Fastest-growing Airbnb market at risk as Japan cracks down

New government guidelines for home sharing in Japan could make most Airbnb rentals in the country illegal

Asia travel

Bloomberg

Published: 5:55pm, 22 Feb 2016

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Aileen Jeffery arrived in Tokyo two years ago and spotted what she thought was the best opportunity of her career: Hotel rooms in Japan’s capital were scarce and a boom in tourism was exacerbating the shortage.

The 26-year-old former real estate analyst took a 21st century approach to the business, investing in condominiums tailored for customers of Airbnb rather than travellers inclined to stay at traditional hotels. That allowed her to offer rooms in residential neighbourhoods and sidestep Japan’s strict and peculiar seven-decade old rules for hotels, which dictate everything from the length of reception desks to the colour of pillow cases. Jeffery’s bet seemed like a good one at the time: Japan is Airbnb’s fastest-growing market in the world.

A building under construction owned by Jeffery. She is investing in condominiums tailored for customers of Airbnb, but new guidelines for home sharing could make most Airbnb rentals in the country illegal.

Perhaps not for much longer though. Under pressure from the hotel industry and a populationconcerned with the increase in the number of foreigners in their neighbourhoods, Prime Minister Shinzo Abe’s government has released guidelines for home sharing – called minpaku in Japanese – that could make most Airbnb rentals in the country illegal. Airbnb hosts would only be allowed to rent to guests who stay for a week or longer, a minuscule slice of the market. The national guidelines only become law if local municipalities decide to ratify them, but that is beginning to happen. Jeffery is rethinking her expansion plans, while Airbnb is seeking ways to hang on to its business.

“If the government is serious about fixing the accommodation shortage before the 2020 Olympics, it can’t place minpaku operators at a significant disadvantage,” says Jeffery, who analysed hotel and residential properties for a London investment firm before moving to Japan to be with her fiance and starting her rental company.

Airbnb, now the third most valuable start-up in the world, was founded in 2008 and has encountered far fewer obstacles on its path to global acceptance than the app-based car service Uber, its companion in the so-called sharing economy. Even so, there have been a number of battles, including clashes over the rules for home rentals in New York and San Francisco.

Yasuyuki Tanabe, who runs Airbnb in Japan, is pushing back against the new restrictions. The company won’t directly enforce the new rules, he says, though it will ask property owners to adhere to local regulations. He adds that hosts may be able to avoid the rules in certain circumstances, without specifying how they would do that.

A labourer works inside a building under construction owned by Aileen Jeffery in Tokyo.

Terrie Lloyd, who heads online travel portal and consulting firm Japan Travel K.K. in Tokyo, says Airbnb and other home- sharing businesses may find ways to avoid restrictions even if they become law. For example, an apartment owner could book a guest for a full week, but then require the person to stay for only a couple of days.

“Airbnb doesn’t want to do those work-arounds, but the people who run the actual places may end up doing that anyway,” he says.

Aileen Jeffery doesn’t want to build a business dependent on skirting the law. As she closes in on completion of her seven-story building, she is scrapping her original plans for mostly Airbnb rooms and converting more than half to standard apartment rentals, replacing magnetic key card-readers with traditional steel locks.

“It’s difficult to work around details that are constantly changing.”

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