The Medellín Government Seeks To Regulate Daily Rentals: What Lies Ahead for AIRBNB? - Medellin Advisors

The Medellín Government Seeks To Regulate Daily Rentals: What Lies Ahead for AIRBNB?

The mayor of Medellin Federico Gutierrez has announced audits to the services of AIRBNB, Booking, Vrbo and digital platforms of accommodation for short and tourist rentals. Read the full article here.


Mayor of Medellín FICO Announces Regulation of 'Daily Rentals'

In the past several weeks, dozens of readers have come to us with an inquiry or statement along the following lines:

Airbnb is about to be banned in Medellin?!

Concerns stem from recent pronouncements from the new Mayor, Federico Gutierrez. He has recently declared his intention to regulate tourist lodging services in response to a surge in complaints from neighboring communities, as well as concerning instances impacting tourist safety, notably involving crimes such as sexual abuse, drug-related incidents, and homicides. Despite mentioning concerns about each of the foregoing, FICO has repeatedly emphasized that preventing the exploitation of children is his #1 goal with this new regulatory campaign. 

FICO was a mayor who managed to confront criminal gangs in Medellin
The Mayor has stated that Airbnb will not be eliminated but that the control of service providers will be improved
 
In this special edition of current news, we will delve into this issue, examining the existing legal framework and the challenges that the city will confront in managing this situation to prevent potential problems associated with the growing tourism in Medellín.

Use of Airbnb, Booking, etc. - A Growing Global Trend

The Air Bed and Breakfast (AIRBNB)  business emerged in 2008 in San Francisco, California, USA, with the concept of collaborative economy – seeking to lower the costs of lodging and hotels while generating income for the hosts. This has revolutionized the tourism industry in recent years, generating more than $9.9 billion dollars in 2023 in turnover for the platform worldwide and a net profit of more than $4.8 billion dollars over the previous year. This is generated from more than 6 million active listings.

The Mayor has stated that AIRBNB will not be eliminated but that the control of service providers will be improved.
The Mayor FICO has stated that AIRBNB will not be eliminated but that the control of service providers will be improved.

Here in 2024, Airbnb is now a global technological giant connecting hosts with guests through its platform. The nature of the service is similar to Uber, Cabify, etc., where operators or hosts pay a small commission for business captured through the app. Since 2020, Airbnb is publicly traded through Nasdaq, meaning it competes with large hotel chains such as Hilton, Marriott, among others, and boasts from that $70B of capitalization. The average cost of a reservation is 163.51 USD per nightx`.

Companies such as AIRBNB and Booking lead the daily rental market
Companies such as Airbnb and Booking lead the daily rental market

There are other platforms in the short and vacation rental market. Booking was created in 1996 and Vrbo from 2006, among others. These platforms generate substantial profits for the tourism and accommodation services industry. Airbnb arrived in Colombia in 2013, being, along with Booking, one of the main options for guests. In May 2023, the national government sanctioned Booking.com Colombia S.A.S with a fine of about 37 million pesos (Approx. 9,250 USD in 2024). The sanction is the result of an investigation that began in 2014 and is due to the infringement of tourism regulations. 

Airbnb
Inbound tourism is a great boost to Medellin's economy

It is unlikely and inconvenient that in Colombia these Airbnb-style services are going to be prohibited. It is not a feasible decision, nor adjusted to the current legal framework. Additionally, this business has economic importance for various actors, as it is carried out by both small owners and entrepreneurs, generating jobs and related services around inbound tourism. However, it is advisable for tourism providers to comply with the country’s tourism regulations in order to guarantee the legality and safety of their operations.

From Housing Shortage to Gentrification in Medellín

There are several problems in Medellín that have been aggravated by recent tourism. First and foremost, a shortage of housing for the local population. According to some analysts, it is estimated that more than 50,000 homes need to be built and that 11% of the population lacks stable housing. This has led to a steady increase in prices per square meter and, consequently, in rents. Thus, for many inhabitants of the city, it is increasingly difficult to buy a house or get an affordable lease in Medellín. Some families have had to move to neighboring municipalities in the Valle de Aburra. 

