Libertarian technology enthusiasts get very excited about the idea of apps and other new tech ideas disrupting existing markets and creating new ones. The problem, though, is that the ultimate goal tends to be less about “disrupting” markets than creating new ones with almost no rules.
Which brings us to the case of Airbnb. Everything Airbnb projects in its warm and fuzzy public communications strategy is that the company is all about allowing individuals to cut deals with each other to rent all or part of their homes to traveling strangers from around the world. That is a fun idea which, as the company reminds us all of in every advertisement and public statement, brings in a little revenue for the people renting their places out and gives some good deals to travelers. The problem is that in the rule-free marketplace Airbnb is trying to create, there is a whole lot more going on than the friendly homeowner connecting to the friendly tourist. In New York City, for example, Airbnb, is happy to give out the statistic that less than 2% of their hosts rent out three or more listings, but they are less likely to mention that those 2% took home 24% of the home/apartment rental income, or that there are 300 different hosts in the city with six or more listings. And in studies in other cities throughout the country, the renting units listed as “commercial lessors” were growing steadily and becoming a major share of the Airbnb revenue.
Added to these worries is some very big news that hit just before the beginning of the year. Three of the nation’s largest landlords — Equity residential, AvalonBay Communities Inc. and Camden Property Trust, which between them own almost 250,000 apartment units — are holding talks with Airbnb about allowing apartment dwellers to market rooms through the companies’ network in exchange for a slice of the revenue. This is a big deal because it would mean a fundamental change in the Airbnb business model, one that could very quickly morph into massive apartment buildings basically becoming regulation-free hotels.
I have had a variety of concerns with the Airbnb and Uber business models for a long time. As I wrote last May:
Uber and Airbnb want to compete in markets where their competitors have to get licenses and adhere to certain basic rules of health, safety and reliability. They figure if they don’t have to adhere to the same rules, they can gain a competitive edge — just like Wall Street traders who know that if they trade in unregulated dark markets, they get an edge over the bankers that trade on the publicly regulated stock exchange. (Of course, that lack of rules frequently means bad consequences, but for the people making all the money, they don’t mind.)
If you are putting people up overnight and there are no rules about room safety and security, no health laws on keeping your rooms clean, no accommodations for people with disabilities or enforceable civil rights laws, and no zoning laws about what kind of neighborhoods your rooms need to be in, it makes it easier to make profits on putting people up overnight — and to hell with anyone suffering the results.
But these new talks between Airbnb and these massive apartment building conglomerates represent two massive new public policy issues. The first is that just as Uber’s ultimate goal is to supplant the taxi industry, this new business strategy is about Airbnb ultimately wanting to undercut the hotel industry in a more serious way. The libertarian tech folks would argue that this is perfectly okay, that if we do away with many of the almost 2,000,000 jobs in the hotel industry, that is just fine because, well, that’s what free markets do.
For those of us who care about building a society with more stable long term jobs, though, just blowing up industries and millions of jobs without thinking about it isn’t the way to go. And when you add in the still unanswered questions about the civil rights, disability rights, health and safety rules, and other regulations hotel owners need to live under — and what happens to all that in the new Airbnb/Uber world — it seems a lot better to slow this process down a little. Let’s ask some reasonable questions, and have cities, states, the FTC, and other governmental bodies think through all the consequences of the brave new world being created.
The second issue is about what this new landlord/Airbnb arrangement does to the affordability and availability of housing for lower and middle income people in big cities. With the current trendlines showing major new movement of younger and more affluent people into urban centers, housing affordability and availability is already a pressing issue. If Airbnb cuts big new deals with landlords owning hundreds of thousands of apartments, these issues get magnified in a very big way. Take a look at this really important study from one of the best community/labor coalitions in the country, LAANE (Los Angeles Alliance for a New Economy), where they documented early in 2015 the impact Airbnb was already having on housing: Airbnn, Rising Rent, and The Housing Crisit in Los Angeles. Now if you add in a new set of deals with the biggest apartment building conglomerates in the country, and you have a world of hurt on your hands in most of America’s big cities.
New technology innovations are a great thing, and if they help us build a better economy and society, that is wonderful. But let’s make sure we are thinking through these new business models, and making sure they are both competing with existing businesses on an even playing field, and not having a big negative impact on important things like jobs and housing in the meantime. Health and safety rules for hotels, civil rights laws, the ADA, fair housing laws, zoning ordinances, and other regulations exist for a good reason: let’s not let the high tech libertarians sweep them out of exist without thinking through the implications.