Airbnb and the home-sharing industry are grappling with a list of regulatory battles from California to Germany, and beyond. In essence, Airbnb is battling four external groups — neighbors of the properties, affordable housing, hotels, and government regulations. However, it seems the company’s biggest battle is with itself, and therein lies a possible solution.



Airbnb’s original premise is to “Belong Anywhere” and let travelers experience the local flavor by sharing private homes with locals, and to let private homeowners benefit by renting out a couch or a room for extra income.



The concept of home-sharing is not new and is not going away. Changes in technology have made the company, that didn’t exist until 2008, soar in popularity (estimated to provide nearly 80 million room nights a year in 2015). However, this growth has generated problems around the world with upset groups and outdated regulations. To continue its growth, Airbnb needs more business/commercial landlords, but this approach poses two challenges: 1. The loss of the authentic ‘live with a local’ premise; and 2. Abuse of vague laws that fall between hotel and residential use.

To address these issues, Airbnb should split hosts and their housing inventory into two groups, eventually evolving into three groups — Host A, Host B and eventually Host C, allowing Airbnb (and other home-sharing platforms) to grow, calm their critics, and forge alliances around the world.



Several of these ideas are not entirely new, but this plan spells out methods to foster growth, enable compliance and provide clear regulations that benefit 7 different groups — 1) Neighbors, 2) Affordable Housing, 3) Hotel Industry 4) Government 5) Home-sharing companies 6) Hosts/property owners and 7) Guests.

THE HOST CATEGORIES — A, B, and eventually C.

Host A (Authentic Airbnb Hosts) are property owners who match Airbnb’s original premise:

– They rent a spare room (or couch) in a shared-living space, or own a duplex and live in one of the units, or own a single investment property.

– They rent their primary residence while out of town and/or own only one investment property in a building that permits nightly/weekly rentals.

Any host larger than this is taking advantage of a platform designed to help owners ‘make ends meet’ and will be considered Host B.

Host B (Business Hosts) is the commercial owner with no ‘shared-living’ who are defined as:

–Real estate investors and developers who have buildings with more than 2 units.

–Condominium owners in buildings with more than 2 units.

–Apartment building managers

Unregulated Host B is currently running a pseudo-hotel. Regulated Host B will adopt a corporate housing model of renting for no less than 30 or 90-day minimum term stays. Host B is currently the group that faces the most scrutiny, but with the monthly minimum lease terms, most complaints will go away.

Host C (Complete Compliance Hosts) is Host B who can rent for less than 30-days only after:

– They meet all the same regulations hotels have in order to comply with standard zoning, safety, and tax laws.

Think of Host C as legitimate, regulated mini-hotels similar to unique extended-stay hotels, or hotel suites, since they have kitchens and larger living areas and will comply with all hotel regulations.

WHY MONTHLY TERMS

The proposed minimum terms for Host B are not arbitrary. Longer terms are the way governments designate residential versus transient/hotel use, meaning immediate compliance. For example, Booking.com will not rent a property anywhere in the world for longer than 30 days to avoid conflict with existing laws. Additionally, many Airbnb units are part of a condominium, and most condo bylaws have 30, 90 or 180-day minimum lease terms.

One note: The difference between Host A and B is not just the length of stay, but is primarily the different guests they attract. The differences between these end users (and their agendas) also impact how the groups battling the home-sharing industry benefit by splitting Host A from Host B.



FOUR PRIMARY OPPOSITION GROUPS

- 1) Neighbors 2) Affordable Housing 3) Hotels 4) Government



Neighbors



Of the four groups, Neighbors are perhaps the most passionate and polarizing force. Having a full-time nightly rental next door can impact the neighbors’ lives, disrupting the comfort in their own home. The uncertainty of living near someone new everyday may evoke fear and anxiety and frustration.

Host A will have the least impact on neighbors concerned about noise and safety since Host A lives in or near the property and has more control over their renters.

Currently, though, absentee hosts/business hosts are the ones raising concerns. Neighbors are faced with issues such as overcrowding, raucous parties, and safety. Some vacationers who pay their own rent look for more space than a hotel room offers. So they try to squeeze more people into a space not designed for residential density. Thus, a 2-bedroom, 1-bath unit with bunk beds and a sofa bed may attract 6–8 vacationers. These large groups can be a huge disruption to neighbors.



However, corporate travelers who stay at a Host B property for 30 days or more have a greater interest in keeping the property well maintained and getting along with neighbors. This is not an absolute, but our short-term corporate renters are usually one or two people who make an ideal neighbor — someone who works a lot, looks to relax at the end of the day, and may go home on weekends. If a family rents (as part of a corporate relocation) their company will find a large enough property to fit the comfort they expect at home.

(As an aside, there is no ‘neighbors’ group seeking regulations in the car-sharing battles, so it’s not equal to compare car-sharing with home-sharing when referencing the ‘sharing economy’ regulations.)



