Interview with Maurizio Fraschini, a partner at Plusiders, on the new draft of the short-term rental bill.
Examples from New York and other European countries: limitations, penalties, and potential effects
Certainly, we will need to await the final drafting and then read the text of the approved law, as many aspects still appear subject to significant “revisions.” However, last week, the legislative office of the Ministry of Tourism provided a preview of the new draft of the short-term rental bill to the associations that participated in the discussions over the past months. Likewise, in Italy, following the recent tightening in New York, we will have legislation aimed at regulating the phenomenon of short-term stays sold on online platforms, as anticipated since May when many called for the obligation to rent properties for at least two nights in the historic centers of metropolitan cities and the establishment of a national identification code, registering residential properties rented for tourist purposes in a database.
What happens next? We Wealth asked Maurizio Fraschini, a partner at Plusiders.
Fraschini, what does the new Draft of the Short-term Rental bill Entail?
In the draft bill, it is stipulated that, “at the risk of nullity, lease agreements for tourist purposes concerning one or more residential properties located in homogeneous territorial zones A (which have historical, artistic, and significant environmental value, or portions thereof, including the surrounding areas that can be considered an integral part of the same agglomerations) of the metropolitan city capitals, must have a minimum duration of two consecutive nights.”
In the new text that has just been circulated, there are no exceptions to the minimum limit of two nights, which was previously allowed in cases where the lessee was a large family consisting of at least one parent and three children.
Furthermore, in the new version, the limit of residential properties owned by the same owner available for short-term rental, subject to a flat tax, has been reduced from 4 to 2.
What is meant by “Rental for Tourist Purposes”?
According to the document shared with the interested parties, “rental for tourist purposes” refers to a lease agreement with a tourist purpose involving the use of a residential unit located in a place different from the lessee’s place of residence, entered into directly by the legitimate holder (host) or through intermediaries engaged in real estate brokerage (property managers) or entities managing online portals (OTAs), connecting individuals seeking accommodations with those who have residential units available for rent.
Which Cities are Subject to the New Regulations?
The regulations apply to the 14 metropolitan cities (Rome, Milan, Naples, Turin, Bari, Palermo, Catania, Bologna, Florence, Venice, Genoa, Messina, Reggio Calabria, Cagliari) as well as approximately 969 high-tourist-density municipalities. No exceptions are provided: the bill specifies that all municipalities classified as “tourist-oriented” by ISTAT must adhere to the rules, even if their population is below 5,000 residents.
What is the National Identification Code (CIN)?
The bill requires the Ministry of Tourism to assign a National Identification Code (CIN) to all properties intended for tourist rentals, aimed at “ensuring competition, territory security, and combating irregular forms of hospitality.” The CIN will be assigned to each residential property subject to tourist rental upon the landlord’s submission of an electronic request. The draft legislation stipulates that the applicant will be responsible for the rental and management of the residential unit in relation to the lessee, public administrations, and third parties.
The CINs must also include the number of available beds as declared in the respective request and will replace regional identification codes (CIRs) for all intents and purposes. Previously assigned CIRs will remain valid for 90 days following the publication of the bill. All properties with a CIN will be included in a national database, which will be public and freely accessible on the Ministry of Tourism’s official website. Furthermore, those renting residential properties for tourist purposes, including intermediaries, will be required to display the CIN at the entrance of the residential unit and include it in all published advertisements. Telematic portal managers will also need to include the CIN in their listings.
What penalties are provided for in the new draft of the short-term rental bill?
The regulations include substantial penalties for those who do not display the CIN (now up to €5,000) and for those who rent without the CIN (now up to a maximum of €8,000). Additionally, individuals engaged in tourist rental activities in an entrepreneurial capacity, either directly or through companies involved in real estate brokerage or online portal management, are subject, for tax purposes as well, to general entrepreneurial regulations. They must also submit a certified commencement of business activity report to the Single Desk for Production Activities (SUAP) of the municipality where the activity takes place, under penalty of a fine of up to €10,000.
To monitor whether vacation rentals and hotels possess and display the CIN and potentially issue fines, this responsibility will fall on municipalities, through local law enforcement agencies, as well as judicial police officers and agents, each within their respective competencies. An important innovative aspect is the equating of residential units for tourist purposes rented with hotels for the purpose of fire prevention, the provision of carbon monoxide detection devices, and hygienic-sanitary and safety requirements for installations.
Those who have received non-negligent convictions with sentences of more than three years of deprivation of personal liberty for non-negligent offenses without rehabilitation, individuals under special surveillance or personal security measures, or those declared habitual, professional, or trend offenders without rehabilitation are not allowed to rent a short-term tourist apartment.
What’s happening outside of Italy? For example, in New York or other European countries?
Legislative initiatives to address the “distortions” in the rental market, resulting from the proliferation of short-term rentals on platforms like Airbnb and Booking, are spreading widely. New York recently introduced regulations to curb and regulate short-term rentals through Airbnb. In Brussels, European regulations on the registration of property and data of lessors and lessees are being considered. Italy, given the significant influx of tourists, is certainly one of the most affected by the phenomenon. It is worth noting that in Florence, there have been calls to halt short-term rentals throughout the UNESCO area.
New York’s regulations are particularly strict. Local Law 18, aimed at limiting short stays in the city, requires property owners who wish to rent their homes for a few days to register with the Mayor’s Special Enforcement Office and, once authorized, they must be physically present in the house throughout the stay. Guests, on the other hand, cannot exceed two people, and rentals must be for a minimum of 30 days.
Airbnb has commented in the New York Times that the new law effectively bans its platform from the market. The new New York legislation, following the example of other cities like Paris, Amsterdam, Barcelona, and San Francisco, imposes strict limitations on platforms operating in this market. Booking, Vrbo, and Airbnb, in the future, will be required to ensure that hosts have registered and meet all the requirements, under the threat of heavy penalties for both hosts and the companies. Non-compliant property owners may face fines of up to $5,000, while platforms facilitating illegal rentals may be fined up to $1,500.
What could be the consequences of these restrictions on short-term rentals?
According to Forbes, Local Law 18 could lead to the removal of at least 70% of the current short-term rental properties in New York, totaling more than 40,000. Other U.S. cities are also taking action against short-term rentals. For example, Dallas has limited short stays in specific neighborhoods to combat noise disturbances, while San Francisco has imposed a maximum of 90 days for property owners who rent their properties on Airbnb. Several European capitals have implemented similar measures: Paris has established a limit of 120 nights per year, while Amsterdam has set the limit at 30 nights.
