Rental Income

Osaka Enacts Ordinance To Open Up Airbnb-Style Rentals

By Jeff Wynkoop

On October 27th Osaka became the first Japanese metropolis to approve a new Private Accommodations Ordinance (民泊条例) to regulate the letting of rooms in private houses. Ota Ward in Tokyo followed suit on December 7th. It is expected that both ordinances will come into effect some time in the spring of 2016.

Inbound Tourism

With foreigners currently coming to Japan in droves, the country is experiencing a shortage of hotels catering to foreign tourists. To fill the market void, Airbnb Inc. came to Japan several years ago to grow its fee business of connecting owners of private residences with travelers looking for inexpensive accommodation.

Hotel Business Law

The problem, however, is that the repeated and continuous offering of for-profit accommodations to the public is already regulated under the Hotel Business Law. In fact, in Kyoto there have been several recent instances of private residence owner/operators being subject to police scrutiny for violation of the Hotel Business Law. Penalties include a potential fine and up to 6 months incarceration.

Osaka Ordinance

The Private Accommodations Ordinance in Osaka is designed to balance the legitimate interests of private residence owners who want to let out their properties versus the legitimate interests of hotel operators already licensed under the Hotel Business Law.

In addition and perhaps most importantly, Osaka has an overriding incentive to make sure the local economy continues to benefit from the growing tourism trade to the greatest extent possible by ensuring that prospective tourists are not dissuaded from coming to Japan due to from a lack of good, inexpensive places to stay.

It is not a coincidence that both Osaka (with Kansai International Airport) and Ota-ku in Tokyo (where Haneda Airport is located) are the first areas in Japan to enact private accommodation ordinances.

Strict Requirements

There are many legal conditions that an operator must meet to be designated by the local government authorities as a ‘private accommodation’ under Osaka’s ordinance. Please see an excerpt of conditions below.

Initially, it should be noted that the ‘private accommodation’ exception to the Hotel Business Law is only available in city wards specified as a “National Strategic Ward” (国家戦略特区), and already designated for an exception to the Hotel Business Law (currently only Osaka, Hyogo Prefecture, Kyoto, and Ota-ku in Tokyo).

All of these areas are located outside of their respective city centers and away from where many tourists likely want to stay.

  • The private accommodation to be approved must be at least 25 square meters in area and separately lockable with private bath and toilet;
  • the visitor must stay for at least 6 nights;
  • the local government authorities have the right to inspect the premises

In addition, in the Ota Ward ordinance there is a requirement that designated owner/operators talk with their neighbors to explain their intentions in advance.

Although Osaka’s Private Accommodation Ordinance was passed to create greater legal clarity for Airbnb-style private owner/operators, the specific conditions above will likely severely limit the number of private residences which can be designated as a ‘private accommodation’ by the local government authorities

Most residences in Japan do not have a separate 25s-sqm lockable room with bath, etc. and many tourists may only want to stay less than 6 nights, among other issues.

In short, these rules represent an interesting compromise by the government in balancing the interests of existing hotel operators and private citizens.