Medellín has a deficit of more than 50,000 homes (11%), which raises rental and purchase costs.
Medellín has a deficit of more than 50,000 homes (11%), which raises rental and purchase costs

With the surge in tourism and the influx of numerous “Digital Nomads,” there has been a proliferation of apartment complexes dedicated to short-term rentals in various neighborhoods, including Belén, Envigado, Poblado, and Laureles. This trend has led to challenges for the local population, as they struggle to afford rental costs, given the profitability for property owners in catering to tourism rather than long-term rentals, despite government-imposed limits on price hikes.

one of the negative effects of the growth of tourism in Medellin is the increase in the cost of living.
One of the challenges of tourism for Medellin is the increase in housing costs, some talk about whether it is convenient the arrival of Digital Nomads

This phenomenon known as gentrification generates many voices of protest against the proliferation of daily rentals. Colombians and residents who cannot pay the high prices end up being displaced to more distant areas of the city, due to the increased arrival of tourists, a phenomenon that is not unique to Colombia and is present in major cities around the world such as Madrid, Mexico, New York, Washington, among others.

Medellín Case - High demand for Tourist Lodging Services & Hotel Bed Deficit

According to reports from the Ministry of Commerce, Industry and Tourism, in 2023, Colombia received more than 3,078,925 foreign tourists (non-residents), of which 677,818 foreigners, equivalent to 22.01%, arrived in the Department of Antioquia, of which Medellín is part. In this regard. It is important to know the capacity of the tourism and hospitality sector to meet this growing demand for services. 

 

The hotel sector does not have the capacity to receive the number of tourists coming to Medellín.
The hotel sector does not have the capacity to receive the number of tourists coming to Medellín

According to the Hotel and Tourism Association of Colombia (COTELCO), by mid 2024, Medellín will have approximately 45,000 beds in the hotel sector. By comparing these indicators. We can clearly see that the formal hotel sector does not have sufficient installed capacity to meet the volume of tourists coming to the city in recent years. COTELCO has seen its revenues decrease by 3.2% in 2023 due to the boom of these digital platforms, and demands a stricter regulation against the competition generated by these ventures. 

Hotel sector occupancy has seen a recovery after COVID19 pandemic in 2020
Hotel sector occupancy has seen a recovery after COVID19 pandemic in 2020

A clear example of the recovery of occupancy in the hotel and lodging sector in Medellín occurred during the 2023 Feria de Las Flores, when hotel occupancy reached a record 81%.

Mayor FICO Gutiérrez has Recognized AIRBNB as a Good Solution to The Housing Problem in Medellín

Evidently, the use of Airbnb and similar platforms represents a good solution to the accommodation problem in Medellín. This has been recently acknowledged by Mayor FICO Gutiérrez, given the growing demand for lodging solutions in the city. 

Airbnb en medellin
Booming short term rental business generates billions each year in Medellin

This trend turns short-term rentals into a great business opportunity for both investors and property owners. Additionally, it provides an appealing service for tourists, who can enjoy more competitive rates than those offered by major hotel chains. Ultimately, it’s an industry where everyone can gain a little.

Booming short term rental business generates billions each year in Medellin
Airbnb solves the accommodation problem, as hotel options are limited.

According to El Colombiano, the Airbnb market in Medellín generates more than US$62 million per year. Between 2020 and 2021, Airbnb revenues in Medellín grew by 119%, from US$15.8 million to US$34.7 million. It is also estimated that in Colombia, tourism is generating more than 435,000 jobs in total. 

Airbnb medellin plataforma
ASOHOST advocates for the professionalization and formalization of the AIRBNB service in Medellín

The profitability depends largely on the location, but generally it is normal to obtain a return of between 7-10% annually. Guests arriving in Colombia through Airbnb generate additional spending on accommodation of US$899 million, representing 14.7% of direct tourism activity in the country. For its part, the Guild of Owners and Hosts represented by the Colombian Association of Providers of Tourism Services through Digital Platforms (ASOHOST), has warned that limiting the activity of Airbnb in Medellín can generate losses of more than $ 110 million for tourism. It therefore advocates for the professionalization and formalization of the sector.

