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Evictions? Regulations? Taxes? How can Singapore deal with sites like Airbnb?

Evictions? Regulations? Taxes? How can Singapore deal with sites like Airbnb?

Faced with rising hotel room rates, many tourists in Singapore have turned to shorter-term, far cheaper accommodation offered by sites like Airbnb and Roomorama, which have lots of rooms for rent listed in Singapore.

These disruptive startups currently face a slew of opposition from regulatory bodies around the world, including in Singapore. Most recently, Singapore’s Housing and Development Board (HDB) confiscated two flats from their owners as they were renting out the space to tourists. The owners were evicted from their homes.

Authorities in Singapore disallow rental of private or public housing to anyone if the lease is under six months.

Both the HDB and Singapore’s Urban Redevelopment Authority (URA) have investigated multiple cases over the past year involving offering short-term accommodation, but this is the first time that they have taken action. HDB has jurisdiction over public housing, while URA oversees private dwellings.

A source who has chosen to remain unnamed reveals that his friend was one of the two homeowners whose flat was confiscated. His friend had allegedly rented his apartment out via an agent on PropertyGuru, but the agent had fled as soon as the incident occurred. He is now uncontactable.

HDB acted on complaints from neighbors of loud noises and suspicious characters going in and out of the house. However, a HDB spokesperson declined to comment on that specific case.

Due to the price range, which was reported to be between S$25 and S$75 per night, it is highly unlikely that the flats in question were on Airbnb, since the going rate for an entire apartment on Airbnb is typically much higher than that. Similarly, Roomorama’s founder and CEO Teo Jia En has stated explicitly that there are no HDB flats listed on their platform.

Are short-term rentals really illegal?

Airbnb has over a thousand Singapore-based listings on its site, while Roomorama has about 500. According to HDB, though, “transient subletting” is illegal in Singapore. A report states that HDB has investigated over 184 cases of short-term rentals in public flats over the last year. Meanwhile, the URA investigated over 2,100 cases in the same period of time, with another 350 over the course of the first four months of this year.

Interestingly, James Chua, CEO of Singapore-based Pandabed, revealed in an answer on Quora that short-term renting for private property is actually not illegal here. Having consulted with a law firm, they found that the six-month minimum rental period stated by the URA is a guideline, and not a law:

Read Quote of James Chua’s answer to Singapore: Is it legal to rent out a room on AirBnb in Singapore? on Quora

There is a caveat: if a guest causes a disturbance of any kind to the neighbourhood, the URA then has the authority to take action.

Chua did, however, concede that HDB short-term rentals were against the law. The minimum allowable period is clearly stated on a HDB page related to subletting:

Owners are not allowed to sublet their bedrooms on a short term basis. The period of subletting to each subtenant per application must not be less than six months.

Airbnb does clearly state on their website that they require hosts to follow the local laws and regulations. A quick search of the database reveals that most of the local listings are privately owned.

By and large, it seems that these companies do indeed adhere to the regulations set by HDB. The question now is whether banning short-term rentals in public housing outright, and the drastic action of evicting wayward homeowners, is reasonable or not.

A problem of space

The government maintains tight control over how land space is used in Singapore, and for good reason. The country has a lot to offer, but space is not one of those things.

The island-state faces overcrowding despite expanding its land area by about a sixth of its original size through land reclamation since the 1960s.

The influx of foreigners from 2000 to 2012 caused Singapore’s population to surge to such an extent that public infrastructure started bursting at the seams. Despite slowing population growth over the last couple of years, as well as plans to reclaim even more land to cater for a projected population of 6.9 million in 2030, the fear that the situation will not improve any further remains ever-present among the populace. These fears are not unfounded – housing and vehicle prices continue to test the boundaries of affordability.

The hotel industry has also been severely affected. They have recently come forward with concerns of a dire shortage of hotel rooms in the years ahead. A report by Chesterton Singapore projected that average occupancy rates would rise from 80 per cent in 2014 to 91 per cent in 2018, causing a room crunch which would drive room rates upwards.

For income and dignity

The premise of renting out bedrooms or entire houses is to make unused resources work for the owner. Rather than let extra living space languish unused, homeowners can rent it out to generate some income. Short-term rental platforms provide the perfect solution.

Earning extra cash can offset the exorbitant costs of housing, and that is especially important to young Singaporeans. The cost of local apartments has often been compared to superior alternatives overseas – sometimes in jest, but more often with a sense of despair:

Evictions? Regulations? Taxes? How can Singapore deal with sites like Airbnb?

Like it or not, future generations of Singaporeans face an uphill climb in paying off their housing loans. The government has introduced several schemes to help citizens with this cost in recent years, but many still find it expensive.

Is it right, then, for residents to rent out their subsidized housing for a profit? Ryan Ong, editor of financial comparison portal Moneysmart, thinks it isn’t.

