Old vs New: Home Rental Services
Short-term home rental services like Airbnb, Roomorama and TravelMob are bringing the sharing economy model to Singapore.
Author: DBS BusinessClass, Administrator of DBS
Old vs New: A Look Into The History And Future Of Short Term Rental And How It Breathes New Innovation To The Jaded Hotel Industry.
Ah, Singapore. A land of good food, high housing prices and very little space. In the world’s most expensive city to live in, both locals and tourists are naturally eager for ways to keep their wallets bulging. So it’s not too surprising that a new type of short-term rental service has been gaining popularity in our city-state.
Unless you’ve been hiding under a rock, you’ve likely heard of short-term home rental sites such as Airbnb and Roomorama. These online marketplaces allow locals to rent out their spaces, so that savvy travellers can find accommodation while avoiding rising hotel room rates. Besides the obvious monetary benefit to both parties, it’s cultural exchange at its finest. The intimate atmosphere of a home means that foreign guests can immerse themselves in a true-blue Singapore lifestyle, while Singapore hosts get to pepper them with questions about the exotic (or not) lands they hail from.
Image Credit: www.wellingtonhousebcn.com
Undoubtedly, the innovative concept of short-term rentals is generating quite a bit of hype here. Last year, home-rental website Roomorama saw more than 500 listings from Singapore properties, a jump of 30% from 2013. The three biggest sites available here – Roomorama, Airbnb, and travelmob – collectively offer more than 2000 listings. And that’s not even counting all the home rentals which might occur through word-of-mouth, mutual friends and so forth.
But before you start wondering how high to price that spare room in your house, you’d better read on first: the buzz surrounding short-term rentals isn’t just excitement.
Fifty Shades of The Law
Sometime last year, when short-term home rentals were still relatively novel in Singapore, there was a lot of confusion over their legality. Who you invite to your home is largely your business, right? Wrong.
Image Credit: Airbnb
For starters, the Urban Redevelopment Authority (URA) guidelines include a golden six-month rule: residential property “should not be rented out” for less than six months. There’re a few other conditions regarding overcrowding, but this is the rule attracting the most debate in this context.
The question is this: if you contravene this guideline, are you breaking the law? James Chua, CEO of vacation rental websitePandaBed, makes an interesting argument in a 2013 Quora response:
‘In 2012, I consulted with a reputable law firm (name withheld)that has issued me a written response about the URAs statements on short-term leasing. Here are their findings paraphrased:
"...the Guideline is not law as it is not codified in a statutory instrument. The URA, in response to a query from the public, made a statement in The Straits Times on 26 May 2012 (Leasing guideline) in which it conceded that the Guideline was not a ‘ruling’, but stressed that the URA “issue[s] guidelines from time to time to provide transparency and clarity on how the URA exercises its functions under the Planning Act.”’
However, you might not want to take his word for it that “Short-term renting is NOT ILLEGAL for private property”. After all, the same URA response is also pretty clear on the issue of enforcement:
“In considering whether enforcement should be taken against any unauthorised use, the URA will take into account this guideline and all circumstances of the case.”
Image Credit: Wikipedia Commons
The ‘enforcement’ isn’t exactly a slap on the wrist, either. As an AsiaOne article in December last year categorically states:
“Currently, it is illegal to lease a home for less than six months in Singapore. Private home offenders can be fined up to $200,000 and jailed for up to a year.”
Anxiety levels over home rentals also spiked in June last year when the Housing and Development Board (HDB) confiscated two flats from their owners, after it was found that they had rented them out to tourists. The move came as an unpleasant surprise, since this was the first time among thousands of cases that HDB had gone to the extent of evicting home owners.
Strangely enough, the folks at URA have repeatedly stated their position, such as in this 2013 response to a request for clarification and this 2014 statement that subletting for a period of less than six months is an offence under the Planning Act. Unfortunately for them, public confusion still remains; their message seems to be having a little trouble trickling down to the grassroots level, as evidenced by discussions in various online forums:
Image Credit: Singapore Expats Forum
Image Credit: Singapore Expats Forum
Image Credit: Travel Stack Exchange
And the fact that hundreds of enterprising locals are still openly listing their home spaces on sites like Airbnb isn’t really helping this wink-wink-nudge-nudge mindset that the rental guideline has somehow attracted.
If you’re a good, law-abiding citizen, however, don’t throw away your dreams of earning some spare cash on the side just yet. In late January this year, the URA announced the creation of a feedback portal for Singaporeans to voice their opinions on short-term rentals. The portal closed in late February.
The jury’s still out on possible changes to the guidelines – URA has ambiguously said that their review will be completed sometime this year. Considering the number of interested parties involved and the strong opinions that’ve been thrown around so far, we anticipate that they might take a while.
