billion in the previous year. As the government sets ambitious targets of boosting the number of inbound travelers to 40 million in 2020 and to 60 million in 2030, minpaku is viewed as key to providing affordable lodging to tourists as increases in hotel rooms often lag behind demand.

Aside from the rules set under the law, local governments are allowed to impose additional regulations on the operation of minpaku businesses in their areas — “in case there is the need to prevent a deterioration in the living environment” of local residents. About one-third of the 150 local governments authorized to make such regulations — including 18 of Tokyo’s 23 ward offices — have reportedly added tougher restrictions on areas where the service is allowed or the time and season when the properties can be rented. Many prohibit the practice in exclusively residential areas or in neighborhoods with schools during weekdays. Tokyo’s Meguro Ward, for example, has established an ordinance prohibiting the service on weekdays.

Many of these municipalities reportedly impose such regulations in response to complaints over troubles between local residents and some tourists who reportedly make noise at night and ignore local rules on garbage disposal. Additional regulations imposed by some local governments to ban minpaku during busy tourism seasons — Kyoto, for example, allows minpaku operation in the city’s exclusively residential areas only during the two-month off-season — are deemed measures to placate concerns over competition with existing local lodging businesses.

These tight regulations are believed to lie behind the sluggish registration of minpaku operators — many of whom are concentrated in the three big metropolitan areas of Tokyo, Nagoya and Osaka, plus some regional cities. Since rental website operators are not allowed to list unregistered properties, Airbnb recently deleted a large number of listed properties from its website. There is concern that many minpaku operators will continue to run their business unlicensed. Efforts to crack down on unlicensed operators have so far proven difficult.

Competition between minpaku and hotels has reportedly pushed down per-unit prices of lodging services. A setback to the minpaku business might push up prices, potentially slowing the growth in inbound tourism. Such an outcome should be averted. The issues surrounding the minpaku business may test the nation’s bid to turn tourism into one of its main industries. The national and local governments should work together to promote the private lodging service — which is expected to have ripple effects on other sectors that collaborate with the minpaku business operators — and explore what regulations best suit their purposes.

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