Property
More clarity needed for home-sharing services
Sonia Ramachandran 
Home-sharing has become a popular trend in Malaysia
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SHORT-term rentals in private residences – be it a room or the whole residence – are fast becoming popular.

In fact, a quick look at popular short-term rental website Airbnb reveals over 300 listings for rooms to rent for a night in Kuala Lumpur for the end of this month.

With the large number of high-rise residences coming on-stream around the country, many owners are considering or opting for home-sharing services like Airbnb, especially if they find difficulty getting longer-term tenants.

However, not everyone is happy about the growth of such services as there are potential downsides. Though the Urban Wellbeing, Housing and Local Government Ministry has been quoted as saying that Airbnb is legal as long as there is no foul play, some industry experts feel it should be regulated.

PPC International Sdn Bhd managing director Datuk Siders Sittampalam tells FocusM that home-sharing services should be regulated in terms of safety measures and security.

He also feels that there should be a limit to such services as too many “would kill the budget hotel businesses”.

Siders feels there should be a limit set to home-sharing services

“These are basically short-term stays as they are neither tenancies nor even hotels, as hotels are governed by many by-laws. And they go through many approvals when it comes to safety and other statutory requirements.

“So [home-sharing services like] Airbnb are not regulated at all although certain states are using their by-laws to regulate this,” says Siders, who is also the Association of Valuers, Property Managers, Estate Agents and Property Consultants in the Private Sector Malaysia’s immediate past president.

Property consultancy firm Taylor Hobbs principal consultant Liaw Lam Thye also feels it is timely for Airbnb to be regulated and for guidelines to be formulated for the benefit of both sides of the divide.

“The complaints against Airbnb mainly come from those who have bought their condominium or apartment and wish to enjoy a peaceful living in the comfort of their investment home.

“When some of the units are turned into Airbnb, the constant shift of unfamiliar faces and the din associated with frequent movement of luggage and vehicles, sometimes late at night, have disturbed the peaceful and quiet enjoyment of their cozy home,” says Liaw, who is also the Sabah Royal Institution of Surveyors Malaysia past chairman.

Liaw says there must be a holistic rather than a piece-meal approach to regulating Airbnb

The frequent ingress of Airbnb guests also increases the cost of security checking, cleaning and the use of common facilities, he adds.

However, he points out that it also creates a lucrative income for those who have invested in the property.

Raine and Horne International Zaki & Partners Sdn Bhd partner James Tan feels Airbnb should not be regulated. “The market will regulate itself.”

“However, certain guidelines have to be in place like minimum cleanliness and fire safety standards,” he says.

 

Commercial titles only

Kuala Lumpur City Hall (DBKL) has been reported as saying apartment and condominium owners may only rent out their units on Airbnb if their management’s bylaws permit it.

If the matter had yet to be addressed in the management bodies’ annual general meetings (AGMs) or extraordinary general meetings (EGMs), then residents could complain to DBKL who could then instruct the building management to conduct an EGM on the matter.

The Penang Island City Council (MBPP) has also been reported to have clamped down on short-term stays while the Sabah government is set to come up with guidelines on Airbnb.

Singapore’s Urban Redevelopment Authority has reportedly instituted a three-month minimum for such private short-term rentals.

Zerin Properties Research and Consultancy head Roja Rani Applanaidu also feels this is an area that should be regulated. She says the type of regulations being considered, taking a cue from measures implemented by other countries, include only allowing residences with commercial titles to be listed on Airbnb.

“This measure will safeguard the interests of purchasers who are buying a home for their occupation, free from nuisance and security issues.

“The owner/host will be paying utilities based on commercial rates, thus creating a fair playing field with hoteliers and serviced apartment operators,” says Roja.

This sentiment is shared by local government and planning law expert Derek Fernandez, who is also a Petaling Jaya City Council (MBPJ) councillor and a member of its One Step Centre which deals with planning and development control approvals.

Fernandez says MBPJ does not currently have a specific policy for home-sharing services but feels that existing zoning laws under the various local plans of Petaling Jaya that define residential and non-residential or commercial use does govern this.

“Technically speaking, if a residential home is being utilised primarily to provide hotel-like accommodation or short-term stays, you cannot do it unless the title is commercial.

“This is possible for serviced apartments with commercial titles such as MiCasa because that was the original intention of such an establishment.

“Short-term stays would push the boundary towards a more commercial rather than residential use and I believe the local authority can take action,” he says.

Fernandez points out  that areas zoned as residential can be only rented out via a lease or a tenancy.

“But you are not entering a tenancy or lease for a one-day stay, in which event you are operating like a hotel without frills.

“In my opinion, operating like a hotel amounts to conducting commercial activities inside a house and therefore you need commercial titles and approvals,” he says.

 

DIBS units

These home-sharing arrangements are potentially a more lucrative arrangement compared to leases or tenancies. It is also an attractive option for owners of the thousands of units purchased during the time the Developer Interest Bearing Scheme (DIBS) was in force and which are now on the market.

DIBS essentially inflated prices and allowed people to buy houses without paying the usual money upfront during the construction phase and was banned by the government in 2014.

While Siders agrees this is an avenue to prevent some properties bought during the DIBS period from going on the auction block, he says that should not be a solution to the oversupply of properties.

“The market needs to make its own corrections,” he says.

Siders also questions the need for additional accommodation. “Is there a dire need? Unless we are holding the Olympics or something, then it is good as a short-term measure.

“But currently, there are enough hotels and budget hotels to cater for the needs,” he says.

On whether Singapore’s model is one that Malaysia should be looking at, Siders says: “That becomes a short-term tenancy and in tenancy agreements, you are well-protected by the contract you sign.

