The Coming Death of Airbnb

[Jason Reed]

I have had a number of investors that have been excited to take advantage of airbnb with their rental properties and their own homes. Numerous clients of mine and aquaintances have already cashed in on airbnb. Properties that would normally bring in $1,200 a month are now receiving that in a matter of days. To further the frenzy, the Twin Cities will host the 2018 Super Bowl, nothing seems sweeter than getting $10,000 or more for one week's rent in February in Minnesota. 

I am all for capitalism and this is exactly what makes America great, however don't plan on cashing in on airbnb for the long-term. Despite the thousands of ecstatic owners that have used this great platform to earn new wealth, there are those that are being hurt by it. Airbnb directly injures hotels business. I know, you're not shedding tears for Paris Hilton and her pals, but owners that are currently cashing in on airbnb are already feeling their wrath. 

New York City, recently adopted legislation to ban any rentals shorter than 30 days. Airbnb spent $10 million fighting the legislation and then dropped a lawsuit after the city promised to only pursue the property owners and not Airbnb. In February, the New York Post reported that Hank Fried and a Real Estate Broker, Tatiana Cames, were collectively fined $17,000 for 17 violations. They are required to pull their Airbnb listings and will have the $1000 violation increased to $5000 each and then $7,500 each for a third violation. 

Similar bans have happened in Colorado, San Antonio, and Santa Monica. Hotels are the big ugly Gorilla that will cause problems for Airbnb, but they aren't the only problem that is surfacing. In Minneapolis, in 2010 the city collected $61 Million in revenue from the extra tax that they add to hotels. Couple this with the additional tax revenue that will be aversely affected by Airbnb, and the same folks that govern rentals will be looking to kill Airbnb because of the lost revenue. Restaurants, are losing revenue, along with downtown areas, as many of the Airbnb units are removed from the more densely populated areas. Once again, this will hurt large cities revenue sources.

Finally,  in large cities and vacation areas, voters will push Airbnb out of their communities. Politicians will respond to home-owners that vote, and many of them will complain about the tenants that are in the short-term Airbnb units. As a rental property owner, I know that it can be difficult to deal with tenants that are loud or disruptive to neighbors, this issue will be out of hand for many airbnb owners. After all, what are the consequences for a tenant that is in the property for two days, and then leaves the morning after they have kept the neighbors up all night. 

I am not against Airbnb, but I feel the end of this great revenue source is near.

[James Carlson]

@Jason Reed

I think typewriters, hardback encyclopedias and, more recently, taxi cabs might have something to say about the staying power of disruptive technologies. An interesting take on Airbnb, for sure, but one I completely disagree with. More and more, people around my age or younger (and even older) are looking to Airbnb instead of hotels. Full kitchen and living space, outside the hotel district, often cheaper price? That is quite appealing to people. Right or wrong, what the market wants, the market usually gets.

There is no broad brush painting of cities' Airbnb laws. New York and San Francisco have certainly tried to ban all or portions of this industry. Take a quick look at the Airbnb site, and you'll see that's not working so well.

The laws are a patchwork of political positions across the country. Just 100 miles apart, three cities here in Colorado offer a perfect example of the variety of regulation. Liberal Boulder has very restrictive laws that, in certain scenarios, only allow you to host for parts of the year and only in your owner-occupied primary residence. A little further south in only slightly-less liberal Denver, the rules also restrict it to your primary residence, but tenants can also Airbnb and anyone who's legally doing it can do it all year round. Travel an hour south to conservative Colorado Springs and property rights rule. That city has no restrictions on short-term renting a property or properties. I've talked to the planner who oversees this stuff, and they have no plans to restrict that.

(BTW, I know the Airbnb and short-term rental laws quite well here, and I don't know of any "ban" on Airbnb in Colorado.)

To your other points:

• Some restaurants may be losing out, but others are winning. Airbnb tends to take visitors to the non-hotel districts where local restaurants are capitalizing off an influx of new visitors. 
• And any argument that can be made about a short-term tenant can be made about a long-term tenant. A bad STR tenant is gone in a few days. A disruptive LTR tenant is there for a year.

There are certainly downsides to Airbnb -- both to a city and to a landlord and neighborhood. But on the whole, I think Airbnb is a wonderful evolution of the accommodations market, and I don't see it going anywhere.