The Conversation About The Sharing Economy: Who’s Benefiting?
An Anti-Airbnb rally in New York. (Image Credit: Reuters)
To all appearances, the short-term rental model is a simple innovation: homeowners get interesting tenants, travellers get a cheap place to stay. But as you’re about to learn, the situation is far more complicated than that. To some segments of society, sites like Roomorama promise a myriad of economic and personal benefits; to others, their possible consequences on Singapore’s social fabric are nothing short of cataclysmic. Let's take a look at what people are saying at three levels: community, corporate and governmental.
Image Credit: The Real Singapore
Naturally, at the community level, there’re few objective parties – this is cramped, tiny Singapore we’re talking about here. Should the home rental model be made legal, chances are that you’ll be either happily renting out your house, or seeing your neighbours do so. So even ignoring the xenophobic flavour of some comments online, the question of short-term rentals is inspiring a lot of impassioned debates about local safety and quality of life.
In terms of safety, the idea of a constant flow of transient strangers in residential areas is worrying for some. In a forum letter to The Straits Times last month, Ms Beatrice Tang pointed this out:
“Short-term renters, unlike hotel guests, are not required to provide identification. Even if they are, landlords do not have the means or expertise to verify their reliability, and could end up housing illegal immigrants or, worse, criminals and terrorists.”
The peace of the neighbourhood is another contentious point. As Ms Celine Wong put it in her Straits Times forum letter:
“Short-term stayers will not care how they use the facilities. Those living in the estate will have to put up with the noise, disturbances, lack of privacy and security, damage to common facilities, as well as dumping and littering…Everyone is entitled to enjoy their home in comfort and peace.”
The entire debate is actually a fascinating look into human psychology. Your view of transient rentals is likely a reflection of the way you view your fellow humans, especially those you don’t know – noisy, unruly would-be criminals or sweet, fascinating potential friends? For condo owner Tan Bee Lian, it’s the latter; in an interview with Today, she said that she supports the short-term rental model because it would give her the chance to meet new people from other countries.
Image Credit: The Real Singapore
At the corporate level, the discussion gets no easier. Just the fact that there is confusion over short-term rental sites is evidence of how disruptive these start-ups can be in the tourism industry.
On one hand, there are some who point out that home rental services could be advantageous for our economy. As Dr Huang Shoou Chyuan, a local surgeon, argues:
“In Singapore, accommodation for visitors is not just expensive but often unavailable during peak periods, such as major holidays or events like Formula One races.
In the private health-care industry, for example, I often hear of foreign patients cancelling their appointments here as hotel rooms are unavailable…
If short-term rentals are legitimised, the country will earn more tax revenue… If properly regulated, this will make our hotel industry more competitive and take our tourism industry to the next level.”
As you might imagine, the prospect of competition isn’t so pleasant for conventional accommodation services, such as hotels and hostels, in the long run. In the short-term, the news might actually be welcome: in May last year, a property consultant report warned that Singapore will face a scarcity of hotel rooms in the next few years.
"Without any new rooms injected, the situation seems set to worsen in 2017 and 2018, when average occupancy rates spike to 88 per cent and 91 per cent respectively. It is also foreseeable that hoteliers would raise room rates given the severity of the developing hotel room crunch situation.”
(Source: AsiaOne Business)
Since legalising home rental services would put extra rooms on the market, our hotels might be able to lower room rates, thus attracting more travellers. Still, it’s a hugely unpredictable situation - short-term rentals only took off in the last five years or so, and cities like London have only just legalised them. In the long term, Airbnb and similar sites could pose a disruptive threat.
Image Credit: Harvard Club of Singapore
Finally, let’s go over some considerations on the part of the URA, the statutory board which is bravely helming the whole debate. They’ve stated that their six-month guideline was meant to:
“…safeguard the living environment of a residential development, and to ensure that residents are not adversely affected by the frequent turnover of transient occupiers on short-term stays.”
Undoubtedly, there’s no way of pleasing all residents – after all, as even our founding father Mr Lee Kuan Yew said, “Singaporeans are champion grumblers.” As the variety of views shown above proves, there will be locals who see it as a way to maximise their unused spaces, those who’re concerned about safety in the community, those who’ve had awesome experiences with home renting, and those who haven’t. The big question, for the URA, is how best to reconcile these opposing viewpoints. We don’t envy them having to go through that struggle.
The Middlemen’s Perspective: What Short-Term Rentals Say
Before we at Vulcan Post give our own take on this, it’s important to hear from some major players in the short-term home rental industry. We’ve been looking at the whole issue from a local perspective, but hey, we’re all also struck with wanderlust at some point in life. And for most of these startups, their primary dedication is to making our experience as travellers that little bit more special.