The Illegality of Some Tourism Service Providers of AIRBNB and Other Platforms in Medellín

Unofficial estimates indicate that around 1,700 apartments and houses in Medellín are being offered on digital platforms such as Airbnb, Booking, among others, without having the required tourist licenses or complying with the country’s legal requirements. This situation has generated great concern and has set alarm bells ringing in both the Mayor’s Office and the National Government.

Source: RNT Confecamaras. Website: https://rnt.confecamaras.co/reportes. Updated March 22, 2024.
Source: RNT Confecamaras. Website: https://rnt.confecamaras.co/reportes. Updated March 22, 2024.

According to the table above more than 53.85%, equivalent to 2,883 of the providers of tourist lodging services in Medellín, have an active RNT. That is, they are legally authorized to offer services. However, as of the closing date of this edition, there are still 2,471 providers with cancelled or suspended licenses, representing more than 46.15% of the providers. This elevated figure has generated alarm in some sectors that demand the competent authorities to enforce the laws.

All AIRBNB operators and other platforms must have an active National Tourism Registry (RNT).
More than half of the Airbnb in Medellín comply with RNT standards, there are numerous illegal establishments operating in the city

Regulations Regarding The Daily Rental Service in Colombia

In accordance with Law # 2068 of 2020, tourism service providers are required to obtain a license from the Ministry of Commerce, Industry, and Tourism. This license, issued through the Registro Nacional de Turismo (RNT), authorizes them to legally operate in Colombia on digital platforms for tourism services such as Airbnb, Booking, among others.

More than half of the AIRBNBs in Medellín comply with RNT standards, there are numerous illegal establishments operating in the city.
All AIRBNB operators and other platforms must have an active National Tourism Registry (RNT)

What is The Difference Between Tourist Service and The Real Estate Rental Regime in Colombia?

The tourist service of lodging or daily rentals is based on Art. 79 of Law # 2068 of 2020. It establishes the lodging contract for a term of less than 30 days. Therefore, if the lodging time is longer than 30 days, it must be performed under the provisions of Law # 820 of 2003 which dictates the urban housing rent regime. It is important to understand that they are two legal and differentiated systems. The nature of tourism service is short-term, whereas the lease contract is intended for longer periods. In tourist accommodation services, we speak of service providers and guests or tourists. 

Law #2068 of 2020 regulates tourist accommodations in Colombia.
Law #2068 of 2020 regulates tourist accommodations in Colombia.

On the other hand, in the  “contrato de arrendamiento”, it implies a residential use (not commercial) and involves a “arrendador” and a “arrendatorio”.  Therefore, tourism service providers must respect the regulations regarding the use of land in buildings and residential complexes, in accordance with Law # 675 of 2001. This law regulates the Horizontal Property Regime, in addition to the Citizen Coexistence Manual or Regulations that have been established in the community. 

Urban leases are regulated by Law #820 of 2003.
Urban leases are regulated by Law #820 of 2003. It is not a tourist service.

What Happens In Some Residential Buildings in Medellín?

According to the Horizontal Property Regulations of some buildings in Medellín, apartments are exclusively intended for residential use. This implies that in the condominium, the rental of properties for periods shorter than 30 days is not allowed. For the practice of renting tourist accommodations to be carried out in a property, it must be explicitly stated in the horizontal property regulations.

Beautiful view of the city of Medellin
In some buildings in Medellin, the service of Airbnb is prohibited

 Following Law # 1558 of 2012, one must comply with the general registration requirements in the Registro Nacional de Turismo (RNT), as stipulated in Decree # 2063 of 2018, among other requirements. Otherwise, offering short-term rentals of less than 30 days is prohibited and illegal.

In some buildings in medellin there is a battle between airbnb providers and building administrations
In some buildings in Medellin, there is a battle between Airbnb providers and building administrations.

 

Therefore, it is essential for owners who aspire to provide tourist services to check beforehand if this activity is prohibited in the Horizontal Property Regulations of their building. Otherwise, engaging in it could lead to conflicts between the owner and the administration, the community of neighbors, or the co-owners of the building.

