Many homeowners and renters are using platforms like Airbnb, VRBO, and HomeAway to make extra cash. On a short-term basis, they rent out spare rooms in their homes — maybe even the entire house or apartment — to out-of-towners to help make the monthly mortgage or rent. Only a small minority of these providers are “pros,” buying up properties for the sole purpose of renting them out on home-sharing platforms.
The real pros, however — hotel chains and hotel workers’ unions — don’t like this upstart competition. They’re working to get home-sharing banned or effectively regulated out of existence.
New York City recently passed a law that imposes fines from $1,000 to $7,500 for advertising entire units for rentals of fewer than 30 days. Santa Monica, California, bans short-term rentals of entire units.
It’s a perfect example of what economists call the “bootleggers and Baptists” theory. This theory holds that, for regulation to emerge and endure, it requires an alliance of moral and economic interests. The home-sharing economy’s opposition is defined by just that unholy alliance.
Hotels and their employee unions feel threatened by the emerging market force of home-sharing providers because it challenges their existing business model and puts downward pressure on lodging prices. In an investor call, LaSalle Hotel Properties CEO Michael Barnello said that New York’s law cracking down on home-sharing providers would be “a big boost in the arm for the business, certainly in terms of the pricing.”
Mike Casey, president of the hotel workers’ union UNITE HERE Local 2 in San Francisco suggested that “there’s probably several hundred jobs a year that are lost as a result of people selecting Airbnb over a unionized hotel.” Yet, more affordable lodging options also mean that visitors spend more money in other areas of the local economy, supporting restaurants and other services with their dollars.
Meanwhile, moral arguments are being made by affordable housing advocates, who claim that short-term rentals “displace” permanent housing, thereby driving up rents for permanent residents. But these “Baptists” fail to mention the flip side of this coin. In light of rising housing prices in many markets, including New York City and San Francisco, home-sharing enables individuals and families to afford to live in such locales because they are able to supplement their income by renting out extra space on Airbnb, VRBO, and HomeAway.
Rising housing prices were a problem long before the rise of the home-sharing economy. Loosening zoning restrictions and allowing for more affordable housing to be built is a much better way to ensure residential housing availability than banning home-sharing ever can be.
Then there’s a fourth group of opponents: Not-in-my-back-yarders who worry that temporary, out-of-town lodgers will create more noise and other nuisances for permanent residents, changing the character of neighborhoods and making them less desirable places to live. Yet it’s far from clear that short-term residents create more nuisance violations than do “regular,” permanent residents.
And if these visitors should present a nuisance, residents have existing protections concerning excessive noise, overcrowding, and other potential hazards. They can enforce peace and quiet in the neighborhood simply by exercising these protections. Of course, the need to do so should be quite rare; responsible homeowners recognize it’s in their own interest to keep the neighbors happy by enforcing house rules among their guests.
Several states are considering pre-empting local home-sharing regulations that interfere with individuals’ rights to use their property as they see fit; this includes making their homes available to short-term renters. Arizona recently prohibited cities from banning short-term rentals, by limiting property use restrictions to true health and safety concerns.
Lawmakers and regulators should exercise care not to fall prey to crony interests who seek to protect themselves against healthy competition from home-sharing. Instead, they should look to Arizona for ways to protect the safe and responsible use of home-sharing as a fundamental property right.
First appeared in The Washington Times.