Organized criminals from Russia are subletting apartments to tourists, as locals struggle with soaring rents.

By Don Quijones, Spain & Mexico, editor at WOLF STREET .

Relations between the ultimate disruptor of global tourism, Airbnb, and Barcelona City Council just took another turn for the worse following news that organized criminals from Russia are making massive profits by subletting apartments in Barcelona to tourists through the online site.

For the San Francisco-based company, any further damage to its Barcelona market could be very costly. With over 23,000 registered dwellings, the city is far and away the most important Spanish destination for the platform’s users and the sixth biggest in the world, behind Paris (1), London (2), New York (3), Rio (4) and Los Angeles (5), five cities that are significantly larger than Barcelona.

Last year the council slapped the company with a €30,000 fine for advertising lodgings that did not have permits to host tourists. The fine was later annulled by court order on the grounds that “sharing economy” regulation is currently in a legal vacuum. That hasn’t stopped the Council from imposing a 20-fold hike in the maximum fine that can be levied on home rental sites, to €600,000.

In September 2016 it sent out a blanket letter to local residents warning them that any apartment rented to visitors must be logged in the province’s Tourism Registry and have a permit. Otherwise, owners could face fines of up to €30,000. The letter also urged residents to snitch on any neighbors who they believe are running illegal tourist accommodation operations in their buildings. Given the volume of noise and scale of disruption tourist apartments tend to produce, many locals are more than happy to oblige.

Airbnb responded by offering to limit the number of rentals available via non-professional landlords in Barcelona’s central Ciutat Vella district. It also promised that professional landlords would provide business information on the site in order to facilitate the collection of tourist tax. The proposal fell short of appeasing the local government which continues to insist that Airbnb take concrete steps to ensure that all of its affiliated apartments have tourist accommodation licenses.

In the meantime, the public backlash against Barcelona’s crazy tourist boom continues to grow. For the first time since the Council launched an annual public opinion barometer, respondents have identified tourism as the biggest problem the city faces: worse than poverty, crime, and even unemployment and general work conditions, which have topped the ranking every year since 2009.

That doesn’t mean that unemployment is no longer a big problem — at close to 10%, it’s still high (though much lower than the Spanish average). It’s just that tourism is now considered a bigger problem.

Tourism may provide buckets of money to the city’s coffers — over €12 billion a year at last count. It also generates plenty of jobs, albeit largely of the casual, low-paid variety. But it also brings with it a toxic mix of externalities, including sky-high prices and rents, overcrowding, noise, overstretched public services and infrastructure, the erosion of the city’s distinctive character, and the gradual formation of a mono-dimensional economy.

Now it’s generating another problem: criminality. As the latest scandal implicating Airbnb reveals, the potential returns in Barcelona’s tourist accommodation rental market are so lucrative that even organized criminal gangs from Russia are getting in on the action.

The scandal came to light when Montse, the owner of an apartment in the popular tourist neighborhood of Barceloneta, discovered that Timur, the young, respectable-looking tenant to whom she had rented her flat was in turn renting it to tourists through Airbnb, in direct breach of a clause in the rental contract forbidding tenants from subletting to visiting tourists.

Unable to track down the tenant, she repeatedly asked Airbnb to remove the listing of her apartment from its site, but to no avail.According to the Catalan daily La Vanguardia, the only way she had of seizing back control of her apartment was to book a night in it on the online platform, move in, and then change the locks. Since then, she has refused to leave out of fear that the tenant will come back.

As soon as Montse’s story was published in La Vanguardia, Airbnb removed her flat from its listings with sudden newfound haste. But the newspaper has since revealed the existence of other cases, with readers writing in to say they had been the victims of similar fraud. Some reported facing the threat of violence for confronting the fraudsters. It also turns out that Timur, of Russian-Chilean descent, is subletting “at least” three other apartments through Airbnb, none of which had been pulled down from the website.

“In fact, he [Timor] is simply the visible face of a Russian band that brings profitability to third-party flats through platforms like Airbnb,” according to La Vanguardia.

It’s easy to see the appeal of such a scheme: Montse was renting her apartment to Timur for a modest €950 a month, who in turn rented it out for €200 a night. If he and the Russian gang he fronts for rented it out every night (not an impossible task in a city like Barcelona, where it apparently takes just three hours to book out a half-decent flat for the entire month of July), he would have made roughly €6,000 in revenues on a monthly outlay of less than €1,000 — tax free, of course!

A few years ago, Airbnb claimed that three quarters of its Barcelona hosts have incomes below the national average. If true, it’s a trend that is rapidly changing as the allure of fast, easy money attracts more professional operators. A recent study by Penn State University identified the rise of the “mega-operator” – people who rent out three or more Airbnb units. The report found that “a growing number of hosts were using the Airbnb platform to operate an unregulated, full-time business. Nearly 30% of Airbnb revenue is derived from this group of full-time hosts. They are becoming bigger and more prominent.”

If the recent experience of Barcelona is any indication, it’s not just professionals who are moving into the sector; so, too, are professional criminals, who are determined to take advantage of the irresistible money-making machine without having to actually buy the property. By Don Quijones.

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