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Sharing Economy

Japan's home-sharing landscape takes shape with new law

Clarified rules bring in new entrants while others seek more profitable options

Corporate operators have prepared to enter the home-sharing market as the rules governing the industry gain clarity.

TOKYO -- Japan's long-anticipated home-sharing act went into effect on Friday, creating new business opportunities and headaches for operators.

In addition to a 180-day annual cap for renting out rooms, the new law requires hosts to confirm the identity of their guests and maintain a guest registry.

When a South Korean tourist and a friend came to check in at a condominium unit in Fukuoka, a city in southern Japan, he unlocked the doors using a passcode sent to his smartphone. The 24-year-old visitor then used a tablet provided in the premises to conduct a video call with the operator, who was able to confirm the identities of the guests by matching their faces and passport information.  

Airbnb has virtually cornered Japan's home-sharing market, listing nearly every private room available on its site. Japanese competitors are attempting to build up market share by providing services differentiating themselves from the U.S. heavyweight.

Loco Partners, the hospitality booking subsidiary of mobile carrier KDDI, recently launched an online home-sharing platform called "Vacation Home." The site connects users with concierges who help pick and reserve an ideal location based on customer preferences.

Hyakusenrenma, an outfit that chiefly rents out farmhouses, lists about 2,000 locations on its website. The company also provides hosts with electronic locks and internet connection services.

E-commerce group Rakuten has gone live with room-sharing portal Vacation Stay, operated by the joint venture Rakuten Lifull Stay. Although only 724 vacation rentals are available for booking at this time, adding the rooms awaiting approval under the new law brings the total roughly 1,600.

Prime Minister Shinzo Abe's government pushed through the new home-sharing rules, also known as the minpaku law, as a way to introduce a novel hospitality alternative ahead of the 2020 Tokyo Olympics. The legislation is intended to help resolve the shortage of lodging, and to help outlying areas accommodate more tourists.

Some municipalities are imposing additional restrictions, constraining the flow of applicants.  As of June 8, 2,707 applications had been received under the new legislation, with 1,134 registrations approved. Only a small portion of the newly authorized locations were accepting guests on Friday.

Instead, some operators are sidestepping the home-sharing law altogether, opting to register properties as a "simple lodging facility" under the existing hotel business law. Others choose to do business in a strategic economic deregulation zone.

Both options generally prohibit listings in areas that are exclusively residential, but qualifying lodgings are allowed to operate year round. Many corporate operators are choosing these avenues.

In Kyoto, a total of 2,291 simple lodging facilities were authorized at the end of March, more than tripling from two years earlier. The number grew further by more than 100 between March and May alone. This category, which includes capsule hotels and other budget options, has reportedly seen a pronounced rise in the share of private dwellings.

Osaka, designated as a deregulation zone, had 1,683 private rooms that can be rented out to tourists at the end of March, compared with less than 100 a year ago.

The home-sharing law in theory opens up residential areas to the lodging business, although many local ordinances forbid the practice. Operators who surpass the 180-day limit may offer rooms under conventional leases, but the administrative hassle presents a hurdle.

The new law is meant to promote Japan's sharing economy. However, a wave of discouraged property owners threatens to block that goal. Some companies provide support for prospective hosts, yet the confusion stemming from the overlapping laws and regulations governing the market is proving to be a limiting factor.

Some homeowners are starting to band together to convince local authorities to relax the supplementary rules hindering home-sharing, pointing to the prospect of private citizens working with the government to improve the regulatory landscape.

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