Budapest becomes the latest European city to join the anti-Airbnb drive

Budapest is preparing to follow in the footsteps of other popular tourist destinations that have sought to rein in short-term apartment rentals, which fuel property prices and feed a raucous party district in the heart of the Hungarian capital.

With more than 10,000 Airbnb listings in 2018, Budapest relies on the industry more than almost any other major European city.

It will now join cities such as Paris, Berlin, Amsterdam and Madrid in imposing more stringent terms on such rentals as residents fight to reclaim urban districts from tourists.

Hungarian politicians last week approved legislation that opens the way for municipalities to cap the number of days annually that proprietors can rent out Airbnb-style apartments.

The capital’s party district also passed new regulations making it tougher for establishments to stay open past midnight.

The proliferation of low-cost airlines such as Ryanair and easyJet helped make the city a favourite for long weekend trips in Europe, so much so that officials and residents now complain of “over-tourism”.

The boom has made short-term rentals so lucrative that entire residential buildings have morphed into mini hotels in the city centre.

“We need comprehensive regulation following the example of Amsterdam, Berlin or London, that limits the period when entire apartments can function as hotels,” says Budapest Mayor Gergely Karacsony.

He says rents in the capital’s city centre are now “out of reach even for a middle-class family”.

Last week, Airbnb said it recorded more than a million bookings globally on July 8 – an early sign of recovery after a slowdown in reservations during the Covid-19 pandemic.

A major part of the bookings is for trips that will begin on or before August 7, the company said.

Airbnb said it hit the million mark for the first time since March 3, partly due to pent-up demand, with cheaper and closer destinations making up for the bulk.

The home-rental company has been reeling under weak demand as millions of tourists cancelled their holiday plans, work trips and family visits because of the pandemic, prompting it to suspend marketing activities for the year and cut about 25 per cent of its workforce.

Bookings on Airbnb and rival short-stay platform Vrbo for week 29 of this year, which started on July 13, have fallen drastically compared to last year, according to holiday rental analysts AirDNA.

In Lisbon, they have plunged by 76 per cent year on year, in Amsterdam by 75 per cent and in Paris by 74 per cent.

In the early stages of the pandemic, at least, this drop in demand was not matched by a drop in offerings – the number of apartments offered on France’s short-stay market only dropped by 3.2 per cent between January and March.

This could be a sign that, under pandemic conditions, landlords are still wary of removing their listings from the market and committing themselves to permanent tenants.

Meanwhile, Airbnb’s market share of overnight stays in Budapest reached 20 per cent in 2018, one of the highest among major European cities, according to a Colliers International report.

That led to a housing squeeze and increasing long-term rental and property prices.

The city’s property prices rose by 16 per cent in the first quarter from a year earlier, the second-fastest pace among 150 major cities in the world, a Knight Frank report said.

Any curbs may benefit a booming hotel industry, which added 1,120 new rooms in 2019, triple the previous year’s pace but still a fraction of the 3,560 rooms in the pipeline.

Of that, 75 per cent was forecast for delivery in 2020, at least before the virus hit, according to CBRE.

Investors include Hungary’s Prime Minister Viktor Orban’s family and closest business allies.

The areas expected to face a crackdown include the city centre, including the area called the “party district”.

Popular with tourists and locals alike, the boom gave dilapidated buildings a new lease on life and boosted the art and restaurant scene.

However, residents and officials have focused on the rubbish, noise and crime that have accompanied the area’s transformation.

“It was pure hell to live there,” says Dora Garai, head of a group representing locals, who said she used to live in the building facing Fogas, one of the area’s most popular venues, a labyrinthine complex of two converted buildings that includes several bars, dance floors and gardens.

She has since moved to the outer part of the same district, no longer within earshot of the party scene.

After years of fielding complaints from residents, the council this year approved a “quiet code” that will come into effect this summer.

It bans establishments from staying open past midnight unless they meet certain criteria, including having equipment that limits the noise level and security to ensure patrons do not drink outside.

For bars and clubs, the timing could not be worse after the virus all but wiped out the first half of the year as flights were grounded and Budapest went into a lockdown for several months.

At Hivatal, a tiny bar whose terrace space is usually overflowing with mostly locals, owners put up a “For Sale” sign after the new regulation was published.

“The timing isn’t great as there are no foreign tourists right now and we’ve had no revenue for the past three months,” says Zsofia Komuves, one of the owners.

At the same time, she conceded that some new regulation was needed, and it just needed fine-tuning so that bars such as hers would not go out of business.

After talking with the municipality, she remains hopeful that a compromise can be reached.

“We are not going to kill the party district,” says Peter Niedermuller, the recently elected mayor of the seventh district.

“But we need some changes because people living in the district cannot sleep at night.”