Short-term rentals increasing, with concerns they are spiralling out of control

By Nick Theodoulou

Is the party for short-term rentals coming to an end, with a heavy hangover on the horizon? There are serious doubts as to how the government will enforce its own looming regulations, while others say the sector is being unfairly targeted.

Cyprus’ Airbnb-style short-term rentals (STRs) have surged in popularity and accessibility with the sector now rivalling the hotel industry in terms of capacity, but the latter is increasingly pressing the government for regulation.

The most common estimates place the STR bed capacity at between 80-100,000.

AirDNA, which describes itself as the leading provider of data and analytics for the $14bn short-term home rental (STR) industry, shows that the number of active rentals in Peyia, for example, increased from 1,152 in Q3 of 2019 to 1,342 three years later.

Paphos city saw a similar trend rising from 1,348 to 1,606 active rentals during that same period, while Polis rose from 333 to 428.

The central Nicosia area, with parts of northern Nicosia included by the company, went from 436 to 465. Ayia Napa went from 916 to 1,237

Light-touch regulation is supposed to kick in on February 7, by which time all those renting out such properties must have registered with the government and received a certificate – otherwise facing penalties.

Others in the tourism industry are pressing for much tighter restrictions, calling for measures such as those in Barcelona and Amsterdam – with caps on the number of days a STR can be let and even bans in certain areas.

A small-time Aribnber with high aspirations, Saaiman & Saaiman Ltd, reached out to the Sunday Mail to express their doubts over the registration system and frustration at the sclerotic process.

“We are a company who have rightfully registered our Airbnb properties, however the process itself was costly and took a long time unnecessarily,” they told us, adding that it took over two months to get a reply from the authorities.  feature nick 1

They’ve been in the business for about a year now and are hoping to take it on full-time, eager to do everything by the book and rest easy.

“It went so well that we’re planning to do more and more, hopefully it will be our main business – our occupancy rate is around 80 per cent,” they said.

But the process to register with the deputy tourism ministry has been a struggle.

“I was told that I had filled some information in the wrong box, so the staff member went ahead and cancelled the application and made me start from scratch again. It could have been easily resolved with a quick email exchange between her and I. I did the process again and waited another month and a half,” they told us.

Deputy tourism minister Savvas Perdios explained in October that about 2,000 listings have signed up so far, equating to about 10,000 beds. That means, however, that officials will likely enter crunch time as tens of thousands more are legally required to sign up ahead of the deadline.

With three properties, both in Larnaca and Limassol, Saaiman & Saaiman had to pay the €220 registration fee – valid for three years – for each of them.

The Association of Cyprus Tourist Enterprises (Stek) has welcomed the looming regulation but decried the government’s previous extension of the grace period – with the legislation initially having been passed in 2020.

They also want tighter restrictions, above and beyond those already set.

Chrysemily Psilogeni, Stek’s general manager, told the Sunday Mail that their core concerns are those of transparency, safety and fair competition.

“We’re not against the changing landscape, it’s there because a part of the market is demanding this but what we’re saying is that this must be regulated and some standards must be ensured,” she said.

Psilogeni emphasised that the unregulated sector leads to unfair competition.

She explained that hotels require dozens of licences, say for music, alcohol sales, swimming pools and so on – whereas a person renting out their house, as it currently stands, isn’t satisfying any of those criteria.

Hotels also pay taxes per overnight stay but that doesn’t apply to STRs, while those renting out their homes are often unlikely to declare that income to the authorities.

But others we spoke to argued that STRs play a vital role in fulfilling the tourism market’s demand for accommodation, saying that hotels operate at capacity during the peak summer season anyway.

The reasoning goes that STRs boost Cyprus’ tourism product and the island’s capacity to host its millions of visitors – essentially offering an alternative experience that is not in direct competition with hotels.

“It’s my view that the customers for STRs is a specific group, it’s not quite the same customer as those who choose hotels – I prefer having breakfast there ready in the morning, for it to be regularly cleaned and so on,” said Psilogeni.

“But for example a group of five youngsters who aren’t as concerned about having breakfast or regular cleaning is different.”

“But whether it helps out [with capacity] is not strictly the point here – we’re not looking to ban it – and it doesn’t change the fact that is still has to be regulated,” she said.

Aside from the unfair competition factor, Stek also argues that STRs are depleting much needed housing stock for local residents – exacerbating the housing affordability crisis.

Stek’s proposals include a cap on STRs of no more than 90 days a year and pressing local authorities to consider banning STRs in area where residents are facing difficulty securing affordable housing.

But others disagree that STRs are having a major impact on the housing market in Cyprus – as is the case in major European cities – instead pointing to other factors.

Pavlos Loizou, CEO of AskWire – a property technology company which provides real estate data analytics – told the Sunday Mail that: “Stek does have a point, but that’s the hotels who are concerned – not necessarily the wider public – whereas in Barcelona it’s the opposite, it’s the ordinary residents who are against short-term lets.”

He said that Barcelona residents are seeing their rents rise or are being asked to leave their homes, but the hotels there are not concerned as they’re full anyway – “there’s just so many tourists, so then the residential stock is being pushed towards ‘hotel stock’”.

“In the case of Cyprus, locals don’t have this concern because, if anything, they then have cheaper access to holiday rentals but then the hotels are concerned because they’re not always full.”

Loizou offered that the market in Cyprus appears to be more focused on holiday homes, which in any case were not the preferred living destination for locals.

“We’re not seeing the level as elsewhere of city centre properties being used en masse for Airbnb, it’s more tourist heavy areas which are the focus of Airbnb,” he said.

“In other places, such as London or Barcelona, the city itself is the destination but say in Paphos you’re unlikely to stay in the city centre, as the beach is the main attraction – so you might go to Peyia or Polis, the tourist areas; not necessarily where the locals are staying,” Loizou said.

He explained that Cyprus’ real estate product is quite segregated, but it is true that more people are viewing real estate as an investment.

He argues, however, that the housing crisis is due to a supply problem overall and not Airbnb itself – pointing to a significant population increase without the corresponding construction of affordable residential stock.

And while the focus is on the government’s so far tepid attempt to regulate STRs, Psilogeni welcomed the European Commission’s proposed rules earlier this week.

Those rules seek to force STR companies to share data on the number of people using their platforms.

“We’re happy to see that the EU is moving in the direction of having a common handle on this while still allowing each member state to tweak the regulation according to their own specific needs and situation,” she said.

“It’s important for us to have these stats because it will help guide policies: How many people stay? Where do they go? What do they prefer? At the moment we don’t have this data.”

Psilogeni emphasised that it’s entirely correct for the authorities to have more precise tools available to them to confirm whether the correct taxes are being paid.

But serious doubts remain over enforcement of the looming regulations.

Saaiman & Saaiman expressed their reservations, telling us that: “I also only want safe homes for guests to stay in when they visit Cyprus. However, to be honest it is too easy to lie on the form and claim the house is safe when in reality no-one comes to check it! What kind of regulation is this?”

Perdios explained that it will be very easy to weed out those renting illegally, as any advert for a property will have to include its registration credentials. If those are not clearly visible on the post, any user can then report it to the authorities.

It was further explained that each property signed up to the registry will be assigned a number which will then be provided to the online platforms, ensuring the property advertised is approved by the government.

Even so, some have raised questions as to the practicalities of conducting such searches – given that a host’s contact details and property location are not made available until a booking is made.

But that’s part of what Psilogeni hopes will be achieved by the commission’s latest proposed rules, which would force such companies to share data about the number of guests and rented nights with public authorities, once a month, in an automated way.