A blueprint to help cities and Airbnb get along

Kevin Krejci / Flickr

Despite a sharp divide over regulations, it’s possible to find common ground in three basic policy principles.

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If you want to see the urbanist-techologist divide in action, look no further than regulatory discussions about the short-term rental market dominated by Airbnb. Take what’s going on in San Francisco. Despite years of dialogue, the two sides now feel farther apart than ever.

In late 2014, San Francisco legalized short-term rentals on several conditions — the key one calling for hosts to register with the city, as a means of upholding public safety. Airbnb officially hailed it “a great victory for San Franciscans.” A city official captured the spirit of good public-private compromise more wryly: “No one got everything they wanted.”

But the reluctant marriage itself was short term. Tensions remained high in late 2015, when voters sided with Airbnb in a local referendum. This June, with few hosts registering on their own and the city struggling to enforce its rule, the city voted to fine Airbnb up to $1,000 a day for posting unregistered listings. The company initially responded by asking officials to simplify the registration process. When that plea failed, Airbnb took the “unprecedented step” of suing the city.

The Airbnb-San Francisco relationship isn’t the only one strained at the moment. New York’s state legislature voted to heavily fine any online ads for short-term rentals, much to Airbnb’s displeasure. Chicago approved a “dizzyingly complex” set of rules that managed to anger both local officials and Airbnb investor Ashton Kutcher. Iceland began to require registration for all hosts, which Airbnb opposed for “occasional home sharers.” Jessi Hempel writes in Backchannel that “Airbnb’s lawsuit against San Francisco likely won’t be its last.”

And that’s just activity from the past month or so.

The truth is, as with the rest of the on-demand economy, the binary conversation of “give in-or-get out” is a doomed framework. Unless policymakers and tech leaders can work together to craft enforceable regulations that protect the public interest as well as innovation, both sides have failed. But while it may be hard to see any clear avenues for progress at the moment, when you step back from the fray, there’s reason to believe urbanists and technologists can find common ground around three essential principles: (1) regulation is necessary, (2) it shouldn’t be onerous, and (3) enforcement requires cooperation.

1. Cities need to regulate short-term rentals.

Responsible regulations drill down to the core need for government oversight while shedding unnecessary layers of vested interest. In the case of short-term rental businesses, that means stripping away any advantages pushed by a hotel industry scared of losing market share in a changing economy. And it means recognizing the importance of rules put in place to maintain the public welfare.

When it comes to Airbnb, there are two regulatory bases that no reasonable observer can deny. The first is a responsibility from elected officials to protect the health and safety of visitors and hosts, and to protect the well-being of locals whose residential neighborhoods run the risk of becoming tourist hot spots. The second is a mandate to ensure that short-term rentals don’t shrink the housing market, thereby making the city less affordable to current or future residents.

The concern over housing impacts has become especially loud of late given the affordability crisis facing so many big cities. There’s increasing evidence, both anecdotal and empirical, that some Airbnb proprietors are converting housing units that would otherwise be rented or sold to local residents into de facto hotels.

In Los Angeles, for instance, the city attorney recently brought charges against building owners for allegedly evicting tenants to turn their apartments into full-time Airbnb units. The hard data on housing supply coming out of various cities are equally alarming. A new report from an affordable housing consortium in New York City found that 16 percent of Airbnb listings in the city are “impact listings” potentially being exploited for commercial profit. These units have significantly contracted the housing market, according to the report (my emphasis):

If the 8,058 units defined as Impact Listings were made available on the rental market, the number of vacant rental units citywide would increase by 10 percent and the vacancy rate would rise to 4.0 percent, holding all else constant.

If the 8,058 “impact listings” in New York became available, the city’s vacant units would increase 10 percent. (Short Changing New York City, 2016)

Of course there are many benefits to short-term rentals, too. They provide hosts with a chance to earn some extra money in a tough economy. They offer travelers an alternative option that’s potentially less expensive and arguably more connected to local culture. They generate tourist and tax revenue for the city and local businesses alike. In short, platforms like Airbnb are exciting technologies that deserve ample protection of their own.

A strong regulatory rule of thumb will follow the words of Federal Trade Commission chair Edith Ramirez from last fall: policy measures “should be no greater than necessary” to address concerns over consumer protection and public safety. Which brings us to the second core principle:

2. Regulation should be necessary, not onerous.

The power to regulate is also the power to over-regulate, and the power to over-regulate is the power to destroy. To get a sense of when a rule crosses the threshold from necessary to onerous, consider the latest round of Airbnb regulations in San Francisco to fine the company for unregistered listings. In response, Airbnb suggested several policy fixes. Let’s examine four.

One seems like a perfectly valid change:

  • Exempting hosts from the Assessor’s overly confusing business property tax inventory process.

