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New York’s War On Airbnb
New York Attorney General Eric Schneiderman is on the warpath against Airbnb, the popular service that allows people to rent out their homes and apartments to consumers looking for a better deal than they might get from the hotel market. Schneiderman’s office has released a massive report attacking the company on a number of grounds, most (though not all) of which are misguided. As I note in my new piece for Defining Ideas from the Hoover Institution:
…[T]he report ignores the substantial gains to Airbnb renters who get better deals than they could find at conventional hotels. Indeed, the net revenues from short-term leases count as a good thing, because it taps space that would otherwise remain an idle form of “dead capital,” as Arthur Brooks of the American Enterprise Institute reminds us. Of course, there is a serious housing shortage in New York City, but the whole point of markets is to make the best allocations of scarce resources under rapidly changing conditions.
New York has a real housing issue but the Attorney General’s office approach is precisely backwards:
The way to tackle the shortage issue is not to mandate preferences for long-term tenants, but to loosen up on the conditions of supply by a massive relaxation of the entry barriers to residential housing markets in New York City, not only in the high rent areas of Manhattan and Brooklyn but throughout the entire City. Streamlining the currently interminable multi-step permit process for new construction would be a real start. Making sensible reforms in the now byzantine affordable housing regulations would also be most welcome. Yet the Attorney General’s report does not say one word about any kind of structural reform. Instead it buys into the fashionable but mistaken view that managing the current mix of housing units in the City is the way to promote equity. But that method comes in a distant second best to a conscious policy that seeks to expand the number of units, which in turn should lower rents and increase opportunities for long- and short-term tenants alike.
Airbnb does present some genuine difficulties — you can read the piece in the full for my discussion of those — but the restrictive remedies that Schneiderman proposes would only make the situation worse.
Published in General
I like you a lot, but disagree entirely with you on this issue. I stayed at one (unknowingly, someone else made the reservation) and it was a horrible experience. I don’t want to stay at a place that does not have deep pockets if my work laptop is stolen because the owner leaves the back door unlocked so late coming guests can get in easily (no room locks, smoke detectors or escape routes either). I don’t like sharing the kitchen unit (without a pot to pee in) and bath with cockroaches, nor asking the owner to get me a towel for a shower, or make me a cup of coffee (because she can’t put anything usable in the kitchen because of the cockroaches). I don’t want to pay to have breakfast, lunch, or dinner and watch tv with the owner of the house.
I cannot do a lot of things to make money with the home I own. For instance, I cannot open a car repair business or paint cars in my garage. The neighbors don’t like the traffic, noise, or smell of paint fumes. I don’t like the idea of sending my kids out in the yard to play if both neighbors take in people from out of town who neither I or they don’t know on a daily basis. How could a sex offender registry work in that case? I can’t open a daycare without licensing and approval. I do think I like the idea of neighborhood businesses, and I do think there are many businesses that could operate in a residential area without problems. If a local Airbnb had to put a sign out, or advertise where they are located, it would change the dynamic because they operate in the dark now, I guess, because of security concerns of the owners.
They are basically running a business that has avoided all the regulations and taxes that legitimate business are targets for. And by the way, I stayed one night, then went to a hotel where it was actually a few dollars cheaper. I paid a lot for the upstairs kitchen unit at the Airbnb that was unusable.
I have family in the hospitality industry — they own and manage a small B&B. They must charge higher rates because complying with the law causes them to incur higher costs, both direct (taxes) and indirect (regulatory, incl. zoning). If the law is going to mandate certain requirements, and authorities are going to enforce them, they must do so uniformly. Otherwise, equal treatment under the law is a joke. (Unfortunately, in my family’s case, some of those very authorities apparently rent out their own unregulated properties in violation of the law, and so refuse to enforce it.)
I agree wholeheartedly with this paragraph in the original article:
The sad and amusing thing about these liberal attempts to punish free actors in markets is that it amounts to:
“Liberals declare war on force of gravity (again); “We will continue to shovel water from one half of the tub to the other in order to alleviate hydraulic inequality,” declares Mayor De Blasio.
So when, by the lights of Wickard v Filburn, are non-participating homeowners penalized for having unoccupied rooms?
Ask Comrade Kaprugina:
Truly, an inspired hydraulic despotism, Comrade.
I would never stay in an Air BnB, but then I also would never shower at a gym. Or go to Liberia.
Ralphie, if you don’t want to be in someone else’s house, don’t lodge with Airbnb!
The biggest point for me — which Prof. Epstein covered in his piece, but not in the blurb above — is that this should all be governed by contract. If a lease (or condo association) forbids subleases, or short-term ones, then the lessor (or condo association) needs to sue the lessee and Airbnb. If Airbnb really harms a building’s ability to market itself to long-term lessees, then building owners should be suing left and right. If that’s not happening (and I don’t think it is), then the market is telling us that there’s not some deep problem with this arrangement.