The Duty of Building Administrators to Report The Illegal Provision of Tourist Accommodation Services

Article 34 of Law # 1558 of 2012 establishes the obligation of horizontal property administrators to report to the Ministry of Commerce, Industry, and Tourism the provision of tourist accommodation services, in the buildings they manage when they are not authorized for such purpose by the regulations or are not registered in the Registro Nacional de Turismo (RNT). This authority has led some building administrators in Medellín to file complaints with the authorities in case of non-compliance by some owners, triggering conflicts between property owners and residential administrations.

In Medellín there have been incidents in buildings involving AIRBNB services
In Medellín there have been incidents in buildings involving Airbnb services

Right to Property Versus Collective Interest of Communities

According to the 1991 Political Constitution of Colombia, special protection is provided for the right to private property (Articles 58 and 59), ensuring its use and enjoyment. This is subject to restrictions determined by law and social interest. Additionally, economic rights and entrepreneurial initiatives are safeguarded. 

In Colombia, private property is respected, but it is not an absolute right, it is subject to the collective interest.
In Colombia, private property is respected, but it is not an absolute right, it is subject to the collective interest

However, this right is not absolute and entails the responsibility to respect the rights of others, e.g. as property owners, residents, neighbors, or community members. Thus, it is established in national jurisprudence that the right to property is not absolute and is subject to responsibilities. If a property owner chooses to use their property for offering tourist services, even if lawful, and this activity disturbs the tranquility of other property owners, the administration may impose sanctions or report any irregular situation affecting civic coexistence to the police or the authorities of the Ministry of Industry, Trade, and Tourism. 

AIRBNB generates important resources for Colombia, so it is not possible to think that it can be banned
Airbnb generates important resources for the economy, so it is not possible to think that it can be banned

On the other hand, there is the right of communities and neighbors not to be affected by commercial activities related to the tourist service. Currently. It is possible that there will be lawsuits from owners against building administrations trying to prohibit Airbnb business and similar platforms in units belonging to these communities. Who will win this battle? For now, it is too early to tell.

Crimes Related to Tourism in AIRBNB Properties in Medellín

So far this year, there have been three homicides of U.S. tourists in tourist accommodations in Medellín. This has raised public concern. The Mayor, FICO Gutiérrez, has indicated that he has received complaints from residents about excessive noise and accusations of serious crimes such as child abuse and sexual exploitation.  In the same sense, the Secretary of Security and Coexistence of Medellín, Manuel Villa Mejía, points out that they will seek to combat foreigners involved in criminal activities, focusing on promoting responsible tourism in the city.

Mayor FICO Gutierrez pledges to tackle tourism-related insecurity problems
Mayor FICO Gutierrez pledges to tackle tourism-related insecurity problems

For his part, Juan Pablo Cubides, Director of the National Police, recently announced severe measures for those who rent properties to “foreign pedophiles” for encounters with minors:  “These individuals will have their properties confiscated, will be investigated, and their accommodations will be removed from all platforms where they are registered.” 

Thumbnail foto copia
Foreigners who come to Medellín to promote sex tourism are not welcome

It is important to note that, despite the unfortunate incidents of insecurity and violence presented in recent times in Medellín. No Mayor in the country has the authority to prohibit the Airbnb service. So, any measure in this direction would be unconstitutional.

Laws provide for Stiff Penalties For Irregular Tour Operators

Failure to comply with the requirements demanded of tourist lodging providers may result in fines of up to 2,000 legal monthly minimum wages (In 2024, it is 2.6 billion pesos approx. 650 thousand USD.). In addition, offenders could be issued temporary closure of the establishment and cancellation of the registration in the Registro Nacional de Turismo (RNT) for up to 5 years.

Properties listed on AIRBNB without the RNT (National Tourism Registry) face severe penalties.
Properties listed on Airbnb without the RNT (National Tourism Registry) face severe penalties

Steps to Formalize The Daily Rental Business in Medellín

The following are the steps to operate legally, as a tourist service provider, through AIRBNB and other platforms:

1). Apply for the Registro Nacional de Turismo (RNT): You must obtain your registration before the local Chamber of Commerce, an entity that is delegated by the national government through the Ministry of Industry, Commerce and Tourism to grant these National Tourism Registry (RNT) licenses. You must comply with the Horizontal Property Regulations and the Citizen Coexistence Manual. There are also regulations regarding service hours, noise control, security of the Police Code that prohibits the use of your property for crimes of sexual abuse, prostitution and drugs.

