The curse of Airbnb

According to Israel Hotels Association (IHA) CEO Noaz Bar-Nir:

“There are as many as 20,000 apartments rented to tourists today in Israel – and that number is growing. In 2012, there were only 900 such apartments…”

That’s some increase. And it’s the hotels that are suffering, which is why they are pressing for such activity to be made illegal. This follows the approach of the Berlin municipality which banned short term rentals of vacation apartments. Their motivation was that rents in the German capital had soared by 56%. The fine for breaking the law is a whopping €100,000.

But it’s not only hotels that are affected. Bar-Nir wrote to Minister of Construction and Housing Yoav Galant and Ministry of Finance Budget Department director Amir Levi, as follows:

“When will you understand that this phenomenon is growing in Israel, that it is shrinking the available supply of housing, and thus hurting your plan to increase the supply, while also driving up prices? And how much revenue is lost to the economy because all of this is takes place in the shadow economy?”

Not only does Airbnb contribute to the ridiculously high prices of residential property, but it appears to be swelling the black economy. Israelis know there is such an economy, and it is largely untouched by the tax authorities as they do not appear to have the resources to do much about it. Since the government seems to be losing out from the present situation, perhaps that will be the decisive factor in persuading them to act and ban short term rentals of vacation apartments. It will harm those who engaged in such activities well before Airbnb, so I doubt a ban or other legislation will happen without further vigorous and heated debate.

Read the Globes piece, here.