As for the public health concerns, they’re overblown. The claim that fires are a risk in high rises is true enough, but it does not prove that Airbnb customers are at a higher risk. I suppose they might not know where the fire exits are as well as residents, but the stairs are clearly marked. Plus, as a former high-rise apartment dweller, I never participated, not a single time, in a fire drill. Nor did I ever take the stairs, or care to look where they were. In other words, I was as much at risk for death from fire caused by ignorance as someone who had never set foot in the building. The same is true of hotel guests too. Have you ever examined that little drawing telling you where the stairs are? I haven’t.
The rest of the concerns — noisy and criminal neighbors — are overblown too. Call the landlord or the cops if that’s a problem. If the room you rent is icky, like Ralphie’s was, the market has a solution for that too–it’s called information, which Airbnb is excellent at distributing.
And, as for the zoning concern Ralphie raises, I don’t think they really apply in the urban setting. And, if you don’t like Airbnb renters in your suburban neighborhood (I wouldn’t), then amend the homeowners’ association rules or take action under existing rules. I don’t really think those concerns are really valid in the context of a compartmentalized apartment building, where nobody ever talks to or sees one another anyway, and there are limited communal spaces. Regardless, I don’t see Airbnb taking the burbs by storm, so I wouldn’t worry about it.
Airbnb will likely have to start doing background checks at some point, or make them voluntary and allow people listing places for rent to require or not require a background check. This should take care of sex offenders, as well as a lot of moveable gambling, prostitution, and drug parties.
San Francisco voted this month to legalize and regulate Airbnb. Here’s what it looks like:
From Techcrunch:
The sin of rent controls pay it forward. Why can’t (I) charge somebody $1,000 for one month total when I pay $900 per month? Because government is holding my rent down from $3,000 where it would be otherwise.
Likewise with some of the registry and regulation bits. If AirBnB is primed to slide from a vacation-stay to an end-run around zoning, occupancy, and other laws and regulations, then some of these points make sense. The 90-day distinction makes sense — you have to draw a line somewhere.
In my mind, this also obviates the sex-offender registry consideration voiced above. I’m of two minds on the whole registry anyway, and by drawing as bright a line as possible between vacation-stays and residences, it should help to keep a lot of the regulatory requirements on the other side of the fence.
My experience with Airbnb was fantastic. We stayed in an apartment built on the back of a 100+ year old house in Woodstock, VT. A four minute walk which included a covered bridge took us right into town. The owner was quiet and didn’t bother us at all except to welcome us and orient us to the apartment. He also stocked the apartment with coffee, homemade granola (it was Vermont after all), and tomatoes from the garden. Two doors down was a very old cemetery. It was wonderful.
Others I know have had similar experiences, with one exception. A friend’s daughter found a place in NYC to stay during a summer internship. Like Ralphie, she was sharing an apartment with the owner. Her parents helped her get settled and were very unhappy with the set-up. She did not stay. Her mother contacted airbnb to report on the situation. She was surprised and pleased with air bnb’s response. I believe they got a full refund and the girl made other arrangements.
I didn’t make the arrangements, someone else did who didn’t explain what I was getting into. It was located in a seedy residential section of a southern city with a fairly high crime rate. I paid for 5 nights, left 4 nights money with the owner, and don’t owe Airbnb anything, including a second chance, or defense. I was that disgusted by the experience.
Regarding safety and fire issues, it doesn’t matter that people rarely experience fires, and larger hotels can have fires and you don’t read the little map. An engineer friend explained the difference between private and public safety and design elements something like this: ” I know that those 2 2 x 12 truss carriers with a couple of pole barn spikes will probably fail only about 5% of the time, but I am not going to seal a set of prints that the math shows requires laminated vaneer lumber and 4- 3/4″ bolts because everyone builds them with 2- 2 x 12’s. With my luck that small percentage of failures would be the one I seal, and I cannot go to court as a professional engineer defending myself by saying, “I know the 2 x 12’s don’t calculate, but that’s what everyone uses.” ” Residential codes allow for empirical design methods, but commercial, which deals with the public does not. Hotels have fire rated halls, elevators and stairs, and sprinkler systems. Most of them are renovated quite regularly. What about lead in these older homes? The EPA has made a lot of builders in my state decide not to work on homes older than 1978. I know commercial stairs are 7″ max riser and 11″ min. tread. An 8-1/2″ riser with 9″ tread 2′-8″ wide stair is a hard climb with a couple suitcases.
A lot of subdivisions are looking at regulating boarders, but many older subs like the one I live in no longer have boards, the city/township is the board.
I did read Epstein’s article, and it is an after the fact defense and plan for their business model, something that perhaps should have been thought of. Most businesses have to check regulations before they open their doors. In Airbnb, there isn’t any. I don’t like the phrase “sharing economy”. It is a business that charges.
Epstein is brilliant and talks so fast, sometimes I have to replay segments to catch his drift. I have listened to him speak on building regulations and zoning requirements being burdensome, and as someone in the construction industry wish more were in his camp.