Stone houses in Bibury, England. (Image Credit: www.123rf.com)
In an interview with The Occasional Traveller, Turochas Fuad, CEO and co-founder of Singapore-based travelmob, shared the personal inspiration behind his startup:
“The trend is that these travellers are often looking for an alternative experience… [Similarly,] I like something with a very local feel to it, I try to go beyond the traditional path. Even if I stay in hotels, I avoid the guest services counter andI talk to the bellboys and the people cleaning the room.”
In other words, travelmob is a safe, convenient platform for travellers wanting a richer local experience. In addition, from his experience with travelmob thus far, “many hosts are happy to share local information with their guests.” (Source: The Occasional Traveller)
CEO and co-founder of travelmob, Turochas Fuad (bottom left), with his Singapore team. (Image Credit: travelmob)
His sentiments are echoed by Tommy Wang, Airbnb’s General Manager for Singapore. In his about.me profile, his wanderlust (or as he calls it, “Wang-derlust”) is epitomised by his belief that ‘Technology + Travel = A Better World’. And Airbnb states their belief in #OneLessStranger - the world being a place "where all seven billion of us can belong anywhere".
Image Credit: Airbnb
Putting aside all the practical problems that we've covered earlier, it's clear that most of these short-term rentals share a fundamental ambition to create a more meaningful experience for tourists - perhaps even for the world. And with over 25 million travellers served worldwide, it’s clear that Airbnb and other home rental marketplaces are revolutionizing the way we travel for good.
Image Credit: www.sharingcodes.com
Once Again, The Grey Area
So, there you have it – the long and storied history behind the short-term home rental model. We’ve done the research, we’ve outlined the benefits and dangers, and now we’d like to convince you that a move to legalise home rental sites here has the potential to be awesome.
Hold your horses - this isn’t an argument for a straightforward ‘yes’. Ultimately, the most intelligent path seems to be a sort of middle ground between naysayers and optimists – a ‘yes’ but with caveats. Let us explain why.
First, why yes? Rigidity never made any country successful, and the URA’s recent openness to feedback is a wise reflection of this. The reality is that disruptive start-ups like Airbnb are already wildly popular, both locally and globally. Rather than fighting a losing battle, Singapore should start thinking about how to capitalise on the industry – the earlier the better.
Image Credit: Reuters
At the same time, it hardly seems necessary to point out that we have to proceed with caution. In the local context, we’re already dealing with unhappiness about foreign talent, migrant workers and so on – no matter how promising short-term rentals may sound in practice, the model is likely going to attract comments along the lines of foreigners ‘infiltrating our country’. In addition, home rental sites like Roomorama aren’t exactly planning to operate on a small scale. As mentioned earlier, local home listings are already thousands-strong in an iffy legal climate, and it’s easy to imagine that short-term rental sites can dwarf the hotel industry if legalised here.
Next, there’s the thorny issue of safety. In a previous article, we pointed out that many subletting websites do, in fact, have regulations in place to ensure user safety. According to Airbnb’s website, for example, “Guests and hosts verify their IDs by connecting to their social networks and scanning their official ID, or confirming personal details.” But what Singaporeans are most concerned about is neighbourhood safety – are there going to be drunken tourists stumbling around late at night? Will transient guests mean more petty theft and public disturbances? These are issues close to the ground which such global sites cannot properly regulate – but our URA and HDB can.
Image Credit: studyinsingaporeguide.com
That’s one more reason why we feel support for short-term rental sites from the authorities will do more good than harm. After all, it’s not as though illegal short-term leasing isn’t already occurring – in the first four months of last year alone, the URA investigated 350 cases of “unauthorised use” of private properties. Instead of a blanket ban, which offers Singapore hosts no legal protection should they encounter unsavoury guests, a more flexible approach means that we can plan for and combat potential problems efficiently.
Essentially, we would love to see sites like travelmob being made legal, but at the same time, it’s also necessary that regulations are put in place to address the valid concerns that many Singaporeans have raised. For example, it might be good to regulate the number of guests in a neighbourhood at any one time and monitor the growth of the home rental market, to make sure that a sudden influx of homestaying tourists won’t destabilize our social and economic status quo. Once we’ve hashed the details out, we can sit back, relax, and enjoy the benefits.
Image Credit: blog.mdna.com
When all's said and done, it’s undeniable that the home rental model has many benefits, from earning you a bit of extra cash to bringing you into close contact with other cultures. For the world today, the ‘sharing economy’ has become a buzzword – a system where individuals rent out items they’re not using to others. This collaborative model implies a certain level of trust in our fellow humans, reminiscent of our kampong days – except now, the world is our kampong.
Doesn’t that sound amazing?