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Lower income Singaporeans can benefit from Airbnb rentals, with a catch

As a first-world nation with one of the highest home ownership rates in the world, Singapore has one of the most restrictive home sharing regulations.

While there are valid reasons to regulate home sharing, the current regulatory framework is clearly far too onerous and bears little difference from a blanket ban, says the author.

While there are valid reasons to regulate home sharing, the current regulatory framework is clearly far too onerous and bears little difference from a blanket ban, says the author.

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As a first-world nation with one of the highest home ownership rates in the world, Singapore has one of the most restrictive home sharing regulations.

Public housing owners can rent their flats out to foreigners with employments passes. Additionally, the minimum stay is six consecutive months. One- and two-room flats are not allowed to be put up for rental.

It is less strict for private condominiums, where short-term rentals are allowed with a minimum three-month duration. This is subject to approval of at least 80 per cent of the development’s occupants, a vote to be renewed every two years.

While Singapore enjoys one of the most robust property rights in the world, current regulation virtually cripples the property right for most Housing and Development Board flat owners to rent out their homes.

How does Singapore’s home sharing regulations measure up to other first-world cities similar in population density?

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In New York, it is illegal for homeowners rent their rooms out for less than 30 days.

Short-term rentals in Paris, one of the largest Airbnb markets in the world, are limited to 120 days a year.

In Hong Kong, any rentals under 28 days without a license are technically considered illegal. In London, there is a short-term rental cap of 90 days per year.

And as recent as 2017 in Tokyo, home sharing was legalised with a ceiling cap of 180 days per year, although hosts are subject to licensing criteria.

In sum, Singapore’s home sharing regulations with its six-month minimum and restriction of rentals to tourists makes it one of the harshest in the world.

Singaporeans’ concerns about home sharing often centre on a loss in privacy or a fear of drop in estate value from a high fluctuation of Airbnb tourist tenants.

These concerns are valid from the homeowner’s point of view. But sound policy cannot only fixate on the bad and negative, but rather should be targeted to the average after weighing the pluses against the minuses.

First, it is not clear that a majority of the local populace are opposed to home sharing. A large informal home sharing economy exists in Singapore despite current regulations, indicating the actual preferences of homeowners.

Additionally, formal research attempts commissioned by Airbnb to study what Singaporeans think of home sharing show that 70 per cent of Singaporeans are in favour of it.

Second, home sharing services like Airbnb and Homeaway in Singapore represent an untapped vehicle for poverty alleviation.

From the perspective of the average Singaporean, the current regulatory framework neglects what home sharing services could potentially do for the low to middle income groups.

There is evidence to show that female hosts alone in Malaysia have made a total of US$39 million just in 2018 from Airbnb rentals.Despite regulations, Singaporean women hosts in 2017 earned SG$36 million.

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On an average Singaporean salary of S$4,400, a S$50/night rental for a mere five nights would be a significant 6 per cent of monthly income. Low-income Singaporeans make far lesser than this average, which strengthens the economic potential of home sharing services for them.

Without an official poverty line, one academic standard of measuring absolute poverty is to look at the eligibility standards to qualify for the Public Assistance scheme: a household monthly income of S$1,500.

Based on this estimate, a mere five nights of short-term rental based on S$50 a night would amount up to a substantial 17 per cent.

That represents a substantial amount of income to the poor who have low financial liquidity but are asset-rich – a characteristic typical of the average Singaporean – since they already own their HDB flats.

Cities such as Hong Kong, New York and London that are similar in size and population with Singapore have a vibrant home-sharing economy.

Using that as a proxy, it is not hard to see that Airbnb would similarly take off in Singapore if regulations were relaxed.

The potential is greater when we consider that Singapore enjoys one of the highest home ownership rates in the world and a comparatively safer housing system.

Finally, a larger macroeconomic concern is the potential disruptive effects that home sharing may have on the economy.

Disruptions are inevitable in any growing market economy. But these can be guarded against by light regulation such as a short-term rental quota to limit the amount of days a host can rent out his property for, as shown by the approach many other cities have opted for. This cap then can be gradually adjusted overtime.

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While there are valid reasons to regulate home sharing, the current regulatory framework is clearly far too onerous and bears little difference from a blanket ban.

While some homeowners might place a higher priority on privacy as well as peace and quiet in their neighbourhoods, less-privileged homeowners would prefer the economic freedom to supplement extra income by renting out their homes – even if only for a few days.

Home sharing policy should decentralise specific regulatory decisions to lower government jurisdictions such as the Town Councils, who has the authority to create by-laws for estate management purposes.

Town Councils can prescribe different types of quota or duration boundaries for home sharing within its own individual constituency. This then is easily enforceable by monitoring homeowner’s Airbnb profiles or through a public licensing system.

There is little evidence to show that Singaporeans are heavily opposed to home sharing.

But should that turn out to be the case, potential problems and grievances by HDB homeowners can be addressed in much more careful detail when there is a direct forum to their Members of Parliaments, instead of having it dictated across the board by the Urban Redevelopment Authority.

A decentralised regulatory framework will be far more effective to capturing homeowner preferences for policymakers to compare and contrast across constituencies so as to address them carefully. This is not possible under the current blanket regulations.

Singaporean policymakers can also take cues from how other countries have regulated Airbnb.

For instance in Amsterdam, tourist taxes have been levied in conjunction with the operation of home sharing. While taxes are not ideal, it still serves Singaporean homeowners better compared to the current far-reaching regulation on home sharing.

Whatever the eventual policy decision, a step in the right direction should appreciate the difference in Singaporean homeowner’s needs and concerns, rather than one that treats them homogeneously.

 

ABOUT THE AUTHOR:

Donovan Choy is a policy analyst with the Adam Smith Center, Singapore’s first and only classical liberal organisation that champions pro-market, pro-competition values in public policy.

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