Stricter rules for short-term rental

Short-term rental means renting out homes or rooms for a limited period, typically less than 30 days at a time. This kind of rental has become popular in Copenhagen, especially among tourists and business travellers looking for unique, local experiences rather than a traditional hotel. Platforms such as Airbnb and Booking.com have changed the way we think about renting out homes, and they have made it possible for many residents to earn extra income by renting out their homes for shorter periods.

Over the years, short-term rental in Copenhagen has changed markedly. While it started as a fairly unregulated practice, the authorities have seen a need for stricter rules. According to the government, this has also led to some homes that used to be available for ordinary rental now sometimes being converted into short-term rental units as “shadow hotels”. This has caused some concern in the government.

The rules on short-term rental aim to balance the needs of tourism with protecting residents’ interests. Recently, however, the rule has been that a home can be rented out under the “short-term model” for a maximum of 70 days a year.

New proposal to tighten the rules on short-term rental

The Danish government recently said it wants to put forward a new framework for short-term rental, aimed at tightening enforcement of the rules (the government on short-term rental, in Danish). A central element of this regulation, if it is introduced, is that there is currently a limit of 70 days for short-term rentals, and that booking platforms such as Airbnb and Booking.com must be able to make data on the number of booked nights per unit available to the municipality on request. The municipality will also get a new supervisory role.

In other words, it may include a registration requirement for landlords and strict fines for those who exceed the permitted limit. If the tightening of the law comes into force, landlords will reportedly have to document that their short-term rental stays within the 70 days allowed by law.

The rules will no doubt affect both hosts, who will have to adapt to the new framework, and tenants, who may see fewer short-term rental options. As a result, everyone involved will need to be aware of and understand the new provisions on short-term rental in Copenhagen. Especially those who run the alleged “shadow hotels”.

Consequences for landlords and tenants

The new rules on short-term rental in Copenhagen will have significant consequences both for landlords who use short-term rental and for ordinary tenants, if “shadow hotels” are a widespread phenomenon. As the proposal presents it, however, we cannot see how big a problem this is supposed to be in Copenhagen. Unfortunately, we find no concrete evidence to support the claim and the concern in the government’s proposal.

With the tightening, however, landlords who run “shadow hotels” in future, meaning rental beyond 70 days, will reportedly face serious and immediate consequences. Again, we unfortunately cannot tell from the government’s proposal how serious this will be financially or, potentially, legally. It does mention, however, that fines today can be between DKK 5,000 and 25,000 for breaking the limit. We cannot see from the proposal how many fines have been issued, which would otherwise be evidence that the rules are being broken systematically.

We unfortunately fear that the stricter rules will have the opposite effect and force many to consider other ways of renting out, which could reduce the number of short-term rentals available. Even among those who rent out within the law. This will have a negative effect on cheaper, local alternatives for travellers, tourists, families and others who want to visit Copenhagen in a flexible way. We also expect that the reduced availability of short-term homes will mean a smaller choice of attractive short-term rentals, which could lead to higher prices.

For tenants who use short-term rental as a flexible housing solution, the changes can create a difficult situation. Many tenants have built their plans around short-term rental, which has offered them tailored and often cheaper alternatives to traditional hotels and other rental units.

There are also potential benefits to the new rules, though. For example, regulating short-term rental can give landlords who follow the law a more stable income. At the same time, tenants can get a better experience in terms of quality and safety in their homes, as only registered and approved units within the 70-day limit will be able to operate. Tenants can also benefit from a more structured rental market where the rules for getting a short-term rental are clear. In the new situation, it is important that both landlords and tenants adapt and find solutions in line with the new legislation, which may include working together to find acceptable housing arrangements.

Cooperation between platforms and authorities

As demand for short-term rental has grown, a more structured approach to regulating it has also become necessary. In the government’s view, one of the most critical steps in this process will be cooperation between rental platforms, such as Booking.com and Airbnb, and local authorities (the municipalities).

This raises a central question about what the line of communication will look like. Will the government ask the municipality to set up a new unit or department to monitor the platforms and demand data from them on individual hosts’ rentals? Which hosts can actually expect to be affected? Is it only those who reportedly run “shadow hotels” today who will face financial consequences, or does it also apply to private hosts who happen to rent out for 72 days instead of 70 in a year, which is seen as a trifle? And how is the platforms’ cooperation with the authorities on sharing data about overnight stays meant to work? Do the platforms even have this data, and is there a legal basis for sharing data on overnight stays at a homeowner’s property? It can seem quite intrusive, and even at odds with the Danish Constitution’s (grundloven) protection of property rights.

According to the proposal, the platforms and the municipalities will play a critical and decisive role in monitoring and enforcing rental activity. But do both have the resources, the technology and the method to put systems in place that can register and enforce the limits for short-term rental, and specifically target those who reportedly rent out methodically for more than 70 days a year?

In our view, the cooperation should extend to professional property management, which plays an important role in making sure rentals are lawful. Professional companies are better equipped than private users to comply with the rules in force and to make sure property owners are informed of their obligations. They can help navigate the complex requirements that come with short-term rental and make sure rentals comply with local law. This would also regulate the market and protect both owners and short-term guests, and we see it as a potential win-win situation that leads to better conditions for everyone involved.

It is essential to remember, however, that the government’s first point, set out above, is only a proposal to tighten the rules, and that it will probably take coordination between several parties to deal with the alleged problem. We are following developments closely and look forward to seeing what the parties agree on. We also hope the government will present broader and more concrete evidence of the problem it describes, to win wider support for the proposal.

At BY Administration, we only rent out in cooperation with the host in question. As a company registered in Denmark, we always aim to stay within the Rent Act (lejeloven) and the guidelines that have been set.