Here’s a clear example of regulation that oversteps basic public protection. Right now the city requires Airbnb hosts to file an annual inventory of taxable items used as part of the rental — everything from silverware to shampoo. It’s takes an 83-page manual to explain all the inventory rules. Surely that’s “greater than necessary” information needed to ensure public safety. It makes sense for the city to collect addresses, names of landlords or owners, and total rental nights. Much more than that feels like an attempt by vested interests to crush a competitor.

A second suggestion for the city also seems logical:

  • Creating a one-stop, online permit application process.

This idea makes great sense in a digital era. Right now, as part of the official short-term rental registration process in San Francisco, Airbnb hosts must arrange an in-person appointment with the city. This time-consuming task has reportedly discouraged some people from registering who might otherwise do so. Not only is it hard to see why this physical meeting is essential to public safety, but it’s easy to imagine an online process benefitting the city by reducing operational costs and creating a wider database of users.

So that’s two fair points for Airbnb. But the company’s case for a third proposed policy fix falls short of persuasion:

  • Creating flexibility for hosts who rent out their space fewer than 14 nights a year.

Here Airbnb wants the city to exempt occasional short-term hosts from registration. But that view violates the basic necessity of public protection. If we agree there’s a health or safety risk posed by amateur hotel operators, then that risk is as present on the first night of a stay as it is on the hundredth. (To wit: You wouldn’t give a restaurant a lenient health inspection just because it serves small portions.) The user rating system that offers some protection to consumers is also less reliable for occasional hosts, given their lower volume of visitors.

A fourth point made by Airbnb also misses the mark:

If we agree that illicit hosts reduce the city’s housing supply, then registration is indeed necessary for officials to detect violators. The only way it becomes unnecessary is if the companies on that “qualified” list—and, conveniently, Airbnb is the only one on there right now—thoroughly vet all hosts themselves. But the recent reports referenced above suggest that effective self-policing isn’t happening.

Which brings us to the third essential policy principle:

3. Companies and cities can work together on enforcement.

San Francisco’s vote to fine Airbnb for posting unregistered short-term rentals was a dramatic regulatory step. But it didn’t emerge out of thin air. Rather it was the direct result of the city’s inability to enforce its own rule given the tools at its disposal.

In this case, regulators likely felt they had no other choice but to paint with a broad brush. An analysis from April reported that officials found it “challenging” to identify violators because Airbnb doesn’t share key information with the city, such as host names, locations, and unregistered listings. Officials have been forced to rely on a reactive system, with 92 percent of enforcement cases coming through complaints (the rest came through analyses of public web scrapes and spot listing reviews). The city’s Office of Short-Term Rentals (OSTR) is ramping up its enforcement personnel, but progress is slow going.
The result has been a “sizeable gap” in registration that’s clearly not in the best public interest:

While OSTR continues to levy fines against hosts found to be non-compliant, there still remains a sizeable gap between the number of registered hosts and the number of hosts advertising short-term rentals on online platforms.

There’s an alternative to sweeping enforcement by cities: Airbnb can police itself with greater rigor. The company told San Francisco that tracking and reporting unregistered listings would be a “burdensome” process requiring it to “stay abreast of changing City regulations, not only in San Francisco, but also in the over 34,000 cities around the world where Airbnb operates.” But Airbnb has shown the clear ability to self-enforce when pushed. And global companies police themselves across a myriad of jurisdictions all the time. If Hilton and Marriott don’t comply with local rules wherever they operate, they risk getting punished accordingly.

At a minimum, short-term rental companies and cities should be able to cooperate on enforcement. As an easy first step, rental sites should require an entry field for registration identification numbers in places like San Francisco. Better still, companies would create data portals for local officials — a system in keeping with Airbnb’s Community Compact pledge to “provide cities with the information they need to make informed decisions about home sharing policies.” Opposing this sort of transparency only heightens the suspicion that Airbnb profits too much from illicit hosts to crack down on them.

Officials, meanwhile, should pursue firm, proactive regulation, rather than complex or flimsy measures they’re forced to revisit in short order. A series of shifting rules isn’t a friendly environment for innovation; as Kevin Roose of New York magazine wrote back in 2014, “we need futuristic thinking from watchdogs, too.” Promisingly, a global consortium of mayors has announced it will pursue a common framework for regulating sharing economy businesses. They’d be wise to consider the recent guidance offered by the European Commission, which has said that banning such services should only constitute “a measure of last resort” if other public protections fail.

It’s certainly possible to find common ground in the urbanist-technologist divide over short-term rentals. Getting there might mean that neither party “got everything they wanted” at the end of the day. But it also means understanding the things that both parties really need.

This post was originally published on Medium.

July 13, 2016