Life in San Francisco: increasingly crazy-making in the “share the crumbs” economy

An open letter to Airbnb “regular people” hosts: Airbnb is selling you out

As San Franciscans contemplate Proposition F, a measure that would crack down on Airbnb rentals, I would like to address the “regular people” hosts who are trying to use Airbnb to make ends meet. Airbnb likes to portray “regular people” hosts as the face of its company. These are people who rent out a spare room to tourists to make some extra money in these difficult times. What could be wrong with that?

Nothing is wrong with it. Indeed, I think that use of their home is legitimate. But here’s the problem that none of the “regular people” hosts who testify at public hearings and who are the face of Airbnb’s $10 million “No on Prop F” campaign have been willing to admit: an increasing amount of Airbnb’s commercial activity in cities like San Francisco, New York and Los Angeles does not come from the listings of “regular people” like themselves, who are merely renting out a spare room.

Instead, it comes from professional real estate operatives, some of whom are renting out dozens of properties, and who are removing badly needed housing from the local market and turning entire buildings into “Airbnb hotels.” Many of these landlords are evicting thousands of people and getting rid of rent-controlled housing, making the housing stock available exclusively for tourists.

For those of you who are truly “regular people” hosts, you are being poorly served by Airbnb. The company knows that its service has been invaded by professional operatives because it has access to its own data. Airbnb could have designed its platform to serve your needs, instead of the professionals. It could have self-regulated by kicking all the professionals off the platform. Airbnb has the data and knows who they are

Instead, it is cynically using you, the “regular people,” as human shields to hide behind, and to deflect criticism, so that the public and the media won’t recognize what it has become.

When I became an Airbnb host

I became an Airbnb host in San Francisco about about nine months ago. Last January I watched Katie Couric interview Airbnb’s 34-year-old billionaire CEO, Brian Chesky, and that’s when I first realized that something didn’t add up.

Couric asked Chesky if his company inspects its hosts’ homes for safety and fire hazards. Chesky replied, “We want to be a gold standard,” saying that he has 100 employees devoted exclusively to safety and that “hosts verify their IDs by connecting to their social networks and scanning their official ID or confirming personal details.”

So to test Airbnb’s system, I signed up as a host. I took a few photos of my house, inside and out and uploaded them to the Airbnb website, and within 15 minutes my place was “live” as an Airbnb rental. No background check, no verifying my ID, no confirming my personal details, no questions asked. Not even any contact with a real human from their trust and safety team. Nothing.

I could have used photos of my neighbor’s house, or even photos saved from the website of Better Homes and Gardens. Within an hour, I had my first inquiry from a guest. Within a couple of months, I had over a dozen reservation requests that would have netted me at least $4,000 in short-term rental income. This had the makings of a seriously lucrative enterprise.

Indeed, an accidentally leaked memo from huge real-estate developer Coldwell Banker Commercial estimated that a landlord could more than double net annual income by renting to Airbnb tourists than to local residents.

I was impressed and appalled at how easy Airbnb’s website made it.

When Couric asked Chesky about fire safety, he replied that Airbnb, a company valued at $25 billion, doesn’t do fire and safety inspections. Instead Airbnb offers free smoke and carbon-monoxide detectors to its hosts. When Couric pushed a bit further, Chesky talked about their “self-administered” system.

“We want to make sure that the codes and regulations are modernized,” he said. “A lot of the laws are 20th-century laws, or sometimes even 19th-century laws, in the 21st century.”

I decided to take Chesky up on his “gold standard” offer of receiving a free and “self-administered” smoke and carbon-monoxide detector for my Airbnb home. I requested one via the Airbnb website, and my query received the briefest of e-mail responses, directing me to a particular Airbnb webpage. But on that page, instead of offering me a free detector, it offered me a free “Emergency Safety Card,” saying I could use it to “list emergency numbers, exit routes, and other resources” for my guests.

Apparently, the offer for a free smoke detector had expired faster than a Groupon coupon. But the Airbnb representative didn’t mention that, nor did Chesky in his interview with Couric.

Besides checking the background of its hosts, or monitoring if they are professionals with multiple properties, Airbnb also has no quality control over the types of guests. Neighbors suddenly find themselves living next door to a “hotel” where complete strangers are traipsing in and out, keeping tourist hours, in close proximity to children, seniors, and other vulnerable populations. That’s true of regular hotels as well, but usually they exist in areas that have been zoned for such activity.

