Realtors, bankers, regulators and other stakeholders in the real estate industry have emphasised the need for policies, guidelines and regulations to govern the fast emerging short-term rental market in order to mitigate the bane of unwanted impacts on the industry and manage the growth of short-term rental.
The comments were expressed at the RAJ Symposium 2018, organised by the Realtors’ Association of Jamaica (RAJ) in partnership with JN Bank at the Spanish Court Hotel in New Kingston late last week (Thursday, October 4). The symposium focused on the theme: “The Impact of Airbnb on Real Estate Investments and Tourism.”
Howard Johnson Jr, President of the RAJ, who was among panellists at the symposium, acknowledged that the growth of the market in Jamaica has created a conundrum for realtors, who are being pressed to balance the emerging conflicts between short-term rentals and private property rights, to ensure the preservation of the real estate industry.
“Providing insight and advice on engaging with local authorities and navigating clients through the process is paramount for the RAJ. Realtors are encouraged to know what they are selling and the restrictions that may exist in the communities,” Mr Johnson stated.
“One wouldn’t want to ruin their reputation because you sold [property to] someone looking to open an Airbnb in a community where the bylaws prevent it,” he said. “Neither would you want to sell to a customer who is looking a community to reside in peace and quiet, when all other units in that community are Airbnb or short-term rentals.”
He was supported by Keith Senior, consultant at JN Bank, who noted that the implementation of guidelines and regulations would assist with the management of short-term rentals and improve the opportunities for investment in the market.
JN Bank, which is among the country’s top three commercial banks, offers mortgages primarily for residential purposes. The bank does not consider short-term rental income when assessing the borrower’s ability to repay the loan, although Mr Senior acknowledges that, as a mortgage provider, JN Bank, and other banks, facilitate lending for properties, which the owners may decide to establish as short-term rental after receiving financing.
“Any financing consideration for the purpose to purchase property primarily for short-term rental accommodation must be supported by clear regulations, policies and/or guidelines with respect to the management of these accommodations,” Mr Senior said.
He noted that in the case of short-term rentals, located in strata developments, those guidelines should be established, to mitigate the potential loss or depreciation in value to owner-occupied homes, noting that concerns about the lack of control as to who enters and leaves the property, for example, may impact property value.
Mr Senior added that other issues, such as insurance, due to various risks and concerns about the safety of the visitors and residents, is another matter which needs contemplation.
However, he maintained that: “Those concerns may not necessarily be negatives. They could offer an opportunity for us, as a country, to demonstrate how a well-managed short-term rental market can function as a major earner for the economy.”
He underscored that Jamaica is already a leader in tourism and that creating an exemplary model for short-term rental accommodations would further strengthen the country’s reputation. However, he noted that, “We must act now to look carefully at developing the right regulations to govern short-term rental.”
In addition, he pointed out that there are opportunities for the development of financial and non-financial products and services to serve the sector.
Rose Bennett-Cooper, chairman of the Rent Assessment Board noted that although the business of short-term rental is currently lucrative, without regulation it could result in more negative consequences to the real estate industry in the long term.
Pointing to several problematic situations that it currently creates for the proprietors of owner-occupied properties, the attorney-at-law noted that there are issues and solutions being contemplated, including amendments to the Rent Restriction Act to address various problems including the matter of short-term rental. The Act was last amended in 1983.
“One of the things we need to do is look at whether or not the Rent Restriction Act needs to specifically deal with short-term rental,” Mrs Bennett-Cooper stated.
“However, we have to be careful. We need to know that if we want to exempt short term rental from this Act that it is exactly what we want to do, because, there are some burdens, but there are also benefits,” she cautioned.
