Airbnb is the latest ‘sharing economy’ company to achieve sufficient scale that local officials are weighing its impact, for good and ill, on the rest of the local economy.
Many who only read the headline, heard a sound bite or caught a secondhand report on a Seattle proposal to impose new regulations on Airbnb likely had a predictable reaction:
“Here go those liberal bleeding hearts and socialists on the City Council again! Doesn’t the city have more pressing problems? Instead, they want to interfere with property rights and harm a tech innovation that helps both owners and visitors.”
I heard variations on this last week from several readers. And if the story were this simple, I’d be in full agreement. But it’s not.
First, some basics. Airbnb is one of the most prominent companies in the so-called sharing economy. Another is Uber. In Airbnb’s case, property owners can act as “hosts” and rent out their home, or even a room, to a “guest.” The “hosts” make some money, as does Airbnb for arranging things, and the “guests,” or customers, get great deals.
Most Read Business Stories
- 5 investment tips from Vanguard founder John Bogle
- King County property tax bills are coming, and the housing market slowdown won't lower your bill
- After Paul Allen's death, Stratolaunch cuts sharply back — but giant plane will still fly WATCH
- Facing populist assault, global elites regroup in Davos
- Alaska Airlines flight diversion leads to a 30-hour nightmare for passengers WATCH
As the company describes it, “with world-class customer service and a growing community of users, Airbnb is the easiest way for people to monetize their extra space and showcase it to an audience of millions.”
Airbnb is one of the most prominent “unicorns” — startups valued at more than $1 billion — to emerge in recent years. It was founded in 2008 in San Francisco and now has a valuation of some $25 billion. According to the company, it operates in 191 countries and has served 60 million lodgers.
It is also one of the most famous new disrupters, in this case of the hotel industry.
As my colleague Daniel Beekman reported, Councilmember Tim Burgess and Mayor Ed Murray are mostly fine with property owners using their primary residence on Airbnb and its imitators year-round.
The new regulations would be targeted more at landlords with bigger operations. Some are essentially using Airbnb to run lodging establishments, often in neighborhoods zoned for residential use. The new rules would place 90-night annual limits on these.
Those using their primary residence would be required to obtain a city license to rent for more than 90 nights in a year, as well as liability insurance. They would have to declare that their property meets city codes, have a local contact number for their customers and post safety information in the unit.
The objective is to free up more long-term rentals at a time when demand for housing is high.
It’s worth noting that both Burgess and Murray have received contributions from the hotel industry. But Airbnb is no slouch in lobbying and spending.
For example, it poured $8 million into the campaign to defeat Proposition F in San Francisco, which would have imposed drastic limits on the company. It has a strong lobbying force in Washington, D.C.
This hasn’t stopped many cities from putting some regulation in place. Some of the company’s most intense controversy has come in New York City, where questions have been raised about whether it is following the law and being straight with data.
The company is smooth in its message. But it has also provoked the website Airbnb Hell, which catalogs horror stories from both “guests” and “hosts.”
From an economic perspective, the sharing economy has received much triumphal hype during this slow recovery. But these companies create few real jobs. Airbnb says the typical “host” in Seattle earns $8,000 a year. When the company goes public, a small number of executives and investors would become billionaires.
Breakthrough technologies can be economically productive. Henry Ford disrupted the buggywhip makers, to use a common analogy. But unlike today, Ford and the automobile industry created millions of new jobs. Together with unions, this new industry lifted up the middle class.
Not so with the sharing economy.
Economist Dean Baker argues that boosters “have overlooked the reality that this new business model is largely based on evading regulations and breaking the law.”
In most places, Airbnb’s “hosts” don’t pay the taxes (Seattle is a rare exception).
As a result, sharing-economy companies shift burdens onto law-abiding traditional businesses. Even perfectly legal tax avoidance adds to already weakened public finances, when infrastructure is crumbling and national parks must try to make up shortfalls by participating in an “American Idol”-likecontest for grants.
Paradoxically, Airbnb would not exist if not for the massive federal investment that created the internet.
Is the proposed Seattle regulation onerous? Perhaps. Difficult to enforce? Definitely. Would it deliver on a promise to free up more apartments for long-term leases in a growing city? Maybe at the margins, but unintended consequences occur.
The city’s larger housing problem includes a history of resistance to density by many neighborhoods and hatred of developers by the left. Call it the NIMBY-Trotsky Coalition. Perhaps the proposed Housing Affordability and Livabilityplan would shake up that alliance.
Meanwhile, the metro region is far behind in building the rapid transit that would connect affordable areas with employment centers.
All these are heavier lifts than the short-term rental proposal.
But I wouldn’t bet against Airbnb and its popularity, incensed property owners — and the fact that we live in one of the most popular visitor destinations in America.