All of this revealed to me a “credibility gap” between the company’s public face and reality.

But the biggest gap of all is in how Airbnb portrays its “regular people” hosts. A 2014 investigation by Eric Schneiderman, New York state’s attorney general, found that nearly 40% of Airbnb’s revenue in New York City, some $168 million, came from hosts who had at least three listings on the site. Data analyst Tom Slee plucked info from the Airbnb site in September and found that of the 30,268 listings in New York City, 44% of guest visits are to hosts with multiple properties.

These are not “regular New Yorkers” renting a spare room — not too many can afford to have control over multiple properties. They are professional operators who took on multiple leases in desirable locations.

One of those operators, Robert “Toshi” Chan, was revealed to be the Airbnb “host” of more than 200 apartments in dozens of different buildings, known collectively as Hotel Toshi. Eventually, Toshi’s illegal operation was shut down, and he agreed to pay a $1 million settlement for not obtaining proper hotel permits or insurance.

Under political pressure, last year Airbnb kicked off some of the worst violators, but recent data indicates little has changed. Its service is eating up affordable housing for local residents.

In San Francisco, various studies have found that a third of Airbnb rentals are controlled by people with two or more listings, and 40% of revenue comes from Airbnb hosts with multiple listings.

In Los Angeles, another study revealed that while a majority of hosts were “regular people,” those rentals generated just 11% of the company’s revenue. The other 89% was generated by professional landlords and agencies, many of whom were renting out dozens of homes for absentee home owners.

The tragedy of Airbnb: it could be a good idea

Perhaps the biggest tragedy in all this is that at the core of Airbnb is a really good idea. It has cleverly used Web- and app-based technology to bust open a global market that connects tourists with financially strapped homeowners. After interviewing some of Airbnb’s “regular-people” hosts, I’m convinced that this service legitimately does help them make ends meet.

But by taking such a hands-off, laissez-faire attitude toward the professionalization of hosting by greedy commercial landlords and multiproperty agents, Airbnb has become its own worst enemy. As the number of victims piles up, it undermines its own “sharing and trust” ethos.

Airbnb could showing some good corporate leadership, and meet cities halfway by:

  • With one stroke of the computer mouse, Airbnb could “evict the evictors” — de-list from its website any professional landlords or property managers operating multiple properties as tourist hotels. It has the data and knows who they are.
  • Cooperate with cities like San Francisco, Santa Monica, and Portland, which require hosts to register with local agencies, by de-listing any unregistered hosts.
  • Stop refusing to supply the data that cities need to enforce regulations and taxation, including the number of rental nights and rates charged by each host.
  • Pay the same hotel occupancy taxes that hotels pay in all 34,000 cities in which Airbnb operates, or collect taxes from the hosts and turn them over to the cities. Airbnb’s latest company line is that it wants to pay its taxes, but the laws are so complex from city to city and country to country that it’s lawyers haven’t had time to figure it out. But that’s ridiculous, no other corporation (except Uber!) gets to set up operations all over the world first, and only secondarily start paying taxes or following local laws “after we’ve had time to figure it out.” You figure those things out first, THEN you start operating. Airbnb now crows that it has begun paying hotel taxes in about a dozen cities — but only after significant political pressure was exerted, it has done nothing voluntarily. And at the rate it is “figuring it out,” it will take Airbnb 50 years to pay taxes in all 34,000 cities. No other company — not Google, Apple, Microsoft, Ford, Dupont, all of which have global operations — have asserted a corporate right to “operate first, follow local laws and pay taxes second.”

Airbnb could have enacted thosemeasures on its own. Instead, it is spending more than $8 million to defeat Proposition F, which proposes reasonable regulations. If Airbnb already had done the right thing, Proposition F would have been unnecessary.

Whatever its remarkable origin as a rags-to-riches story that began in Brian Chesky’s living room, Airbnb is no longer simply a platform of “regular people” hosts. Instead, it has morphed into a giant loophole for professional real-estate operatives, allowing them to evade long-standing city laws that previously had protected the local housing stock by banning short-term rentals to tourists. The fast-growing company and its politically connected investors have shown no interest in killing their golden goose. So goes the “sharing” economy.

Steven Hill (www.Steven-Hill.com) is a Senior Fellow with the New America Foundation and the author of the book, Raw Deal: How the “Uber Economy” and Runaway Capitalism Are Screwing American Workers. You can follow him on Twitter: @StevenHill1776.