Live Anywhere? Who Says You Are Not Entitled?

The subject of short-term rentals just doesn’t go away. This started long before Airbnb exacerbated it. The dialog goes back to 2009 when the laws first came to light (they had been on the books since 1948), but weren’t being enforced at the time. Much has changed since then, as the city officials don’t really know how to manage it. They think they do, but we’ve watched them grapple with it as they accomplish the reverse of what they set out to do.

Local authorities in French towns now have the power to make their own rules regarding rental properties on Airbnb (and other sites, although they see Airbnb as the primary culprit), according to a decree published by the French government.

I’m getting really tired of the dialog because I could offer up a number of solutions, but would also like to see real economists and analysts determine the true implications of short-term rental as our world becomes more and more transient. Transiency is something I don’t envision going away any time soon and in fact, it will likely increase as we have discovered our ability to work remotely from anywhere in the world. This means that while we might not like transients to be in and out of our buildings with their endless stream of suitcases, we also are those same people as we ourselves travel more, have multiple homes and want the same freedoms. Can we have our cake and eat it, too? We should be able to, but the authorities are concerned with housing shortages, hotel industry lobbying and the advent of cities emptying out of full time residents while transients move in. Quelle horreur!

Paris authorities are particularly thrilled by the ruling that was published in June of this year, as they have been the most zealous of all. As you know, Socialist Mayor Anne Hidalgo is a major proponent of such regulations, with her man in charge of housing (Ian Brossat) a registered Communist who I joke “doesn’t want anyone to own property!” Now, the French government allows the City of Paris to subject the renting of local businesses to prior authorization. This decree applies to all types of establishments which have been converted into holiday rentals. The idea is to allow towns to rule for themselves on limiting short-term rentals, “protect the urban environment and preserve the balance between employment, housing, businesses and services in their territory.”

Airdna market research analysis of Airbnb in Paris

Until now, many of the commercial spaces, legal for commercial activity, such as ground floor “ateliers,” have been of special interest as investors buy them up to convert them to vacation apartments. Brossat is now trying to put an end to that, too. The decree came into effect July 1st in another effort to “prevent local businesses from being turned into holiday rentals,” he tweeted. The regulations are currently being drafted, but expected to come into effect by 2022.

Up until now, registration of a rental property has been mandatory with restrictions of a maximum of 120 days of rental for primary residences. (Secondary residences have no permission whatsoever!) With this new decree, in order to rent a property less than one year, the owners must apply for permission to change the registered usage of the property, and even then, are obligated to buy a commercial property of equal size to convert to housing as compensation. This past February, the Court of Cassation, France’s highest court, ruled that such tactics were in line with European law.

Do you think this is nuts? I do!

Nice has viewed the laws a bit differently than Paris and has been quite a bit more lenient…until now. As of July 1st, the rule to be able to rent out your own property as a seasonal rental requires the application for a change of usage of the property. Prior to July 1st, authorizations for short-term rental have been issued with a maximum duration of six years. Now, authorizations will be granted for one year only, with renewals annually. And the city reserves the right to terminate the authorization if nuisances have been reported by residents of the building. The local “housing protection brigade” will be out in force to ferret out the offenders.

Till now, the city took the owner at his word that the rental was authorized by the building regulations (the “règlement de copropriété” or by-laws), but no longer. Now, an excerpt must be submitted as proof. This is where the gray area will upset their plans, as there are very few buildings which have addressed the issue and one finds that the language in them can be very ambiguous. Some by-laws have been written so many years ago, that rentals of this kind didn’t even exist and were never considered. In this situation, where short-term rentals are not addressed in the regulations, the building’s Syndic (management entity) must provide an attestation.

Bonne chance! The Syndics may not want to make a stand to interpret the regulations on behalf of the owners. Disputes over interpretation of such regulations is common and open for debate. I can’t wait to see how this plays out! The city will be battling with the Syndics and the Syndics will be battling with their owners. Sounds like loads of fun, but the bottom line is that it takes a unanimous vote to change the building’s by-laws and that’s a relief for owners of such rental apartments.

Map of Airdna market research analysis of Airbnb in Nice

Here’s the really bad news—non-compliance has some pretty hefty fines:

• 50,000€ for failure to obtain authorization for change of use or failure to comply with the Regulations, under L.651-2 of the C.C.H.;
• 80,000€ and ONE YEAR’S IMPRISONMENT for false declaration, under L.651-3 of the C.C.H.;
• 15,000€ and ONE YEAR’S IMPRISONMENT for drawing up a certificate stating materially inaccurate facts, under Article 441-7 of the Penal Code;
• 10,000€ in the event of unauthorized rental of the entirety of one’s main residence for more than 120 days per year under Article L324-1-1-IV of the Tourism Code;
• In the absence of a registration number, a penalty of 5,000€ may be applied under Article L.324-1-1 III of the Tourism Code.

Shocking, but there is one element that makes this palatable—that the building’s owners will have the right to choose for themselves if they allow it or not. This is where, in my opinion, the authority should lie, and not at all with the city. Personally, I don’t believe that any city has to right to tell me as a property owner who I let stay in my own property, rented or otherwise. Collectively, as owners in a multi-family building is yet a different case, because we should have the right to govern ourselves.

In addition to this point of view, is that the regulations do not take into consideration the needs of EVERYONE for limited accommodations, not just “tourists.” You have the right to come to France for 90 days without a visa, but you don’t have the right to housing. Think about it! And what if you are renovating your property and need a place to live for just a few weeks? What if you’ve separated from your spouse and need temporary housing? How do you fit into their rules? And why, as investors, are we not entitled to seek a return on our investment by covering our costs with rental revenues?

I am not in favor of turning our collective homes into hotels, but I am in favor of maintaining certain basic rights and freedoms. I also believe the future will get the best of the old order which is trying to control the way we want to live our lives. Anyone who wants to travel, anyone who wants to live anywhere they want for any period of time, should be opposed to such authority and realize that if they want to have their cake and eat it, too, they need to stop talking out of both sides of their mouths!

Be prepared for fun and games for the next few years, as it may even get worse before it gets better…for everyone, both the tenant and the landlord.

A bientôt