Airbnb in for a Rude Awakening in 2018?

By Razvan Cimpean

Airbnb listing

The beginning of the year brought news—both good and bad—for Airbnb.

The home-sharing site’s legal dispute with Apartment Investment & Management Co. over whether Airbnb encouraged or enabled tenants to break their lease agreements ended in early January. The court decided in favor of Airbnb, stating that it bears no responsibility for illegal listings. Later last month, a San Francisco regulation forced the company to reduce its listings by almost a half, cutting ties with illegal short-time rentals. The law, adopted in 2016, requires Airbnb-like platforms to only accept users who registered with the city first. San Francisco and home-stay companies reached an agreement last May after Airbnb and HomeAway tried to block the law by suing the city in federal court. And as more states get ready or are taking action to impose new and harsher regulations on the short-term rental industry, 2018 might prove a difficult year for Airbnb and the like.

For a company—and industry—that started out because two former schoolmates could not afford to pay their rent, Airbnb came a long way in its nine years of existence. But as the San Francisco-based company continued to grow, so have the authorities’ need to regulate the new industry. Moreover, ShareBetter’s campaign to raise awareness of home-sharing platforms’ impact on gentrification and affordable housing has expanded from San Francisco to other major U.S. metros.

The snowball effect

Santa Monica, Calif., was one of the first places in the country to put in place tough restrictions on room-sharing platforms. In 2015, the city voted unanimously to require a business license for hosts to operate a short-term rental and imposed a 14 percent hotel tax.

At the end of January, Boston followed suit with a proposed ordinance to regulate Airbnb-like sites, influenced by a bill, still in discussion at the Massachusetts State House. The new regulations would enforce a payment system for users based on how long they rent their places. The three-tiered classification differentiates between ‘home share units,’ ‘limited-share/home-share units’ and ‘investor units’ obligates renters to pay up to $500 per-year to the city. Under the citywide regulation, users would not be restricted from operating their homes as de facto hotels.

In Florida, things are moving in the same direction. Last month, the Senate Community Affairs Committee passed a bill that would give the state regulatory power over short-term rentals, stripping such authority from the local government. The bill would enforce a provision already in place that requires rental owners to get a license. The new regulation would make the public display of the license in both the rental and advertisements mandatory. Additionally, the bill would ensure that 1 percent of rentals face unannounced inspections.

Earlier this month, a new zoning ordinance went into effect in Detroit, restricting Airbnb to operate certain units in two residential zones, R1 and R2. An amendment states that the “[u]se of a dwelling to accommodate paid overnight guests is prohibited as a home occupation; notwithstanding this regulation, public accommodations, including bed and breakfast inns outside the R1 and R2 districts.” Hosts received cease and desist letters telling them they have to stop operating Airbnb in their units. Airbnb stated there are more than 400 active hosts in Detroit, but has not mentioned how many of them would be affected by the new regulation. However, the city later issued a statement saying that it will not enforce the new ordinance, asking instead the law department to review the controversial amendment.

These are some of the recent steps taken by local and state authorities to restrict or regulate the home-sharing business. Columbus, Ohio, and Sandy Springs, Ga., are also considering enforcing some form of restrictions or regulations against room-sharing sites. If this trend continues, Airbnb-like companies could soon face unprecedented financial difficulties, while a decrease in offer could see prices go up. However, it is too soon to tell what measures would be adopted by states that have yet to pass a bill concerning home-stay platforms. But one thing seems clear: the home-sharing business’ days as a non-regulated industry are coming to an end.

Image courtesy of Airbnb