“I am sure the main reason [for disallowing short-term rentals] is simply to discourage people from staying with their parents, and then applying for flats just to rent them out,” he says. “If that person doesn’t really need the flat but just wants to rent it out for profit, it should instead go to someone who truly needs the housing.”

Chua, however, thinks that short-term rentals should be allowed – at least for retirees and senior citizens. In a statement made at the opening of the Singapore-based Sharing Economy Association last night, he explained that this would provide the elderly with a dignified way to earn income in their old age. After all, an elderly person’s house is still their biggest asset at the tail-end of the 30-year loan they would have taken out to finance it, and it’s their right to make use of it as they see fit.

Why regulate?

Despite the HDB and URA’s attempts to explain why it’s disallowing short-term rentals, some residents are unconvinced. A homeowner who rents out his place on Airbnb, who only wants to be known as Richard, finds this unacceptable.

“HDB and URA regulations make no sense. They can’t even tell us why it’s not a good idea to have people stay over for a few nights. How does this harm Singapore at all?” asks Richard.

“Those who can’t afford to stay in a hotel will end up skipping Singapore altogether, and consequently less foreign exchange will be earned by Singapore in general. My point is that if we are all making money, we will have extra to spend on the economy – everyone wins [...] Instead of making everything illegal, they should let us speak out.”

He adds that lawmakers and politicians seem unable to understand the problems faced by the nation’s middle and lower class citizens.

A HDB spokesperson explained to Tech in Asia that their regulatory stance is for the purpose of protecting the interests of other residents – specifically, to keep the living environment safe.

Darius Cheung, CEO and founder of property search websites Homie.co and 99.co, confirms that this is usually a cause for worry among the residents and landlords that he deals with. “There is a real concern with the security issues of having short-term visitors moving in and out of apartments quickly,” he says.

See: With $560,000 in hand, 99.co is the Airbnb for long-term property rental

But is security really a huge concern for Singaporeans? The island-state is the second-safest country in the world right now, according to the US-based World Justice Project Rule of Law Index 2014.

However, the Singapore Police Force has identified a rise in serious property crimes over the last year, which they attributed to cyber extortions. This may present a real concern to those who are considering whether to rent property via online platforms, regardless of whether for long-term or short-term stay.

Perhaps the concern is not with crime per se, but more a general sense of insecurity. A URA spokesman adds in the report on The New Paper that most homeowners do not want to live among transient strangers. An article on the URA website states a sense of comfort as the reason:

Allowing residences to be used for short stays leads to high turnovers of occupants, and gives rise to nuisance and safety concerns. Most of us do prefer some familiarity with the people who live around our homes.

Simply put, residents feel ill at ease with strangers moving in and out of neighboring apartments. A vague sense of discomfort, however, might not warrant booting culprits out of their flats.

Alternatives to heavy-handed measures

Many might find that the outright confiscation of HDB flats is too harsh a measure. It is questionable whether a homeowner whose flat has been confiscated would ever be able to purchase another HDB flat again.

A HDB spokesperson assured Tech in Asia that whenever HDB reacquires flats, they will ensure that the evicted parties have alternative accommodation.

Rather than punishing people making use of these new web services, the authorities involved should address the root of the problem by ensuring that the platforms in question adhere to regulations. Of course, since the renter himself flouted the rules set by HDB in renting his place out on a short-term basis, a heavy fine should ensure that he never does it again.

Given the benefits of short-term rental, a compromise between the governing bodies and companies involved would be ideal. Teo, Roomorama’s CEO, believes that a mutually agreeable solution can be struck:

This is not an issue that will go away soon [...] given that there is demand for short-term accommodation in Singapore, and hotels are often too pricey for people staying for more than a week, or are simply in short supply. With dialogue, all sides can express their areas of concern, and try to come to a mutually agreeable solution.

Ong from Moneysmart suggests that regulatory measures be put in place to check who these houses are being rented to. This would help in preventing unlawful usage of flats, as well as alleviating the concerns of neighboring residents.

An issue with this solution is that it would take considerable collaboration and openness between the authorities and companies in this industry to enforce such measures. Dialogue between the parties involved, therefore, is key to making this a reality.

Another solution that should appease the government would be to tax short-term accommodation platforms. This should address the concern that all the profits from subsidized housing is going into the pockets of these corporate entities.

One thing is for certain: short-term rentals aren’t going away anytime soon. The sharing economy in Singapore is slowly but surely gaining traction, and the recent opening of the Sharing Economy Association will certainly help in pushing it forward. As Eugene Tay, president of the Sharing Economy Association, puts it: a middle ground has to be achieved with the authorities involved.

(Image credit: Flickr user Khánh Hmoong)

Editing by Terence Lee and Steven Millward

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