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Real-Estate Speculators, Tourist Mobs, And Airbnb

A report from Realtor.com. “For more than a decade, short-term home rental websites such as Airbnb, HomeAway, and VRBO have helped everyday Americans squeeze some serious cash out of their homes. Easy-peasy! But those carefree good times may be coming to an end. Tensions between unregulated rentals and cities have been simmering for years, spurred by pissed-off neighbors and pushback from landlords and hotel operators. Now they’re boiling over.”

“This year Las Vegas and Washington, DC, will phase out full-home rentals on sites like Airbnb with no owner present, which make up more than 70% of their current markets. New Orleans enacted legislation in January that will push these units out of historic residential neighborhoods. And a number of smaller cities are anticipated to follow their lead.”

“If Airbnb is in your plans, ‘do the math before purchasing a home. Look at how much you could get for a traditional, long-term rental if legislation comes into town and makes that necessary,’ says Peter Lorimer, a real estate broker who stars on the Netflix series ‘Stay Here,’ which helps folks spruce up the properties they list on Airbnb and HomeAway. ‘Make sure it isn’t a saturated [market]. Look at the daily rates of competitors, and see if you can match or beat them.'”

The Monterey Herald in California. “To thwart homeowners from renting out their houses for short periods of time and consequently taking them off the market for long-term renters, the Monterey City Council is continuing its beefed-up enforcement of its short-term rental ban. Karen McBribe from Renters United said the greed coming out of wealthier cities to the north is palpable, particularly with timeshares.”

“‘These are not old-school timeshares,’ she said. ‘These are new-school timeshares coming out of Silicon Valley.'”

From 48 Hills in California. “The San Francisco tech boom is not just an accident. City policies under the late Mayor Ed Lee were designed to attract tech companies to the city, no matter the damage to the rest of us. Uber, Lyft, and Airbnb were allowed to violate local laws with impunity because the mayor saw them as local tech companies that should be encouraged. Thanks to those policies, a relatively small number of people will be getting very rich – and the rest of the city will be getting poorer.”

“Yes: Tech booms like this make most of the city worse off, because they drive up the cost of real estate. That means teachers can’t afford to live here, long-term tenants are thrown on the streets, those who remain have to pay far more than a third of their income (the federal standard) for housing, prices go up in stores and restaurants, small businesses close because the rent is too high … you get the picture. We all know it.”

“City policies have already driven up the cost of land and labor (construction workers can’t live here anymore) and made it so expensive to build that no developer is going to construct workforce housing. And no lender is going to invest in it when there’s so much more to be made in exclusively high-end housing.”

From the New Yorker on Spain. “When Airbnb was founded a decade ago, it marketed itself as a more evolved version of couch surfing. The company soon raised millions of dollars in venture financing, and its listings and aspirations grew glossier. In 2010, Joe Gebbia, one of the founders, told the Times, ‘We started by renting out spare rooms in our apartment, but it’s grown to entire apartments, homes, castles, boats, even private islands.'”

“Brian Chesky, another founder, said at the time that he saw no reason that Airbnb, which extracts commission fees from all transactions, should not grow into a billion-dollar company, by enabling people in appealing locations to ‘monetize their house.'”

“There are almost twenty thousand active Airbnb listings in Barcelona. Even in residential neighborhoods, the sounds of dozens of wheelie suitcases rattling over the cobblestones after an 11 a.m. checkout—and of late-night revellers sampling the bars that have sprung up to cater to them.”

“Nearly half the Airbnb properties in Barcelona are entire houses or apartments. The conceit of friendly locals renting out spare rooms has been supplanted by a more mercenary model, in which centuries-old apartment buildings are hollowed out with ersatz hotel rooms. Many properties have been bought specifically as short-term-rental investments, managed by agencies that have dozens of such properties.”

“The true landmark of the contemporary Raval, however, is a billboard that looms over the plaza. Placed there by an activist group, it features an illustration of a ‘not welcome’ mat laid over a puddle of lood, and announces, in Catalan, a list of aggressors to the neighborhood: real-estate speculators, tourist mobs, and Airbnb.”

“The protests in the Barceloneta precipitated greater cohesion among neighborhood groups throughout the city, many of which were concerned about similar problems, such as access to housing and privatization of public space. They began voicing opposition to the pestilence of young visitors who came to Barcelona not to sample the local culture but to enact internationally recognized tropes of partying, as if it were Mardi Gras three hundred and sixty-five days a year.”

