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Tea Leaves

In Japan, Airbnb is rubbish

Cultural quirks pose a threat to short-term rentals

Japan has imposed new requirements under which homeowners can rent out their properties for only 180 days a year and must register for a license.

Airbnb has grown since 2008 from a tiny Silicon Valley startup into the world's most popular short-term accommodation rental platform, with 5 million lodging listings in 81,000 cities and 191 countries -- and a valuation of more than $30 billion. In the process, it has generated controversy or even uproar in many countries.

In Asia, officials have traditionally taken a "blind eye" approach to informal economic activities. This owes much to innate familiarity with the principles of what the West now calls the "shared economy." I've seen the informal economy over many years in Asia, from the swapping of goods and services to backroom startups that fly under the regulatory radar.

One family in my Bangkok neighborhood opened a snack bar business in what was effectively their living room, achieving further success through a deal with a local massage parlor to offer 30-minute foot massages to diners. Another family decided to open their home, conveniently located off a main road, to people who merely wanted "rest time" to snooze in air-conditioned comfort -- for a price. I'm sure their earnings were not declared.

But like anything that makes serious money, Airbnb's wildly successful business model has drawn regulatory scrutiny worldwide. The fight has spread from Europe and America to Asia, which was late to embrace Airbnb but is fast developing into a surprisingly harsh battleground.

In April, for example, two Singaporean Airbnb hosts were each fined $60,000 Singapore dollars ($45,800) for renting out apartments without official permission, the city-state's first case under new short-term rental rules. In China, Airbnb said in March that it would comply with hotel regulations and pass details of renters to the authorities. And in Hong Kong, rules require anyone taking paying guests for less than 28 days to obtain a permit to ensure premises meet guest-house standards.

But nowhere in Asia is the reaction more extreme -- and puzzling -- than in Japan, where an estimated 80% of the 62,000 short-term rental properties listed in early spring have been eliminated by draconian new regulations.

Amendments to Japan's Inns and Hotels Act imposed tough new limits allowing homeowners to rent out properties for only 180 days a year and requiring them to register for a license. On June 1, shortly before a mid-June deadline, Airbnb was instructed to cancel reservations made at unregistered residences. The company set up a $10 million fund to compensate distressed renters whose holidays had been marred by the surprise crackdown and issued an unequivocal apology: "This stinks -- and that's an understatement," it said.

What makes the Japan case particularly baffling is the increasingly desperate shortage of accommodation in the run-up to the country's host role for next year's Rugby World Cup and the 2020 Olympics. Short-term private rentals were seen as one solution.

It is also worth noting here that Japan has traditionally nurtured its own informal economy, with a thriving odd-job industry that could be seen as an early pioneer of TaskRabbit -- an online platform for odd-jobbers that was initially launched in the U.S. In Japan, "nandemoya" services -- mainly reached through telephone bookings and advertisements in yellow-page style guides -- offer everything from people willing to stand in queues to traditional shiatsu massage services in rural villages and drivers who will turn up at a restaurant at short notice if you have drunk too much and want your car driven home.

It wasn't the limits on rental periods that upset the Japanese market. Similar restrictions have been applied in cities including New York and Paris. But Japan has taken it much further with licensing requirements which critics describe as onerous and unreasonable, evidenced by the fact that only a fraction of the previous Airbnb renter base had qualified by July.

On top of that, some local governments, the ultimate regulator for commmunity services, have imposed even harsher restrictions, citing security or noise concerns. Kyoto, for example, is limiting rentals in residential areas to between mid-January and mid-March, the low season for tourists.

The global controversy over Airbnb and its copycat rivals is about many things, including the relentless drive by governments to close lucrative tax loopholes. It is also fueled by arguments that short-term rentals are squeezing the supply of rental accommodation for those who can't afford to buy a home, while driving up housing prices and undercutting the regulated hotel industry.

In Japan, there is a less obvious factor behind the government's move. Few officials will admit that a chief concern is rubbish -- or rather, the treatment of household garbage.

Anyone who has lived in Japan may understand the deep concern Airbnb has raised among the citizenry and government about the disharmony that (occasionally) unruly foreigners can bring to local communities. Expats generally present a challenge to the national obsession with garbage, which consists of not only separating it into appropriate bags, but first washing used plastic receptacles and putting different sorts of garbage out on different days.

There are even neighborhood garbage committees, appointed by local communities, to govern the process. Airbnb is viewed as the ultimate disrupter to this communal harmony, rather than the quick accommodation fix that Japan needs -- and ultimately, perhaps, as a force for greater internationalization.

Gwen Robinson is the Nikkei Asian Review's editor-at-large.

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