 

Properties listed on AIRBNB without the RNT (National Tourism Registry) face severe penalties.
The Registro Nacional de Turismo (RNT)is essential for the legalization of short rental services.

To register in the RNT, you must:

*Go to https://rnt.confecamaras.co/registrar

**Fill in the corresponding information.

***Select the type of RNT.

****Apply for registration for each property, commercial establishment, branch or agency.

Nacional de Turismo (RNT), is a free online procedure.
Lodging service providers must comply with regulations to operate in Colombia

If the provider or owner has only one real estate property, then it is not required to have a Commercial Registry, but if the owner manages several real estate units that are dedicated to exploiting the tourist service permanently, then you are considered a merchant and must create a company and have a Chamber of Commerce. In the same way, you must apply for the Registro Unico Tribuntario (RUT), Codes CIU for lodgings in the city 5519 and rural lodging 5514. All Colombian and foreign persons must register with the DIAN, declare and pay the corresponding taxes, according to the Estatuto Tributario.

All persons in Colombia must file the Single Tax Registry (RUT) with the DIAN
All persons in Colombia must file the Single Tax Registry (RUT) with the DIAN

SEE ALSO – Everything You Need to Know: Impuesto Predial Tax Reform Project

SEE ALSO – How will Colombia’s Reforma Tributaria Affect us in 2023?

2). Validate that the activity to be carried out complies with the Plan de Ordenamiento Territorial (POT): This plan regulates the use of urban land and defines the spatial distribution of activities carried out by public and private agents. Allowing the establishment of the city’s animation characteristics and the use and occupation of the land. Mixture refers to those territorial spaces that concentrate various land uses simultaneously, such as housing, commerce, industry, rural, urban, and services. 

El Plan de Ordenamiento Territorial (POT) regulates land use in Medellín.
El Plan de Ordenamiento Territorial (POT) regulates land use in Medellín

 Agreement #48 of 2014 of the Mayor’s Office of Medellín defined 3 major general areas of use; low, medium and high mixed, in addition to setting specific categories. If you carry out the commercial activity in a mixed residential area, you would be in breach of the concept of land use and therefore the regulations in force.

3). Implement controls and reporting of guests to the competent authorities: Operators should comply with the use of the Tarjeta de Registro de Alojamiento (TRA) established in Art. 22 of Law 2068 of December 31, 2020, which reports to the Ministry of Commerce, Industry and Tourism. As well as the Sistema de Información de Reporte de Extranjeros (SIRE) which gets reported to Migration Colombia.

TRA is a mandatory requirement for providers on AIRBNB and other platforms.
TRA is a mandatory requirement for providers on AIRBNB and other platforms

There are options that allow automating these reports through a registration link, such as Digitra, which simplifies the process.

AIRBNB operators must report foreign persons in the SIRE of Migracion Colombia.
AIRBNB operators must report foreign persons in the SIRE of Migracion Colombia

Combating Sexual Tourism, Abuse, and Commercial Exploitation of Minors and Human Trafficking

Recently, on Sunday, March 31, 2024, a newsworthy event has alarmed various sectors of society, where a 36-year-old American citizen was found with minors aged 12 and 13 in a hotel located in the El Poblado District, in a presumed case of sexual abuse and child prostitution.  

The Colombian Police have closed the establishment for 10 days, while authorities announce the investigation and sanctioning of the events. Mayor FICO Gutiérrez has disclosed the identity of the American citizen, Timothy Alan Livingston. Who fled the country and could now face criminal charges in Colombia and be subject to extradition.

Tourist accommodations must comply with regulations and take measures to combat child abuse, exploitation, and commercial sexual trafficking of individuals, children, girls, and adolescents in all forms. These behaviors are serious crimes according to Colombian law and carry severe civil, economic, and prison penalties for offenders. 

For providers of tourist accommodation services such as hotels, hostels, inns and houses rented by AIRBNB or other platforms. This situation of abuse of minors implies extreme controls to prevent them from being used by depraved and, criminals to commit these crimes, being a great responsibility to control the entry and exit of people. 