“‘It’s Magaluf all over again,’ a leader of a neighborhood association said at the time. He was referring to a town in Majorca that had become so overrun with intoxicated Britons that the local government was obliged to remind visitors not to defecate in the streets.”

“In Bologna, I met an Airbnb host named Mauro Bigi. He looked forward to being able to list his apartment on Fairbnb, not least because Airbnb’s algorithm had started pushing him to rent his apartment for a price so low that it no longer made economic sense for him to do so. Airbnb, he went on, encouraged a kind of professionalization of hosting—such as offering twenty-four-hour check-in—that he was unwilling to engage in.”

From News Talk in Ireland. “Threshold CEO John-Mark McCafferty said there were 5,762 Airbnb listings in Dublin alone last month, 41% of which were available as full-time holiday rentals. He said thousands of properties have also been removed from the housing stock in Galway and Cork.”

“‘While tourists are always welcome and short-term letting platforms, such as Air BnB, have a role to play in the tourist market and wider economy, this volume of short-term lets is taking units that would otherwise be available for long-term rent out of that market,’ he said. ‘These new restrictions will release badly needed housing onto the market and we believe it can have a positive impact for those families who are currently experiencing homelessness.'”

“Airbnb said it was a ‘false promise’ to claim that the regulations could offer a solution to the housing crisis.”

From Vice on Australia. “In the Byron Shire, where according to the Australian Coastal Councils Association, 17.6 of properties are rented to tourists via short-term holiday letting agreements, including Airbnb.”

“Scrolling through the Byron community houseshare pages on Facebook, there’s an abundance of young people, couples and single parents looking for a place to rent. One of these pages, Reasonable Rentals Northern Rivers NSW, was shut down in January after one of the administrators conceded that there were nowhere near enough reasonable rentals available per month for the 10,000 members of the group.”

“In the Northern Rivers of NSW, 74 percent of Airbnb rentals were entire houses as of 2017. In that year alone, one host in Byron Bay made $3.7 million from the 40 properties they had listed. And more than half of Byron’s ‘hosts’ have multiple listings.”

“How is it that a Silicon Valley tech company can have more power than the government? The acting mayor’s answer is remarkably frank: ‘Because we have a system that allows corporations to donate to political parties and buy policy outcomes.'”

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This Post Has 73 Comments

  3. ‘Because we have a $ystem that allows corporation$ to donate to political partie$ and buy policy outcome$.’”

    All those in favor vote, looks like it’s the aye’s have it 5 to 4

    Citizens United v. Federal Election Commission, 558 U.S. 310 (2010), is a landmark U.S. constitutional law, campaign finance, and corporate law case dealing with regulation of political campaign spending by organizations. The United States Supreme Court held (5–4) on January 21, 2010, that the free speech clause of the First Amendment to the Constitution prohibits the government from restricting independent expenditure$ for communication$ by nonprofit corporation$, for-profit corporation$, labor union$, and other a$$ociations.

    1. ‘Uber, Lyft, and Airbnb were allowed to violate local laws with impunity because the mayor saw them as local tech companies that should be encouraged’

      If you have enough money that is. I’m pretty sure that if I asked the mayor, “which laws can I ignore?” I’d be told to bug off. And if I said, “can I pay you to look the other way?”

      1. The guy is desperately trying to boost Tesla stock by releasing soundbites, since the financials are extremely ugly.

    3. The self-driving video I saw of this looks like a much more advanced autopilot version than what I am running. I’m sure this is still a long way off and what comes next will be very limited in geo-fenced areas with very predictable routes and patterns. I know I wouldn’t feel comfortable putting my model 3 in a robotaxi fleet unless I could earn a good deal of money.

      The way to make self-driving foolproof is to basically put them in dedicated, isolated routes with almost no edge case scenarios and have them travel at a slow speed of less than 30 mph. Then just make the vehicle like an egg with tons of cushioning and protection and let the users lay down and sleep, read a book, or watch entertainment.

  5. And THAT is really what it is all about.

    Having an HOTEL without paying the hotel taxes, abiding by hotel fire, safety and health codes and avoiding hotel zoning codes that real hotels have to live by.

    Airbnb is a scam.

    ++++
    “The conceit of friendly locals renting out spare rooms has been supplanted by a more mercenary model, in which centuries-old apartment buildings are hollowed out with ersatz hotel rooms. Many properties have been bought specifically as short-term-rental investments, managed by agencies that have dozens of such properties.”

