Tel Aviv Municipality Mulls Measures to Regulate Airbnb Use

Airbnb rentals are pushing up prices for locals and putting pressure on hotels, leading the municipality to consider capping them at 90 days a year

Screen shot from Airbnb website.

Tel Aviv City Hall is pushing back at the rapid growth in apartments being offered on platforms such as Airbnb with a bill to criminalize the use of a home for short-term rentals over 90 days a year.

Some 9,000 dwellings in Tel Aviv are listed for short-term rental on Airbnb. This lowers the apartment supply for locals looking for a place to live, pushing up prices, and creates competition with hotels. The hotels say the competition is unfair, as Airbnb rentals aren’t subject to the same regulations and often don’t pay taxes.

A few months ago, an attempt by Tel Aviv to raise municipal tax (arnona) on short-term rentals failed. The Interior Ministry had argued that the city’s category of short-term vacation apartments wasn’t clearly defined enough and violated the city’s arnona policy. The city sought to charge vacation apartments 2.5 times the residential arnona rate.

People swim at the beach in the Tel Aviv.
Ofer Vaknin

The municipality's proposal, which would need to be legislated into law, states that homes cannot be rented out short-term for more than 90 days a year, otherwise a fine would be imposed and the transgression considered a criminal offense. This would apply even when apartments are managed by a company that pays taxes in keeping with the law. The proposal gives local governments responsibility for enforcement.

“This is a global phenomenon that can harm entire neighborhoods, so we’re proceeding with caution so that this doesn’t turn into a pandemic,” said Eytan Schwartz, CEO of Tel Aviv tourism company Tel Aviv Global.

A little extra money – for big players

The municipality found that as of December, 6,580 homes in the city were being offered for short-term rental by an individual or a company with more than one apartment on the market.

A review at the end of 2018 found that short-term rentals were not a way for average people to make a little extra money, as the web platforms advertised. Rather, 191 people and businesses were responsible for the 3,087 Tel Aviv dwellings available for short-term rental.

These reviews painted a picture of a market controlled by real estate investors looking to maximize profits.

Transparent, a company that aggregates data from sites offering short-term rentals such as Airbnb, Booking and HomeAway, found that around 13,000 apartments are being offered for short-term rental in Tel Aviv. Of these, 11,500 whole apartments are being offered, as opposed to one room. As of last year, the average daily rental price ranged from $115 to $152.

Tel Aviv's proposal would strike at the income of dozens of apartment management companies, but also of major hotel companies including Marriott and Fattal, which also offer apartments for short-term rentals. Fattal, for example, has five buildings of short-term rental apartments, including three in Tel Aviv.

“In Tel Aviv, apartment management cartels and apartment owners are earning a lot of money from offering de facto hotel services without paying anything,” namely taxes, Schwartz said.

“We have no problem with residents who spend a few weeks abroad renting out their homes while they’re away, but the moment the apartment is being rented out for more than 90 days a year, we have a problem with managing the city and the nature of residential neighborhoods. The city’s greater interest is being hurt by apartment owners looking to increase their revenue streams.”

Flashpoint Neveh Tzedek

The city is aware that the proposal could harm tourists and raise hotel prices, but it prefers this to alienating local people. “We’re already sensing residents’ feelings of discontent and alienation from their neighborhoods, and the sense of community and belonging is being harmed,” Schwartz said.

The problem is worst in the city’s Yemenite Quarter and Neveh Tzedek neighborhood, he said. “This is what we’re trying to stop,” he added, comparing the city’s proposals to nature reserves capping the number of visitors per day. “Also on the west side of Hayarkon Street we’re sensing inflation in Airbnb apartments over the past two years,” he said, referring to the side that abuts the beach.

The city expects a backlash from apartment owners and asset managers, whom it expects the Tourism Ministry to back. Tourism Minister Yariv Levin has said he does not intend to limit Airbnb until more hotel rooms are built.

According to a July 2019 survey, Eastern European tourists gave Israel a poor ranking for the cost of hotels, restaurants and attractions. The survey found that 60% of the tourists stay at hotels, while only around 10% stay at apartments through sites like Airbnb.

Tel Aviv isn’t the only city to try to limit the phenomenon of apartments being converted into vacation rentals. In Barcelona, for instance, special permission is required for an apartment to be listed for short-term rental.

In London and New Orleans, homes can be listed for short-term rental for no more than 90 days a year. In Amsterdam, the limit is 60 days.