A sign at an apartment building in Tokyo displays a ban on Airbnb usage at the complex.   © Reuters

One of the reasons Airbnb and other platforms hate government regulation, and spend millions every year lobbying against it, is because they know that even relatively modest rules, such as requiring hosts to register with government authorities, represent a major threat to their business. This was seen recently in San Francisco under new laws coming into effect in January 2018. There, registration requirements led to a more than 50% drop in listings.

Now, something similar is happening in Japan.

Japan has introduced new laws to liberalize the home sharing, which was previously banned (though grey areas in the law led many Japanese people to list their properties).

Under the laws, hosts must register and receive permission to operate a home sharing unit (called a minpaku) with the land registry before they can rent their property. The permitting process generally involves some form of safety checks designed to protect consumers, which some criticize as onerous. Once registered, hosts can rent their property for a maximum of 180 days. Absentee landlords face additional restrictions, including having a management company to oversee their let. Local governments and building organizations can put additional restraints on the practice (and some local councils and building organizations have decided to ban the practice altogether due to the nuisance home sharing causes).

Crucially, the Japanese government is also asking the platforms to remove all unregistered listings from their website.

The impact of these new laws on Airbnb has been significant. In spring,  more than 62,000 properties in Japan were available on the company’s website. The number has since plummeted  80% to about 13,800 as Airbnb has de-listed non-compliant listings. Other home sharing platforms will likely follow-suit.

Interestingly, Airbnb seems fine with the loss of 80% of their listings. “We welcome the legislation,” said Yasuyuki Tanabe, Airbnb’s country manager for Japan, when the law passed in 2017. “It is clear, simple and easy to understand, while reflecting Japan’s unique needs.”

This change is likely to force Airbnb to change its business model in Japan, forcing them to focus on catering to hotels as an OTA, high end properties, or more traditional B&Bs which have a long history in Japan.

Whether this new focus will please Airbnb’s investors remains to be seen – Airbnb is currently valued at a much higher multiple than most OTAs. If Airbnb’s core home sharing business continues to shrink under regulatory pressure this valuation will look less and less justifiable.

To learn more about the new law see this  article by Bloomberg, for a report on the fall in Airbnb listing numbers in Japan see this report in Nikkei’s Asian Review.

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