In order to avoid sanctions ranging from millionaire fines, temporary or definitive closure of establishments and, even cancellation of licenses to the extinction of domain. Which implies the forced and summary expropriation of the places involved in these facts. 

Tourist accommodation sites must take measures to prevent and report cases of child abuse, human trafficking, among other crimes
Tourist lodging sites must take measures to prevent and report cases of child abuse, human trafficking, among other crimes
U.S. citizen charged with child abuse in Medellin
U.S. citizen accused of child abuse in Medellin

Non-compliance with these regulations will be reported to the competent authorities and does not allow for procedural benefits. For your reference. We inform you of pertinent laws that establish measures of protection and prevention against sexual exploitation, including:

  • Law #679 of 2001: Establishes measures for protection against exploitation, pornography, sexual tourism, and other forms of sexual abuse involving minors.
  • Article 188 of the Penal Code. Law #985 of 2005 and Decree Law #1069 of 2014: Adopt measures against human trafficking and norms for the care and protection of its victims.
  • Law #1098 of 2006: Childhood and Adolescence Code. Which establishes policies for the prevention of sexual exploitation in tourism.
  • Law #1336 of 2009: Establishes policies for the prevention and sexual exploitation of minors and typifies the crime of sexual tourism, as well as sanctions the sexual use of girls, boys, and adolescents in tourist activities.
  • Law #1801 of 2016: National Police and Coexistence Code, which establishes a code of conduct to counteract the sexual exploitation of children and adolescents in travel and tourism. Tourist service providers, their legal representatives, directors, and administrators must adopt this code.  
The Police Code establishes obligations for tourism service providers in Colombia.
The Police Code establishes obligations for tourism service providers in Colombia

4). Contract Civil Liability Insurance: Law #2068 of 2020 on tourism imposes on service providers the obligation to contract a complete third party liability insurance policy. The aforementioned policy must cover any loss that may occur during the provision of the tourist accommodation service. As a minimum, it must cover the risks of death, permanent disability, temporary disability, injuries, damage to third party property and, medical expenses.

Atencion el gobierno exige poliza de responsablidad a turistas
The service providers of Airbnb and other platforms must have a complete insurance in favor of guests and third parties, according to the law 2068 of 2020.

Currently, we have agreements with several insurance companies – offering extensive coverage which can help keep individual property owners within the confines of this law.  Contact us for more information about the necessary liability insurance.

Guest liability insurance should cover any accident or unforeseen event related to the service
Guest liability insurance should cover any accident or unforeseen event related to the service

5). Payment of Fontur Fees: According to Article 3 of Law # 1101 of 2006, tourist accommodations and other types of non-permanent lodging dedicated to offering tourism services must make the parafiscal contribution for the promotion, sustainability, and competitiveness of tourism every three months, at a rate of 2.5 per thousand on said income (ARTICLE 2.2.4.2.1.1. Parafiscal Contribution for the Promotion of Tourism). 

Aportes parafscales
Non-payment of FONTUR fees generates penalties and interest.

Failure to make this parafiscal contribution or its delay incurs late payment interest and penalties as outlined in Decree #1074 of 2015. This can include significant fines, as well as the collection of interest and administrative sanctions. Depending on the severity of the violation, these sanctions may result in the suspension, renewal, or temporary or definitive closure of establishments providing tourism services.

Fontur parafiscales liquidaciones
AIRBNB lenders can pay their contributions to FONTUR online

Conclusions:

There are many tourism service providers that do not comply with the legal regulations in force in Colombia. These must be legalized or else they could be sanctioned by the competent authorities, respecting due process, economic rights and the right to defense.

Building Administrations may not exceed their functions and violate the property rights of providers that comply with legal requirements.

Security controls and the fight against drug trafficking, sexual exploitation and child abuse are necessary to maintain social peace and the protection of tourism in Medellín.

The Mayor’s Office of Medellín cannot prohibit the Airbnb service in the city; this would be unconstitutional, however they can and apparently will regulate short term rentals in buildings which do not allow them. 

Questions, comments? Contact me today and I will be happy to discuss any of these issues further with you. 

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