Affordable Housing Advocates



Affordable housing advocates are seeking ways to make cities more livable for residents. These advocates battle with business landlords when they convert housing designated for residents into hotel rooms. In some cases, landlords evict tenants or refuse to renew leases in order to make more than market rate rents. During peak periods and using hotel-like rates, some landlords can collect in one week what they could get in one month. This artificially pushes affordable housing and residents further from the central parts of town.



Pushing residents out contradicts the original Airbnb premise to “Belong Anywhere”, which values sharing one’s extra, unused assets while meeting people from all the world. A renewed focus on the core Host A group would not force anyone out — in fact it would only add to communal living. Host A makes cities more affordable when done with shared-living.

Likewise, Host B with monthly terms makes housing more affordable by instituting longer lease terms, which brings down the huge price disparity from nightly and weekly rates. Monthly rates are more closely aligned with unfurnished, year-term rentals once you factor in the furnishings, the utilities and flexible terms (monthly vs annually). Our property owners make a good return, but sometimes, based on the property, the location, the restrictions and the property features, owners choose to keep their property unfurnished and rented on an annual basis.

Since Host C would only exist after meeting all regulatory requirements, including affordable housing, these hosts are now welcomed by affordable housing groups.

Hotel industry



Hotels welcome fair competition. But they don’t want to lose business to unregulated pseudo-hotels that ignore the stricter safety, staffing, and occupancy standards that drive up hotel expenses. Besides higher labor costs, their employees seek out affordable housing within a reasonable distance of the hotel.



Host A is barely a concern because hotels do not compete for the same clients. Just as bed and breakfasts and youth hostels appeal to some travelers, others loathe the idea of shared living. And Host A. limited to one investment property will also be a smaller number and will not greatly impact a hotel’s business.

Host B with monthly terms does not compete for the leisure and business travelers who would normally opt for a hotel. Under this proposal, until zoning and safety standards match those required for hotels (Host C), Host B will be required to provide 30- or 90-day minimum stay terms. This eliminates the bulk of a hotel’s unfair competition.

Local Governments



As noted, hotels are large employers and the main source of rooms for tourists and convention goers. Their employees often need affordable housing. Hotel groups tend to be active in local chambers of commerce. Upset neighbors are also active in city affairs. Even more active are affordable housing advocates. So these three groups look to the local government to fix these ‘home-sharing’ problems.



In addition to hearing out all groups, local governments have a valid interest in ensuring safety, regulating zoning and collecting taxes. The local government also needs to plan for a city’s future growth and change, including the infrastructure to ensure police, fire, hospital, and transportation services are in place to serve their community. However, they also must keep in mind the importance of tourism and convention dollars, in addition to — for some cities — a reputation for openness to innovation that could attract new employers.



Host A will not significantly burden any municipality’s service system. Again, most problems related to Airbnb are found with unregulated Host B. It’s hard to imagine Host A’s growth will run rampant because sharing a personal space with complete strangers isn’t for everyone. A sharing license and basic safety regulations should be in place. Cities all over are proposing terms and restrictions and penalties for less than 30-day stays. The best thing Airbnb should continue to do for the cities is to collect and track transient taxes with Host A. Since taxes are calculated using the number of days someone stays and the specific property address, the home-sharing industry can share this information to help cities track length of stay for enforcement. Host A also provides cities with economic stimulus in neighborhoods under-represented by hotels and tourist dollars.

The Host B license would be similar to renting out an unfurnished, year-term property, aside from a provision for collecting and paying a transient lodging tax, when applicable.

When Host A, B and C exist, the local government will be able to create services and densities that can best serve their residents, businesses and their visitors.

BENEFIT TO HOSTS



Host A, once disassociated from Host B, would not face the severe scrutiny of these four groups. Host B, with 30 or 90-day minimum terms, is already a legal and a viable business model. The monthly terms will provide more consistency and fewer people in the property. Corporate renters tend to spend more time at work and may travel home on the weekends. The hosts of pseudo-hotels that currently represent Host B will see a reduced daily rate since the terms will be monthly. However, with the longer terms, the occupancy rates will increase and Host B’s income at the end of the year may be even be higher. With this change, Host B can keep the furniture and the utilities running, while exploring nightly/weekly rentals to become Host C.



If a lower overall rent results from monthly terms, Host B will have a path to convert their properties into a legitimate hotel — Host C. Of course, if regulations or rental incomes don’t work out, Host B/C will always have the option to become traditional landlords of unfurnished, year-term rentals.

BENEFIT TO GUESTS

Guests have expressed a growing dissatisfaction with the quality of rentals and the rental experience. They complain that they can’t find authentic hosts to share space or discover how locals live. Some guests feel cheated when they expect an authentically local experience only to find a rental unit owned by an investor, shared with other travelers instead of locals, and furnished to look like a big box showroom.