“With such a rule, you are basically stopping Airbnb. Short-term rentals for one or two days is where the market is.”

Taylor Hobbs’ Liaw says that while there is no apparent sign of a glut in residential and condominium units in Kota Kinabalu, Airbnb will help to fill up the current empty units in high-rise buildings.

“Appropriate regulations can in fact give property investors the confidence in investing in high-rise buildings, especially in good quality condominiums.

“As the trend of development is now towards high-rise buildings, well-regulated Airbnb will certainly help to absorb unoccupied or unsold high-rise residential developments and therefore fuel the demand for such property,” he says

 

Laissez faire approach

Nevertheless, Liaw feels a laissez-faire approach to Airbnb will create a win-lose situation. “The Airbnb operators will win at the expense of other residents who use their property as a private dwelling.

“This is because the non-Airbnb residents will have to bear equally the additional cost in security surveillance, cleaning, and wear and tear from the use of the building, its facilities and lifts.

The use of facilities meant for residents by strangers are one of the concerns about short term rentals

“They will also have to bear with the frequent change of short-term neighbours, who are total strangers,” he says.

That is why he says it is crucial for authorities to thoroughly weigh the pros and cons of Airbnb operations within residential developments before finalising guidelines to govern it.

“Regulations on Airbnb are a much bigger issue than just letting the management corporation decide whether or not to allow Airbnb within the development.

“It must have a holistic rather than a piece-meal approach to regulating Airbnb,” he says.

Raine and Horne’s Tan however feels a laissez faire approach is better. “Airbnb is a good thing for the tourism industry like what Grab and Uber is to the taxi industry.

“It is a source of additional income that will help offset the high vacancy rate of apartments and provide owners with a lifeline and to a certain extent prevent the increase of non-performing loans,” he says.

PPC’s Siders, however, says while this approach works to some extent, the government should step in “when the volume of Airbnb units available goes up and things get out of hand”.

Type of guidelines needed

GUIDELINES formulated to govern home-sharing services must include letting the buyers know from the onset of launching the development whether units there can or cannot be used for such services.

“It is only fair, and without misrepresentation, if the buyers know in advance whether they can operate Airbnb business before they commit to purchasing the property,” says Taylor Hobbs principal consultant Liaw Lam Thye.

Roja feels that only residences with commercial titles should be listed on Airbnb

“Some buyers may just want to have a home to live peacefully and they do not want to buy a property where any neighbour can turn his or her unit into an Airbnb accommodation,” he adds.

Zerin Properties Research and Consultancy head Roja Rani Applanaidu feels that residences rented on Airbnb and any other home-sharing platforms must be registered with local authorities and the tourism registry.

“Short-term rentals should be permitted only for partial unit rental with the owner/host occupying the other portion. Full rentals of the unit should only be allowed for long-term rental, that is, for a minimum one-month period,” she says, adding this can be relaxed for cities with a short supply of hotels/serviced apartments.

Siders says the government should set a limit to the number of home-sharing services and this should be calculated based on the number of budget hotels available in the country and the occupancy against tourist arrivals.

Roja also feels there should be a limit to the number of listing days per annum and the number of units available for listing within the same building (strata building) at any point of time.

She adds that there should also be only one listing per owner/host in a city. “[This is] to control the number of units listed for home-sharing as many investors opt to purchase premises specifically to cater for the Airbnb market.

“This may reduce availability of long-term rental housing options for locals and also lead to a significant rent hike in popular Airbnb neighbourhoods,” says Roja.

 

Taxes

She also suggests Airbnb listings be subjected to a daily tax according to respective classifications based on services provided or that the daily tax imposed on hotel guests be removed in order to create a fair market.

Taylor Hobbs’ Liaw agrees that taxes are one of the concerns for the local authority. “Airbnb is recognised as a commercial or business entity and the local authority is likely to impose a higher assessment rates for those residential properties used as Airbnb.

“The local authority may also require Airbnb operators to get a business licence and comply with other relevant safety and building bye-laws to ensure the safety and welfare of the Airbnb guests are not compromised,” he says.

Liaw adds that income earned from Airbnb activities is a source of business income taxable on individuals at the graduated personal income tax rate.

 

 

Home-sharing not ideal for all

AIRBNB is not a popular word for many apartment owners. Ashok Gorasia, the joint management body (JMB) chairman of Armanee Terrace condominium in Petaling Jaya, is not in favour of Airbnb bookings at his condominium.

Ashok feels that Airbnb should be regulated to protect the safety of travellers as well as prevent their stay from causing a nuisance to residents or damage to property

“Here, everybody knows the person next door and the issue of safety and privacy within a shared living space is our primary concern.

“The Airbnb travellers will have access to our common areas and facilities such as corridors, pools, sports facilities, gymnasiums, spas, etc,” he says.

This would be the case unless the JMB passes a house rule denying the travellers access to these areas or the said units be subject to higher maintenance rates or be ordered to place huge damage deposits,” says Ashok, who acknowledges that such guidelines will make the property less desirable for Airbnb prospects.

He adds that guests may also not be too concerned over house rules and the communal living environment.

“Even for guests causing damage to property or injury to themselves, our insurance coverage and premiums need to be relooked at to be valid,” he says.

Ashok feels that Airbnb should be regulated with regulations to protect the safety of travellers as well as prevent their stay at the destination from causing a nuisance to residents or damage to property.

“Some form of regulations of the imposition of breach of rules deposits, tightly worded standard Airbnb rental agreements and stringent screening processes could be put in place,” says Ashok.



This article first appeared in Focus Malaysia Issue 259.