Kenya’s short-term rental sector stands at crossroads
Operators of short-term rental properties will be required to register with the Tourism Regulatory Authority (TRA) effective immediately. PHOTO | SHUTTERSTOCK
All ‘airbnb’ investors in Nairobi—and soon across the country— will be required to register a business, then present relevant documentation to the Tourism Regulatory Authority (TRA)— including a lease agreement where the landlord expressly agrees to a term rental business, have the unit and amenities inspected for safety before a licence to operate is issued.
These revelations follow discussions in a meeting recently held between short-term rental sector investors in Nairobi under the Vacation Cribs Association of Kenya (Cavak), a voluntary umbrella body, and Norbert Talam, the director-general of TRA.
“A new draft legislation will be out soon and will be subject to public participation before being formally adopted,” says Noah Amoke, the chairperson of Cavak.
The meeting comes soon after Kisumu County directed registration of all ‘airbnbs’ by the end of this month. Other counties are also in the process of enforcing registration.
The latest developments are the initial stages of formalising a sector that legal and real estate experts say has been at crossroads due to an ambiguous definition, leading to confusion in registration, categorisation and taxation.
Definition and registration
According to experts what Kenyans call ‘airbnb’ is technically a general term for a furnished residential unit which comes in many names and sizes depending on location. Guests typically stay for short periods of time, mostly below 30 days but can be as long as two years.
“A unit is only an Airbnb if it is registered and approved by the Airbnb platform,” notes Jeniffer Murigu, a real estate lecturer at the University of Nairobi.
“If you flag down a taxi in town and board, you cannot call it Uber or Bolt unless you hailed it using the respective applications. It is the same case here,” explains Dr Murigu.
In Kenya, villas, serviced apartments and flats, game, retreat and eco-lodges, guest houses, rooms, holiday and beach cottages, tree houses, tented and safari mobile camps and homestays have been lumped together as ‘airbnbs’ by the general populace.
This has made it difficult to implement an integrated registration.
“Unfortunately, there exists no unified framework for registration of short-term rentals.
This could be because of the proliferation of short-term guest accommodation, spurred by the entry of online platforms such as Airbnb and Booking.com,” says Divinah Ongaki of Sarange Mwaniki & Company advocates.
“You would be hard-pressed to even find a definition of “short-term rental” in our legislation because the arrangement falls outside the common “lease” concept which Kenyans are more familiar with,” she adds.
Taxes and fees
Among the contentious issues is the classification where studios, one, two, and three-bedroom units are grouped together under ‘serviced apartments’ and investors are required to pay Sh26,000 per year for a licence and an additional Sh1,000 for registration irrespective of the number of units.
Investors also want the new legislation to clarify situations where the host is not a landlord and in essence, does not attract rental income to warrant rental income tax.
According to Ms Ongaki, a person operating short-term letting is generally required to file tax returns and pay income tax on the income earned.
At the same time, under the Tourism Act, any commercial income from the use of property is subject to income tax at rates between 10 percent and 30 percent for individual hosts.
Further, hosts with an annual turnover exceeding Sh5 million are required to register for and to charge VAT.
“Separately, under the Tourism Act, hosts who are licensees are required to remit 2 percent of gross receipts for monthly sales of food, drinks, accommodation and all other services to the Tourism Regulatory Authority (TRA),” says Ms Ongaki.
Unless these are harmonised, investors say the tax burden will not make economic sense for the businesses and will kill the budding sector.
“We need these harmonised so that everyone pays a fair share compared to what they have invested,” says Mr Amoke.
Those already operating, however, have a small reprieve.
“We have negotiated an extended period of compliance for our members who are already operating but are yet to comply fully with the directives,” he adds.
Other contentious issues include the need to have identification documents held and registered at the entrance to the units due to safety concerns.
There have been complaints from members of the public due to disturbances as some bookings tend to be noisy or with many ‘visitors’ in areas with families. “There’s a need for standards to address security. You cannot allow parties in a residential neighbourhood or frequent short-stay visitors who come and leave without proper recording,” says Olivia Mwembe, a Nairobi resident.
Investors say that the security and building standards required before approval should automatically weed out some unscrupulous elements.
These developments follow public uproar after two murder cases were reported back-to-back in short-stay rental units in Nairobi, thrusting to the fore issues bedevilling the rising sub-sector.
Is technology the answer?
Dr Murigu opines that outside regulation, planning, classification and taxation, order can be enforced through booking platforms.
“Most of these booking platforms have guidelines on registration and listing approval for legitimacy of a unit where details of the unit owners are captured and verified. The details of the client(s) are also captured and in case of any incidences, the persons concerned can be easily traced,” says Dr Murigu.
All global brands in the short-term rental booking space have a similar modus operandi; the owners of the units have to provide details of the units and proof of ownership using verified government-issued identification. Clients intending to use the units have to log into the system, register and pay on the platform.
In Kenya unfortunately, a majority of the bookings are done through word of mouth or through unverified social media channels where anyone can create a page and post.
“The current booking practices leave clients susceptible to being conned on false bookings. It is good to see something being done,” says Ms Mwembe.
The closest platforms Kenya and the region have resembling the global brands include Triptaca and TheLinks which are more or less websites where potential clients can view units, select and then call a number to book.
