Yves here. AirBnB is responsible for increases in housing costs in many communities, as well as abuses of state and local laws. I’m not at all a fan of them as a business proposition. This post suggests a way to provide for AirBnB’s supposed original intent, the occasional renting of spare rooms, without the profiteering
By James Muldoon, a lecturer in political science at the University of Exeter. Originally published at openDemocracy
So far 2020 has not been a good year for AirBnB. The company has missed its chance for an initial public offering (IPO) and racked up millions in losses – including a $250m payout to landlords for reservations cancelled due to the coronavirus pandemic.
In a bid to save $800m, the company has suspended all its marketing activity for 2020 and given executives a 50% pay cut. After a spectacular rise, things now look uncertain for AirBnB and its global dominance over short-term rentals. Landlords are leaving it in droves following the “ AirBnB Apocalypse” and are putting their houses back in the long-term rental market to salvage their losses.
The entire industry faces a devastating impact from the coronavirus pandemic due to knock-on effects of cancelled travel, events and conferences. AirBnB will eventually re-emerge, but it will no doubt be rattled by this experience and see a significant amount knocked off its market value.
Previous attempts to regulate AirBnB have proved ineffective due to the company’s deep pockets, lobbying power and willingness to fight regulations in courts across the world. The coronavirus has been the only force so far that has been capable of preventing the company’s continual expansion. While it is temporarily halted, it’s time we acknowledged that it is a threat to affordable housing and should be replaced by a democratically controlled alternative.
AirBnB began with a feel-good story that captures the myth of the “sharing” economy. A couple of friends rented out an air-mattress and decided to expand with the mission of helping families share their homes, make some extra money and meet new people along the way.
In 2020, the reality is that more than half of AirBnB listings in London are entire homes, displacing resident Londoners, and almost half are hosts with multiple listings. The rapid expansion of AirBnB’s extractive business model has gone hand in hand with a global covert war on attempts to tax and regulate it. The main beneficiaries of the business are venture capitalists and predatory landlords who run small rental empires, depriving locals of desperately-needed homes.
But how did AirBnB became such a threat to local communities? And are there alternatives to the profit-driven models of platform capitalists that can keep wealth circulating within communities, and create a digital future owned by all?
Scrolling through job advertisements you might be surprised to find the following: “AirBnB seeks community organizers to organize and advocate for home sharing in cities throughout the United States and abroad.” The corporate giant, which currently hosts over 7 million listings in more than 100,000 cities across 220 countries and regions, still likes to depict itself as a grassroots community-led organisation.
But the idea of AirBnB as a community of like-minded individuals interested in home sharing is little more than marketing spin. Its valuation of $31 billion dollars in 2017 would have placed it in the top 100 nation states in terms of GDP. It has a sophisticated communications plan to maintain its image as a pioneer of the “sharing economy” while keeping its many litigations and disputes with authorities out of the news.
This strategy has become increasingly difficult as it has continued to expand, with a growing collection of scientific studies and news reports casting doubt over its noble intentions and positive impact on local communities. Analysis conducted by the Economic Policy Institute, a non-partisan American think tank, reported that the economic costs of AirBnB to local communities likely outweighed the benefits.
Research from the Harvard Business Review found that AirBnB is negatively affecting the housing stock across the US due to the incentive for landlords to take properties out of the long-term rental market and turn them into profitable short-term rentals.
A recent Guardian report also found that AirBnBis threatening affordable housing across the UK. AirBnB rentals have become so prevalent in some parts of the country that there is up to one listing for every four properties, prompting calls for increased government regulation and for a 90-day cap on all homes let on the platform.
In 2018, AirBnB reached a landmark: they reported $200 million profit for the year and seemed poised for a successful public listing. But in the first nine months of 2019 AirBnB recorded a $322 million net loss, with the coronavirus now threatening to push its initial public offering date back to 2021.
As their public listing approaches, everything is on the line. Investors are already weary following the poor performance of other platform companies such as Uber Technologies Inc., Lyft Inc. and We Co. The fear is that further troubles could jeopardise their attempt to go public.
At this crucial moment AirBnB is doing everything it can to assure investors that future regulations won’t limit their profitability and maintain its positive image with the general public.
AirBnB’s Undercover War on Cities
“Read my lips: We want to pay taxes,” declared Chris Lehane, AirBnB’s global head of public policy, in 2016. But despite their many public statements about partnering with cities and working with local communities, AirBnB has been one of the most litigious startups in Silicon Valley, fighting cities across the world in an attempt to avoid regulations.
Since launching in 2008, AirBnB has been involved in at least 11 lawsuits against local and state authorities in America, with legal action taken against Boston, Palm Beach County, Miami Beach and New York in the past two years. They have used their deep pockets in a protracted campaign to undermine regulators across the US.
Officials at Palm Beach County, Florida have been attempting to force AirBnB to collect and pay the county’s 6% occupancy tax on visits since 2014. Three law suits later and millions of unpaid taxes still remain outstanding. “We knew we were going to get sued,” Palm Beach County tax collector Anne Gannon reported to Wired last year. “That’s what they do all over the country. It’s their mode of operation.”
In a joint letter written in 2018, Amsterdam, Barcelona, Berlin, Bordeaux, Brussels, Krakow, Munich, Paris, Valencia and Vienna pleaded for the EU to more effectively regulate holiday rental website like AirBnB, claiming they were reducing the stock of long-term housing and adversely affecting neighbourhoods. Airbnb have ramped up lobbying efforts of EU institutions, spending millions in efforts to achieve less onerous regulations, according to a Corporate Europe Observatory report.
