Short Term Rental Airbnb Regulations in Malaysia

Short Term Rental Airbnb Regulations in Malaysia
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Short Term Rental Airbnb Regulations in Malaysia

Over the past several months, there has been a lot of talk surrounding the development of short term rental Airbnb regulations in Malaysia.

The question, ‘Is Airbnb is legal in Malaysia?’ is no much less asked as people have come to understand that it most certainly is legal under most circumstances.

The industry at the moment is still in its nascent phase and needs certain ground rules to be established to improve the standards of the industry which will allow it to flourish and enhance the tourism industry in Malaysia as a whole.

On the 9th of October 2019, a public consultation was held by the Malaysian Productivity Council (MPC) under the authorization of the Malaysian Tourism Board at Marriott Putrajaya, to get public opinion on short-stay Airbnb regulations in Malaysia.

MPC has put together a set of guidelines which were presented to stakeholders who attended the meet up covering issues such as licensing, night caps, safety, maximum occupancy, nuisance control and taxes.

You can download the PDF which was given up for download during the session here – MPC Short Term Rental Airbnb Regulations in Malaysia

For your convenience and ease of understanding, I’ve decided to go through each of these sections in detail and offer my 2-cents worth on the issues being addressed.

Short-Stay Airbnb Licensing

Let’s start off with what I feel is good for the industry based on the proposed guidelines by MPC, the first being – Licensing.

Licensing for hosts and agents is definitely something that will do the industry good.

As with all forms of businesses, there is a need for the companies to be registered under a particular department or organization to ensure that everyone involved is in a way, ‘backed’ or ‘under’ some form of compliance.

This helps the industry maintain a certain standard whereby services rendered are delivered properly and transparently and that both operators and homeowners are on a level playing field. To put it plainly, it gives the industry legitimacy.

Currently, there are many operators operating without a license, and it is quite likely that they are not declaring their business income either.

MPC has outlined certain guidelines for hosts and some things to note are:
1. Hosts must be Malaysian or Malaysian Permanent Resident
2. Accommodations must have Certificate of Compliance and Completion (CCC) and must not be subsidized government housing (PPR, PR1MA, etc)
3. There are 3 different types of classifications for short term rental airbnbs; Hosted, Un-hosted, Hybrid and commercial. These different types of short-stay airbnbs will have different rulings based on the type. More information about this below.


Short-Stay Airbnb Safety

MPC has done a good job here fixing some basic safety requirements for STRAs.

MPC has recommended that all STRAs be equipped with the following items:
1. Smoke detectors/alarms
2. Portable Fire Extinguisher
3. Detailed Emergency Evacuation Plan

It has also put caps on the maximum occupancy of STRAs based on size.

The amount being proposed was strangely enough based on ‘one adult per 350 cubic feet’.

Seeing as we aren’t fish living in a tank full of water, converting this to square feet gets you one adult per 50 square feet meaning that you can fit 10 people in a 500 sf apartment and still not be breaking the law.

Not sure what MPC was up to here as these limits exceed current hosting capacity already. 500 sf is the size of a studio unit, so am quite curious how you can fit 10 people in one.

STRA Tax

The main reason for any form of regulations is most definitely Taxation.

This allows the government to profit from any type of economic activity while at the same time standardizing the industry to benefit all the players involved.

MPC has proposed the industry to face the standard income tax for short-stay Airbnb operators plus SST. SST was initially proposed but from what we’ve last heard was that SST would not be charged. It is yet to be seen what the final outcome is, however.

On top of this foreign tourists will also face the RM10 per room per night that hotel guests face plus a local government fee of RM2-3 that has also already been put in place by states like Penang and Melaka.

Maximum Number of Days Per Year

This is where things start to seem like they are going awry.

For those of you who don’t know, many countries have resorted putting a ‘night cap’ or a maximum number of days per year that a short-stay Airbnb is allowed to be booked.

For example, Japan recently implemented regulations on Airbnb and as part of this legislation, included a maximum number of days, of 180 days per year. It did not matter if lodgings were low-rise private properties or residential high-rise mixed developments – all were bound to country wide or local regulations.

Just like in Japan, these laws were developed to protect the hotel industry. It is also the main reason the Malaysian government has taken interest in developing these laws.

The hotel industry is crying foul play, saying that short-stay Airbnb operators and agents are killing their businesses. They believe that decreased revenue over the past few years is due to the uprising of short-stay Airbnb accommodations in Malaysia.

Putting a night cap seems to be their solution to their problem and also something they are quite content with.

From what we’ve heard on the streets, it also seems that this part of their proposal is almost certainly going to be put into place with only the number of days being in question.

MOTAC has proposed different night caps for different classes of short term rental airbnbs which can be seen below:
Short Term Rental Nightcap

They are proposing to separate the types of short-stay units according to their title.

This meaning the separation of Residential and Commercial titles with further segregation on residential units into 3 different types: Type 1, Type 2 and Type 3.

The types here depend on whether or not the unit is hosted or not.

In Japan, after the Minpaku regulations were put into place, it led to a doubling of room rates with a higher occupancy rate. This meant that operators were actually earning just as much as they were before, if not more, yet having a lower number of bookings.

This isn’t a bad thing by any stretch of the imagination, It means that we, as operators, get to earn the same amount for doing half the work!

If anything would be music to our ears, then this certainly would be.

This is however, only the case if everyone plays by the rules.

My concern here is that, MPC has stated that these regulations will be enforced by the local authorities or town councils such as DBKL, MBPJ, etc.

How will the town councils be able to monitor this maximum number of days?

MOTAC has said that they would need the data from short-term rental platforms such as Airbnb, booking.com, Agoda or Expedia to be submitted to them.

Who in DBKL would monitor the activity and then enforce this should an accommodation reach its night cap?

Will they order the building management to block guests arriving?

What if the guests booked directly off platform?

What if the operator has multiple units?

What if the host is staying in a unit in the development but not at the unit itself, does this make it a type 1 or type 2 or type 3 residential unit?

There’s so many questions with no very obvious solutions on how to verify these things…

Is the state going to spend government resources to develop short-stay task forces that monitor and work hand-in-hand with JMBs to combat the breaking of short-stay regulations?

It certainly looks that way and if they’re effective, by all means, I think all operators can say that they are happy for the industry to go in this direction.

But I fear that there will be a high level of non-compliance with very little the authorities can do to prevent the breaking of these laws without spending a significant amount of resources.

The question the authorities need to ask themselves, Is it really worth it?

I’m also not the first to think this, nor will I be the last, Ikhram Merican of Living Space, has given his thoughts on the issue of regulations and this issue of a night cap already of which are very in much in line with mine. You can find the article here.

Conclusion

All in all, the regulations do not look like it will bring detriment to the industry and in fact may actually improve it and promote better services and competition among operators.

Whether any of this will still stand is yet to be seen, especially with the shenanigans that have gone on this past month with the formation of the new government and the collapse of the Pakatan Harapan Coalition following the PM’s resignation.

Get in touch with us now if you’d like to find out more about turning your unit into a short-term rental to help you cover those property loan repayments. We’ll do our best to advise you on what you should be aware of moving forward and what the future holds for Short Term Rental Airbnb Regulations in Malaysia.

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