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Money Times - June 5, 2018

Posted by Jill Kerby on June 05 2018 @ 09:00

WILL AIRBnB REGULATIONS KILL OFF YOUR GOLDEN GOOSE?

The occasional trundling sound of wheeled suitcases outside my front windows in Kilmainham now competes with all the other traffic noise, especially the ambulance sirens en route to the A&E department at St James Hospital.

As an occasional suitcase trumbler myself, I don’t mind. But then none of my immediate neighbours rent their spare rooms so I’m never inconvenienced by late night arrivals or an entire home being rented out to noisy, visiting hen and stag parties.

Meanwhile, the more distant neighbours who are AirBnB hosts – retirees living on small pensions and young families with big mortgages - certainly appreciate the extra cash. This is a popular neighbourhood with quick public transport routes into the city centre and lots of historic sights.

New proposals on regulating AirBnB are expected to further heat up the debate about private property rights:  how far should the government go in restricting short term letting at a time when over 9,500 people are homeless and the cost of accommodation is soaring?

AirBnB is already complaining that we have a very restrictive regime in Ireland on the numbers of days you can rent, how many people can use the property and the number of rooms you can rent before you must apply for a change of planning, as a corporate AirBnB host with your local authority.

This is only fair, say critics since actual hotels and traditional BnBs are highly regulated in terms of fire and safety laws, must pay rates as well as corporate taxes.  The expected proposal will limit the number of days that the occasional AirBnB host will be able to let out their room (s) in their family home, or the entire home as a short term let. The number will vary from area to area.

AirBnB has certainly contributed to the property shortage in Dublin: the property and letting website Daft.ie shows that more than half of all lettings in Dublin - c5,500 – are now short term AirBnB rentals.  It is a common statistic in many other popular European tourist cities where public housing in particular has not kept up with demand.

Bad planning, the post-2008 debt legacy, inept politicians, mass tourism and the lure of bigger short term returns by property owners have all fed high the rolling property crises across so many cities her and in the EU.

Whether you live in Dublin or Dubrovnik, in the end, the huge potential returns from the AirBnB model – whether you rent a room per occasional night or by the month/year – is more attractive than becoming a registered BnB owner or a fully registered landlord. 

For many, even the tax free, regulation-lite Irish Rent-a-Room scheme in which you can earn €14,000 a year renting a room or rooms in your home, is just not as attractive as the higher yielding (and less personal) AirBnB option.

So alluring is the higher AirBnB yield that I know of student tenants in Dublin who are now advertising on closed, pseudo AirBnB social media sites for replacements as each of their fellow tenants graduate and either return home or find other accommodation closer to new jobs.

New student tenants of, say, a two bedroom, four-bed apartment are, I was told, so desperate for even a shared place to sleep that they are willing to pay by the night a la AirBnB. The other three, whose rent (if it is in a major city) is controlled by Rent Pressure Zone rules keep paying the usual rent to their landlord, but pocket the difference for the fourth bed, tax-free.

Regardless of your personal views of property ownership, governments are convinced that AirBnB is contributing to housing shortages (albeit mostly of their making). The numbers of consecutive days that can be let out have all been restricted in Paris, New York, London, Amsterdam, Barcelona, Berlin and other popular tourist destinations.

If you are already an Irish AirBnB host and are renting your entire property in a Rent Pressure Zone area, you might want to reconsider your profit targets.

Meanwhile, all income from AirBnB lettings is subject to income tax but under Schedule D Class A Trade Income, just like any other business.  Unlike someone who rents a property fulltime, AirBnB hosts cannot claim the same tax reliefs or deductions.  Always get proper advice before you make any tax assumptions.

Anyone who has not registered as an AirBnB host with the Revenue is asking for trouble. They know who you are because the company is obliged to furnish your details to the Revenue. Being unregistered risks not only a back-tax payment but penalties and surcharges and a very chance of being audited.  Renters who sublet a room via AirBnB also have to register with the Revenue, but should seek permission from the owner first.

 

(The new TAB Guide to Money Pensions & Tax 2018 is now out. See www.tab.ie for ebook edition.)  

 

 

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