One of the primary threats to AirBnB’s business model is enforceable caps on property rentals. Cities such as Amsterdam, London, Paris, Tokyo and San Francisco all have caps from between 60 to 120 days a year. Candidates in Paris’ upcoming mayoral elections have suggested reducing their cap to as low as 30 night per year. Fears of the success of such a move have prompted AirBnB to demand “a single European oversight body for digital services,” which they could lobby instead of fighting battles against multiple cities. Airbnb recently won a legal battle in the Court of Justice of the European Union which foundAirBnB should be classified not as an estate agent but as an “information society service,” thus avoiding tougher regulations.
Throughout its ten year history, AirBnB has preferred to act without gaining permission and to allow regulators to chase them over violations. The resulting disputes have been like a global game of whack-a-mole, with AirBnB challenging local authorities’ attempts to stand up to them. The company fights every battle out of fear that if a particularly onerous set of regulations prove successful in one city, others would be encouraged to follow suit. For example, after regulations took effect in San Francisco, AirBnB lost about 4,000 listings.
What is clear in this pattern of behaviour is that Airbnb’s priority every step of the way has been to ensure that stricter regulations do not affect their future market opportunities. Concerns about AirBnB’s negative impact have only worried them following negative press, which is treated primarily as a PR exercise. AirBnB are prepared to work with cities so long as their business interests are not adversely affected. But in many cases, the rhetoric is simply a smoke-screen for a company that would prefer to operate with as minimal regulations as possible.
AirBnB Versus the People
In 2018, AirBnB publically declared that the company was not simply shareholder-driven, but would attempt to benefit all of its stakeholders, including local communities. Two years later and Airbnb report to be still “early in our work” with plans for the release of their first Annual Stakeholder Report in March of this year. But the only metric regarding protecting communities published in a recent update is about measuring AirBnB’s “carbon footprint”. Despite ongoing concerns, none of the indicators address rent and housing affordability or the impact of Airbnb’s activities on neighbourhoods.
We should ask ourselves the following: if AirBnB care so much about local communities, why has it taken the company over 10 years to produce a stakeholder report? Why was this only seriously considered following a wave of negative press just before its IPO? If this is more than a simple marketing exercise, why are there no robust and measurable targets?
AirBnB has consistently put its corporate interests ahead of those of local communities. In instances where being responsible and abiding by a cities’ regulations has threatened its profitability, it has fought tooth and nail to undermine and defeat local elected representatives. Its fight against San Francisco, which was eventually settled out of court, cost the city about $330,000 in legal fees.
AirBnB’s behaviour has opened up a new industry of companies offering assistance to local authorities attempting to regulate short-stay accommodation. The company’s reluctance to release its data to local authorities has also given rise to Inside AirBnB, “an independent, non-commercial set of tools and data that allows you to explore how AirBnB is being used in cities around the world,” administered by community activist, Murray Cox. Since AirBnB rarely releases data of its operations, it’s difficult to have an informed public debate over their policies and their effect on cities.
AirBnB doesn’t simply require more regulation. Instead, we need a complete overhaul of its extractive business model. It continues along its current path because there hasn’t yet been a large enough outcry over its actions combined with a co-ordinated shift towards a more ethical alternative. But a growing number of activists hope that this could soon change.
A Cooperative Alternative
Fairbnb.coop began in 2016 as a movement of people in Venice, Amsterdam and Bologna hoping to challenge the extractive model of existing holiday rental platforms. The organisation incorporated as a co-operative in October 2018 and has recently launched a beta version of its reservation system, allowing its 8000 registered users to book accommodation in five cities across Europe.
For Damiano Avellino, co-founder of Fairbnb.coop, AirBnB has “turned into a way for people to speculate.” This includes predatory landlords who buy up multiple properties to rent them out on AirBnB, as well as investors in the platform itself, who hope to turn a profit through the 23-25 percent commission paid to AirBnB on every transaction.
The model of Fairbnb.coop tries to stay closer to the original concept of “home sharing” while escaping the predatory aspects of Airbnb. As a workers’ co-operative, Fairbnb.coop invests half of the 15% commission on bookings into social projects chosen by hosts and travellers. Whereas AirBnB is designed to maximise profits for its shareholders, Fairbnb.coop only retains as much as is required to continue running the platform. This is a reversal of the underlying business model of AirBnB, which relies on maintaining a monopoly over the short-term rental market and extracting profit by exploiting their position as broker.
Its social projects enable the co-op to make a genuine contribution to the community. For example, travellers in Genoa can donate to the activities and projects of C.R.E.A, the Food Surplus Recovery Center and Mediterranean Laboratory, a space of culture and sharing. “In Amsterdam the money will go to a community gardening project in the north and an urban agriculture project for migrant women in the south-east – both poorer parts of the city,” Spanish founder, Sito Veracruz, reported to the Guardian.
In addition to its pursuit of public utility over profit, Fairbnb.coop also aims to reduce the negative impact of tourism and short-stay rentals through a “one host/one house” policy. This prevents landlords from taking properties off the long-term rental market by discouraging hosts with multiple lettings. Almost a quarter of London AirBnB hosts have five or more properties, with eleven hosts who have over 100 properties listed on the site, according to data from Inside AirBnB.
Damiano Avellino argues that it’s the communities themselves who have a right to decide on what further regulations should govern each city: “how to choose the best regulation for each city is something that we should come up with together,” he claims. “What is really important is to make sure the platform is governed as a commons and can act as a positive force for change in local communities.”
The challenge for Fairbnb.coop is how to expand their ownership and governance structure beyond the original investor/workers of the enterprise. Fairbnb.coop has ambitions of bringing in more stakeholders that would have voting rights over how the enterprise is run.
Currently Fairbnb.coop remains relatively small, but the model represents a genuine alternative to venture capitalist-funded Big Tech platforms. Next time you book short-term accommodation after the coronavirus pandemic, check to see whether you could support the local community instead of Silicon Valley.