Risk vs reward: Is the net tightening around Airbnb owners in Paris?

16 June 2017

If you own a property in Paris and let it on Airbnb illegally, it might be time to start looking over your shoulder.

After carrying out a series of sting operations designed to catch those illegally renting their homes through Airbnb red handed, it looks as though the Parisian authorities have realised that the only way of halting illegality in this growing market is by targeting the pockets of those concerned.

But it’s not with owners where the hammer has fallen first. For the first time in history, a Paris court has fined a Parisian tenant who sublet their rental home over the internet without permission of the owner. He used Airbnb.

The District Court of the 5th arrondissement of Paris sentenced the offenders to pay €5,000 to the owner. This does not include the €2,500 euros of lawyer fees.

But with €22,000 in revenues, was a €5,000 fine enough?

Subletting is nothing new, it happens everywhere and the rise of websites like Airbnb has only compounded the issue. In this case the court found that the tenant never informed the owner of what they were doing (surprise) and therefore did not get permission as required by French law (and the law pretty much everywhere else).

The lessee, a Parisian stage director, sublet his 60 sqm apartment for €700 per week (€4,000 per month). He had been renting it for three years, generating around €22,000 in the process.

With such a readily available demand at the click of button, perhaps you can’t blame him. And this is exactly what the authorities are worried about. This fine is proof that the authorities are getting serious with those stepping outside of the boundaries of the law.

They’ve got their work cut out though. Airbnb in Paris has exploded over the past few years. In 2012 there were just a few thousand listings across the city and now there are over 60,000. Is this too much supply? Not really. Over 2.5 million people used the website to find accommodation in 2015 alone. In 2014 more than 500,000 bookings were made.

These sorts of numbers do two things. Firstly, they make budding Airbnb-ers go weak at the knees with the potential earnings (it's been proven that Airbnb's in Paris generate 2.3 times more than the traditional rental). Secondly, they make people blind to the rules concerning short-lets in Paris.

What are the rules?

Owners intending to let their furnished apartment out on a short-term basis in Paris, be it on a website such as Airbnb or through a traditional agent, need to gain permission from the local municipality. Those that don’t carry the risk of a €20,000 fine. The Paris town hall estimates that around half of the 60,000 furnished properties listings on Airbnb are being illegally rented.

French hoteliers are always the first to point this out. They’re worried they’re losing their grip on the market, saying that Airbnb is a quasi-hotel system designed to avoid taxes and regulations, all veiled behind a ‘sharing’ brand. It’s the same story in New York and many other cities across the US. The hotel industry is losing its vice-like grip and they are worried.

As you’d expect, Airbnb is taking this all head on. They’ve commissioned studies on how it positively affects local economies, areas where your everyday tourist cash often doesn’t reach. The company also claims to have generated €2.4 billion towards the French economy between Nov 2014 and Nov 2015.

Tourism is the backbone of Paris and after the terrible attacks last year numbers have waivered a little. Therefore many in the industry (not working for a hotel chain) hope that the authorities temper their crackdown on those illegally renting their properties through Airbnb. Whatever happens, owners need to set their affairs in order or they could be in for an unexpected knock at the door and a big fine.

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