Short-let apartments spark Paris row as Airbnb thrives

The Airbnb internet phenomenon is a boon for tourists, who find accommodation in popular destinations at a fraction of the cost of a hotel.

But in some cities the explosion of holiday lets is beginning to cause serious concern.

The authorities in Paris are so worried about the drain on residential property that they have enacted drastic measures to bring it under control.

However, so far few property owners have complied with the new rules.

Under French law you can rent out your flat for short periods to holiday-makers - as long as it is your primary residence.

But City Hall in Paris believes that as many as two-thirds of properties being rented on very short lets are not primary residences.

They are flats that are being used solely for making money via year-round holiday lets, the authorities say. And in the vast majority of cases their owners are flouting the law.

As a result it is estimated that a staggering 20,000 people - foreigners as well as French - are today liable for fines of thousands of euros.

Very short term internet flat rentals have seen a vertiginous increase in the last three or four years, in Paris as well as in cities like New York and Barcelona.

The last study, carried out in 2011, put the number of Paris apartments being let out to tourists at 20,000. Today officials say it has risen to 30,000.

"Holiday lets are an extremely profitable business," explains Francois Plottin, who runs a team of 20 inspectors at City Hall.

"A small flat can make in a week what it would normally make in a month if it was let out to locals."

"And because of the popularity of Paris as a tourist destination, the occupancy rate is very high. Flats are typically let out for 75 or 80% of the year."

But French law says that the minimum period for letting out a residential property is one year.

To let out a flat for shorter periods requires registering it as a commercial property. And - despite repeated warnings - that is something that only a tiny fraction of owners have bothered to do.

At Airbnb - by far the biggest internet site dealing in holiday lets - they say that the vast majority of their business is with people legally letting primary residences.

The figure offered by Airbnb's Paris director Nicolas Ferrary is 83%. However, that is disputed by Francois Plottin, who says around half of properties advertised on Airbnb are not primary residences.

"We do everything to comply with the rules, and it is clearly signposted to users of our website what those rules are," says Mr Ferrary.

The repercussions on the Paris residential market are severe, according to Ian Brossat, Director of Housing at City Hall.

"There is already a serious shortage of flats in Paris, especially studios and two-room apartments where couples might start a life together.

"Now we have this growing problem of holiday lets, with investors moving in and buying up as much as they can.

"It has become a business, and the result is fewer properties on the market for ordinary Parisians, and higher prices for what is available."

The holiday let phenomenon is concentrated in big tourist areas like the Latin Quarter and the Marais. Here it is possible to find buildings where multiple flats are being permanently let out to short-stay visitors.

"We feel that our apartment building is being turned into a hotel," complains Jean-Claude Guillot, who lives on rue Vieille du Temple in the Marais.

"There are the regular incivilities like the cigarette ends and the constant parties. But more than that, it is destroying the sense we used to have of the building being a shared space where we all knew and respected each other."

"When that happens in a whole neighbourhood, then the life just drains out of it."

Faced by a growing number of complaints, City Hall has toughened its rules.

There was already a so-called "rule of compensation", designed to maintain the stock of residential properties in Paris.

Under this, an owner who turns a residential flat into a commercial flat (by using it for holiday lets) has to compensate for the loss to the regular rental market by acquiring a commercial property and turning that into residential.

In theory this should be a major deterrent, because it means that an investor in holiday lets has to buy two properties instead of one.

In practice the rule was not being observed. However rather than scrap it, the City Hall has now decided to make it even stricter.

From now on, the second - commercial - property acquired under the compensation rules has to be in the same arrondissement, or district, as the buy-for-let property.

This is to stop people buying a residence for let in an expensive central area like the Marais, and then the compensatory commercial property in a cheap area near the ring-road.

If it all sounds ludicrously complex and expensive, that is exactly what it is. Which explains why virtually no-one is complying.

"There are no more than 100 or so owners every year who are going through these compulsory steps, and acquiring the compensatory property," says Francois Plottin.

"That means 20,000 people breaking the law. But now we are slowly starting to levy fines. This year 50 people have been fined 10,000 euros (£8,000; $12,000) each."

Mr Plottin's inspectors have the right to enter properties to find if they are being used illegally as holiday lets.

Where owners declare that the flat is let out legally, inspectors can ask for documentary proof that the lease is for the minimum of a year. If owners produce fake leases, they face criminal prosecution for fraud.

All of which is beginning to create panic among the 20,000.

"The people I advise didn't think they were doing anything wrong when they bought flats in Paris as an investment," says American Marais-based property consultant Adrian Leeds.

"And now suddenly they are being turned into criminals!"

Many of her clients bought pied-a-terres which they visit occasionally, but rent out the rest of the year to pay off the mortgage.

She says inspectors are following people with suitcases on the street to see what apartments they go to.

"We feel like we are being spied on. It's like World War Two. And they have the right to enter apartments without the owner even being there. It is incredible!"

The hotel industry is also watching the accelerating spread of Paris holiday lets with misgiving.

"We are not against competition per se, just distorted competition," says Alexandre Loisnard-Goyeau of the hoteliers' union Synhorca.

"The distortion comes because on our side we have all the taxes and the legal obligations concerning security and access for the disabled and so on.

"And the flat-owners have none of it."

Everyone accepts that weekend or week-long flat rentals are here to stay. They bring in new tourists and are a welcome source of revenue to thousands of people.

But the suddenness and scale of the phenomenon have taken city authorities by surprise. And they are struggling to react.