When Airbnb was first unveiled, it represented, like so many other new companies, a disruption of an industry. What Uber was to taxi cabs, Airbnb wanted to be to hotels. They marketed themselves as a game-changer for two groups of people: travelers and hosts. Travelers could now get away from the far-reaching hotel industry, find competitive pricing, and live like a local in any city they visited. Hosts could be anyone with an extra room or an unused apartment. Now, everyday people had a way to make a good passive income. Overall, this business model seems to have very few drawbacks. And yet, cities all over the world have decided to regulate the platform.
Disruptions at Home
One of the main allegations leveled against Airbnb is that the comings and goings of tourists disrupt residential areas. This can be immediate disruptions. In the case of Los Angeles, there have been several reports of huge parties in rented-out mansions. Some of those parties lead to cars blocking neighborhood streets, many noise complaints or in one case, gunshots being fired.
Furthermore, the prevalence of Airbnb may be taking a toll on local long-term rental markets. There have been reports that rather than the intended apartment dwellers occasionally leasing out their space, large companies and professional realtors have been finding ways to profit.
A report by Haaretz on Airbnb in Tel Aviv revealed that of 8,000 listings, 5,000 were owned by just 800 people. This means that in Tel Aviv, people are drawing income solely from Airbnb. These are real estate professionals who are specializing in short-term rentals through the app. In the city, only one third of the apartments on the site are being rented as the app intended, by owners who happen to be not using a space.
The use of whole apartments as full-time short-term rentals takes those apartments off of the long-term rental market. This can fuel the trend of so called “ghost apartments,” which are especially prevalent in Israel. These spaces are no longer available to people living in the city, driving prices for rentals up as available spaces fail to meet demand. Since Airbnb arrived at Tel Aviv, rent is up 324 shekels for a 2-bedroom.
Even more, short term rentals can transform an area from a local community to a tourist spot. This brings focus away from residential projects like community centers, playgrounds, and libraries, which can lose funding. Essentially, instead of letting tourist live like locals, Airbnb is transforming locales into places for tourists to visit.
To Regulate or Not to Regulate?
In order to combat the risks that Airbnb presents, cities around the world have been cracking down on Airbnb. In Miami beach, police have been deployed to vacate illegal short term rentals, often listed on Airbnb. Rentals less than six months and a day are illegal in Miami beach, excluding certain zones. Now, officials have made the penalties for violating that law steep. The fine for a first time violation is $20,000 dollars.
Airbnb officials say that officials are being unfair. First and foremost, they point out the fact that Airbnb pays a lot of taxes towards the cities they operate in. Secondly, they argue that cities are acting in accordance with big hotel industries. This, they say, leads to restriction in income for middle-class families. According to an Airbnb spokesperson, the average Airbnb host makes over $6,000 dollars a year from renting their home. This can be a huge economy boost. The app also does not want to have the onus of removing illegal rentals; they say the zoning laws are too complex to keep up with city to city.
In Tel Aviv, city officials are deciding not to regulate the platform. One of Tel Aviv’s main industry is tourism, and the rentals allow tourists with less budget to stay in the city. Furthermore, hotels are not enough to meet tourist demand, and officials say the online site is a good solution. Airbnb officials point out that long term rent increase is fairly nominal, and could be related to other factors.
Paris, on the other hand, is taking a very firm stance. They have been in legal battle since June 12 to remove 84% of the Paris listings from the Airbnb site. They say that the platform willfully flaunts the law, and refuses to regulate unregistered listings.
Lose the Battle, Win the War?
Despite the hostility from host cities, Airbnb shows no sign of slowing. The company recently projected that its earnings will be more than US $3 billion by 2020. This is more than 85% of the Fortune 500 earn. This is especially impressive considering the company turned its first profit in 2016. So despite city official’s best efforts, Airbnb seems here to stay.