Tuesday 25 June 2019

Time to keep Airbnb's move beyond the sharing economy in check

Airbnb says that its entire listings for Dublin amount to just 1pc of the available stock — but Daft.ie has put the figure at half of the market
Airbnb says that its entire listings for Dublin amount to just 1pc of the available stock — but Daft.ie has put the figure at half of the market
Richard Curran

Richard Curran

Airbnb is one of the original disruptors. It basically disrupted the hotel and professional hospitality industry by providing a cheaper alternative using the so-called sharing economy.

It was never the businesses intention to be a disruptor of the housing market - the 'roof over our heads' market. The extent to which it may be doing that is something the Government will have to decide on in the coming months.

Daft.ie said during the week there were just 1,258 properties available in Dublin for long-term renting. Yet, according to the monitoring website Inside Airbnb, the stock of properties to let on Airbnb from professional listers, and not those just temporarily sharing their home, was 1,419.

The figures suggest that 53pc of the homes available to rent in the Dublin market are not available as places to live for people in need of a long-term rental property.

Airbnb fired back, refuting the figures, by saying it represented a scraping of data, and that entire home listings on Airbnb in Dublin last year represented just 1.1pc of the available housing stock.

Not every home available for rent is up on Daft.ie. Nevertheless, the figures provide a useful snapshot in time of the dysfunctional housing market in the capital city.

Airbnb claims you would have to rent out a typical Dublin property for well over 120 nights a year in order to make it financially worth your while. It says it had just 550 properties in 2016 that were booked out for more than 160 nights.

If that is the case, then why are there so many professional listings out there? There are already a number of restrictions in place for use of apartments as Airbnb rentals, including the need for planning permission for change of use and the number of rooms that can be rented out in a particular apartment.

But what level of local authority resources is going into policing this? Given the fact that unregulated rental properties run by unscrupulous landlords, with up to 50 long-term residents in one house, have slipped under the radar, it is hard to imagine there is an army of Dublin City Council inspectors all over these changes of use, or monitoring the number of nights rooms are vacant or full.

The bottom line here is that Airbnb is a great business idea that has made a significant contribution to the tourism industry in Dublin and in many cities around the world. The second point is that our rental market in Dublin is utterly dysfunctional.

Airbnb needs to be regulated when it comes to professional hosts who have apartments being used exclusively for that purpose. The Daft figures - although disputed by Airbnb, if not all that convincingly - point to a material negative impact on the regular rental market.

Let Airbnb disrupt the hotel sector in a Dublin that has now become notorious for price-gouging, especially on nights where demand for rooms is high. It shouldn't affect the ability of people to get a home to live in.

The problem is all about inspection and regulation. The rules that are already there are meaningless unless they are enforced and the necessary resources are put in place to do that. One option is to introduce more restrictions on professional Airbnb hosting in Dublin, so rooms could only be rented out for a certain number of nights per year. This might make it less attractive for professional short-term lettings.

However, these rules, if introduced, will have no impact unless they are policed. The cost of inspection and regulation could be quite high. And somebody will have to pay for it.

Airbnb is not to blame for Dublin's housing and rental crisis. But it should stick to its original concept of the sharing economy. Any move by government to achieve this has to be enforced.

Oil price rises bad news for us

International oil prices hit their highest level since late 2014 during the week on the back of prolonged supply cut arrangements, chaos in Venezuela, wars in Yemen and Syria, and the possible re-introduction of major sanctions by the US on Iran.

It all makes for a heavy mix that drove Brent crude oil prices up to $80 (€68) a barrel. Saudi Arabia is eyeing an oil price of $100 as it prepares to IPO Aramco, the world's biggest oil company in a part privatisation.

In recent years, US shale has plugged the gap but infrastructure and delivery constraints are holding its production back - which means oil prices may well drift back up towards $100.

This is bad news for Ireland, given our dependence on imported fuels and energy. The Irish economic recovery of recent years enjoyed three tailwinds: cheap oil, a cheap euro and low interest rates.

While there is little short-term sign of interest rate rises yet, the other two tailwinds may be running out of puff.

But the bigger fear is uncertainty. Many of the big oil producers are politically more volatile, and economically more powerful, from Saudi Arabia shaping up to a conflict with Iran, and Russian president Vladimir Putin remaining in power for another term.

Each year, Freedom House compiles a global index of "not free" countries based on democratic structures, political freedoms and civil liberties. In 1990 countries it rated as "not free", accounted for just 12pc of global income. Now they are responsible for 33pc, which matches the level they reached in the 1930s.

Within the next five years the share of global income held by countries considered to be not free - including Russia, China and Saudi Arabia, will be greater than the share held by Western liberal democracies, according to an article by two academics in the current issue of Foreign Affairs magazine.

May you live in interesting times, indeed.

Where are the Brexit IFSC jobs?

The move by Thomson Reuters to transfer its foreign derivatives trading from London to Dublin, is significant for many reasons. Firstly, it is moving ahead of Brexit to service its EU clients before London's passporting rights for financial services to the EU has been formally withdrawn.

In other words they have to assume passporting arrangements will end. Secondly, neither the staff or the computers on which this system operates will be transferring to Dublin. The company will hire around 20 staff in Dublin, which will enable it to comply with regulatory requirements but basically nobody will be moving from London.

It is a prestigious win for Dublin and IDA Ireland because it can be used as a calling card. The trading platform handles about £300bn of foreign currency transactions a day. However, it won't be a direct jobs or investment bonanza for Ireland.

It appears to be a serious regulatory issue for the Central Bank given the scale of transactions involved. It will also create a few regulatory, legal and advisory jobs at the Central Bank and some big law firms around town.

This seems to be the pattern for financial services investments shifting to Ireland because of Brexit. It's not a bad deal - just not a bonanza.

Sunday Indo Business

Also in Business