    1. Where I manage my Airbnbs, Airbnb collects and remits all applicable city and state taxes (eg transient room tax). The effective tax rate on stays of less than 30 days for my city is 13.37%. Not all jurisdictions have this agreement with Airbnb which means hosts are responsible to collect and remit this (but they surely don’t). However, certain high revenue counties in the US have worked out an agreement with Airbnb, VRBO, and HomeAway where hotel and occupancy taxes are collected and remitted to the IRS automatically on behalf of the host.

      What I see happening with Airbnb and taxes is similar to the sales tax deals that Amazon started to do with specific states. In the early days, Amazon paid no sales tax for online sales. But certain states went after them and they cut deals with them and before collecting the sales tax more broadly. Now, only about 5 states do not collect sales tax for Amazon. Amazon still does not impose sales tax on 3rd party sellers, which is still a major loophole.

      1. So you’re driving a Tesla and renting out Airbnbs. Are you also speculating in crypto? I mean, you aren’t just living the bubble, you are the bubble.

        1. Yes, driving a Tesla because it is about the same cost-wise as driving my Honda Civic with my commute. Renting out Airbnbs because the owner of the complex has 10 in a pool. Wouldn’t touch crypto with a 10-foot stick.

          1. driving a Tesla because it is about the same cost-wise as driving my Honda Civic

            And it only cost $200,000 to produce it. That’s what we call a No-Brainer.

          2. And it only cost $200,000 to produce it. That’s what we call a No-Brainer.

            Auto teardown expert who slammed Tesla Model 3’s fit and finish admits car is surprisingly profitable

            Luke Stangel
            June 17, 2018

            “Auto teardown expert Sandy Munro, who once said the Tesla Model 3’s shoddy fit and finish reminded him of a Kia from the 1990s, this week admitted the car is the most profitable electric sedan he’s ever tested, with a roughly 30 percent gross margin.”

          3. surprisingly profitable

            Does Teardown Sandy see $10 Billion in debt amongst the bits and pieces?

          4. You should Google how much debt Ford has and then look at its sales trend compared with Tesla and decide which company, Tesla or Ford, should be more concerned about debt.

          1. You were a Honda guy. They don’t have much debt.

            I did like Honda for their reliability. But they and Toyota have lost their way. To me, the new Honda designs look too much like Japanese anime cartoons, and both Toyota and Honda are stuck thinking that hydrogen fuel cell is the future (Toyota Mirai is a total bust).

            I only pointed to Ford because they recently closed a bunch of their EU operations and have been struggling internationally. I could have cited GM which also has been closing plants (and which DJT rails on them for). I think Fiat/Chrysler is in an equally precarious situation.

            VW seems to get it and is massively transitioning to EVs. Head of VW America recently gate the nod to Tesla:

            “We have not seen in the history of the auto business, a company going from zero to fourth place in luxury in a matter of a few years.”

          2. To me, the new Honda designs look too much like Japanese anime cartoons

            I’m with you there. The new Civic is supposed to be so good. But I can’t get past how it looks.

            Regarding the fuel cell commitment, I have a theory. Honda and Toyota tended to be a little more engineering-led than most car companies. Do you think it’s possible that they are actually technically correct that fuel cells were the best solution and then got blindsided by politics? It really does seem that Tesla might have a “special” relationship with the US govt that isn’t public knowledge.

          3. Do you think it’s possible that they are actually technically correct that fuel cells were the best solution and then got blindsided by politics?

            Everything I’ve read from on the subject of fuel cells is that they are a massive boondoggle and are not near as efficient as a pure EV battery solution. They have massive efficiency losses and cost way too much to produce the hydrogen, store it, and distribute it. Corn ethanol comes to mind.

            I think the stars aligned for Tesla. I don’t think govt had much to do with it. All car makers had access to the same credits that Tesla had, so no special treatment there. The zero emission credits have been helpful though.

            All legacy car makers made “compliance” vehicles or ugly looking ones (I’m looking at you Nissan Leaf and BMW i3). Tesla made something that actually looked sexy. They marketed it to the wealthy and affluent and rode a wave. And, it is one of the few companies around right now that genuinely does seem purpose-driven.

  6. Looked at buying a place and turning it into a vacation rental but then looked at competing properties and their calendars. The area I was looking at showed a handful of days booked across all properties over the next 120 days. I quickly abandoned the plan. Not worth the trouble.