Guests looking for authentic stays, living and learning from locals, will get to see which properties are represented by Host A. These will be easier to find, sort, choose, and book. And guests looking for cheaper nightly and weekly rentals, without caring about living with locals, can find legitimate less expensive options using apps such as HotelTonight or alternative hotel options such as motels, youth/elder hostels, and licensed bed and breakfasts.

Guests on business travel will now have certified business owners and consistency of service via Host B (for monthly terms) and Host C (when their properties become compliant).

BENEFIT TO HOME-SHARING COMPANIES

Separating the hosts allows Airbnb to build a growth strategy for business owners of units related to Hosts B/C while keeping Host A as their core model. In New York City, Airbnb preemptively removed around 2200 mini-business listings to avoid the new legislation being proposed. They did this in 2015 as well, but soon afterwards, the listings reappeared. These removals show Airbnb already knows a distinction between Host A and Host B exists.

Airbnb’s approach to fighting these regulations is doing everyone a disservice. It seems they are trying to force their system on cities using top lobbyists and celebrities, grass-root activities and their financial clout, in essence, being a bully. They are also suing cities claiming freedom of speech, but this argument is contradictory on several levels as highlighted in a great article by Tess Townsend on Inc.com. I will share the link to her insight at the bottom of this article.

Airbnb’s technology already helps Host A, and brings in tremendous revenue for the company. Host B can use the company’s platform for listing and booking rentals for monthly terms. Host B can also use a property management service to help with the consistency of the guest experience, or self manage their monthly rentals. There are several companies popping up to provide this type of service for busy hosts around the world. Host C will also be able to use their software and platform.

Airbnb has made moves to attract more business guests to its platform and have started a program to make their hosts ‘Business Travel Ready,’ and connected their listings with business-focused travel companies such as Concur, Carlson-Wagonlit and American Express Global Business Travel.

However, Airbnb’s head of hospitality and strategy, Chip Conley, has stated that they will never be more than a periphery player for business travelers. While Airbnb has established a code and system to make sure business traveler hosts are ‘business traveler ready’, the challenge will be maintaining a consistency of service. Business travelers, staying for any length of time, let alone 30 days or longer, rarely want to gamble on part-time landlords who may not be available to handle wi-fi outages, lock-outs, or other repairs and maintenance while on a work assignment in another town.



Separating out Host B, with professionally managed inventory, will provide a greater consistency of service to help increase confidence for business travelers and grow Airbnb’s business travel market… for both Host B and eventually, Host C.



THE FUTURE



My prediction — I believe that by January 2019, this standard will be in place and enforceable in most major cities that regulate rentals of properties for less than 30 days. Since the sharing economy companies and the government have vast resources of data, (in addition to some of the best software in the world) this will make the data more accurate and everyone will be mostly accountable — There will always be cheats.



The hardest part of this proposal is deciding who qualifies as Host A or Host B. My suggestion is to start with clear, broad and global terms outlined above. Then allow for countries and cities to create ‘amendments’ to these terms based on what benefits their community the most.

THE GROUPS UPSET BY THESE CHANGES

There may be several groups who will fight these changes. The three major ones are the real estate investors looking for maximum returns while circumventing regulation, guests looking for the cheapest hotel-type options, and the home-sharing companies looking for the fastest growth as quickly as possible — ‘Billions of room nights booked’. All of these groups are seeking quick compromises. They fear short-term losses while only delaying long-term stability and growth.

The monthly minimum restriction may anger some real estate investors who are not able to squeeze every last penny out of a property by renting it nightly. Since they’re running unregulated mini-hotels, they should be advocating for laws to make their investment legitimate without disrupting so many lives. These investors do not fit into the ‘belong anywhere’ mentality and are not looking beyond their pocketbook at the impact they’re having on their neighbors and other industries.

If their focus is truly on maximizing returns, these investors should want to become legitimized so they can grow even faster. They should stop pretending they are anything but a loophole in housing regulations, while waiting for home-sharing companies to muscle their way through the masses by suing governments and evading regulations.

IN CONCLUSION

Call me a delusional optimist, but I believe all businesses, from gig-economy consultants to Fortune 500 companies, should focus on creating businesses that make money by solving problems, finding efficiencies in markets, and making the world a better place for as many people as possible.

The ‘sharing economy’ is a great example of using technology to enable new markets of efficiency to replace inefficiencies in wasted effort or materials and/or unused assets. Unused beds and couches are a great way to fill market needs and benefit as many people as possible. While these regulations to split hosts into A, B and C, will eat into some groups’ financial return in the near term, as efficiencies improve within these guidelines and regulations, the long-term returns will outgrow everyone’s expectations for years to come.

● Tim Touchette is the President of Attache Corporate Housing

Articles to read:

http://www.inc.com/tess-townsend/the-hypocrisy-of-airbnbs-lawsuit-against-san-francisco.html

https://skift.com/2016/06/29/airbnb-explains-its-peripheral-move-into-the-meetings-and-events-industry/