        1. What was that old skit with the sock puppet dog – “…for me to POOP ON!!”? Uber, Lyft, etc….

    2. When you run a short-term rental, you don’t want to chase 100% occupancy. Ideally you are only occupied at 60-70%. If you can’t make things pencil at that amount, then it’s not going to work. Unless you are in a place like San Francisco or NYC, you have to realize there will be some seasonality trends.

    1. I have a home in Palm Springs, CA and often wondered how much would the prices decrease if owners could not Airbnb their homes.
      I have friends who have purchased million dollar homes in Deepwell and South canyon who could not afford the monthly expenses if they could not rent them out.
      I think prices would drop significantly.
      There has been an all out war in the Coachella Valley between the Airbnb units and permanent owners.
      I wouldn’t want a hotel next to my home.

      1. Nobody does. When Craigslist did this years ago, they got thrown out everywhere. Why, cuz Craigslist didn’t have billions of dollars to bribe government types. (And BTW, it’s was the exact same “arguments” then: these people need the money, wouldn’t be able to pay the mortgage, etc). What happens when politicians will take money to push stuff that’s bad for people who live there? You get more of those types of politicians. Mafia tactics are corrupt and corrupting.

        As we’ve seen, eventually the fat envelopes stop showing up, locals get more and more pissed, and it gets put to and end. It’s unsustainable, but the people running these companies don’t care. All they care about is getting to the IPO finishing line and then watch it fall apart in every nook and cranny of the globe.

      2. My sister and her husband got an offer on their home yesterday in Salt Lake City. It is just below $600k. They fully renovated the basement and it has a full kitchen and like 3 bedrooms and 2 bathrooms. The basement rents for $1400-$1500/month. I think the buyer is counting on that income to justify the home purchase. In other words, lots of home buyers also make the calculation of whether they can “afford” to buy a house based on renting out a basement or a room. It’s not just short-term rentals that fall prey to this type of stretching.

        1. I know someone personally here in Phoenix who bought a house with this intention. There’s a small building/former garage that they plan to AirBnB. It was the only way they could not be house poor.

        2. This is what they are doing in NYC, open houses mostly Asians, and they all are promoting the illegal basement apartment as a way to justify the insane list price. Here the apartment has to be 50% above ground and must have some full size windows to escape from, which can be ok if the land slopes to the back, also lots of people are converting the garage in the back into a extra room or a studio apartment… so its borderline legal,

  8. Is Sonder the same thing as Airbnb? They seem to be taking over many large rental buildings for short-terms stays in the Greater Boston area….which of course I would assume…drive up rents!

  9. ‘Because we have a system that allows corporations to donate to political parties and buy policy outcomes.’

    Yep. And until it changes, I won’t be concerned what Republicrats are saying or promising, since I know they will only do their master’s bidding.

    2. Democrats and Republicans answer to the same master. It’s a false left-right paradigm.

    1. They aren’t satisfied with ripping everyone off for ridiculous commissions and want to add a middle man cut on top of it?

      1. I wonder how many more megacorps and “institutional investors” we can get into the single family home market? Working people have zero chance anymore.

        1. What worries me is that, when this bloated whale goes belly up, this is just one more sector they are going bail out with our money to “stabilize” the system. When these institutional flippers are left holding onto a portfolio of depreciating assets that they have to maintain and pay taxes on, they will fold like a circus contortionist. Can’t have all those overpriced homes flooding the market at bargain prices.

          3. The market would fix this problem for everyone, if it were just allowed to.

            Not everyone. And some of the would-be losers are People Who Matter.

          5. The millions that got schlonged the last go around…..

            Did they matter?

            If they got well and truly schlonged then I think you know the answers. That mustn’t happen to People Who Matter.

          7. Not to People Who Matter. Mr. Banker has been made whole many times over. You are correct, those who got schlonged by the millions will get it again quite soon. But that’s because they don’t matter. They are just the dotted line signing tools that make the magic happen.

  16. US new home sales rise to near 1½-year high

    Maybe this is part of the reason, lower prices
    excerpt:
    The median new house price dropped 9.7 percent to $302,700 in March from a year ago, the lowest level since February 2017.
    […]
    New home sales in the South, which accounts for the bulk of transactions, increased 3.6 percent in March to their highest level since July 2007. Sales in the Midwest soared 17.6 percent, while those in the West surged 6.7 percent. But sales in the Northeast tumbled 22.2 percent.

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