Local and city governments hate freelance, citizen organized business activities such as Uber and airbnb. The reasons have always seemed rather obvious to me: you don’t want the peons rising up, upsetting the established order and cutting anyone out of their piece of the pie. Uber steps on the toes of the cab drivers and their organizers who have cozy deals with the government covering things like airport access and medallions. Airbnb is, if anything, even more dangerous to the establishment since it cuts into the business of hotels and city planning.
With that in mind it’s no surprise that some municipalities continue to try to find ways to squash these pesky bugs before they get out of control. At Watchdog Arena, Nick Xavier identifies some places where cities are taking extraordinary measures to crush airbnb and he finds a curious correlation between them. The biggest push seems to be coming from the cities which practice rent control.
[Airbnb] has also become a contentious issue among some major U.S. cities – especially New York, San Francisco and Los Angeles – leading to aggressive measures against home-sharing services.
Earlier this month, the Los Angeles suburb of Santa Monica began enforcing the toughest of these regulations in the country. The city estimates the new rules will wipe out 80 percent of the city’s Airbnb rentals.
Aside from their determination to crack down on Airbnb, these cities have one thing in common: they are among a handful of U.S. cities that implement rent control.
The deal in Santa Monica is particularly harsh. Under the new laws, anyone wishing to make a few bucks renting out some space through airbnb will only be able to do so if they live on the property during their visitor’s stay. They will also be forced to register for a business license and collect a 14% occupancy tax. Current estimates predict that these measures will eliminate 1,400 of the city’s 1,700 Airbnb listings. In other words, the vast majority of offerings through the smartphone service will disappear.
The city offers a rationale for this, but unlike the author, I’m not finding it quite so obvious why this makes sense.
The main argument made by the Santa Monica City Council is that Airbnb causes the price of housing to go up by forcing residential housing off the market in favor of short-term housing.
At first glance, the argument makes sense. Given a limited supply of housing in a city and high demand, every short-term rental is taking away from the supply of long-term, residential property. With a lower supply and high demand, prices go up. Simple economics, right?
How does the existence of overnight rooms for rent through this service “force residential housing off the market?” I’m just not seeing the connection, unless they mean that the people using airbnb for income won’t be able to afford their mortgages without it and will have to sell off their property. (And if that’s their explanation, it’s a pretty cold blooded one to put out in public, isn’t it?) Honestly, I don’t see any obvious correlation between the number of airbnb rentals being offered and the real estate market at all, except possibly to make it more possible to afford a home.
But I can think of one group who would be very opposed to airbnb doing business, and that’s the hotel industry. But they don’t have any power in the government, do they? According to Xavier, at least in Santa Monica, they most certainly do.
In Santa Monica, a handful of political groups make the vast majority of campaign contributions and have the most political clout.
It is perhaps no surprise that “the city’s single-most influential political organization” is Santa Monicans for Renters Rights, which promotes and defends rent control and other forms of “tenant protections.” Historically, whichever candidates are endorsed by SMRR almost always win.
Unite Here Local 11, a regional hotel workers union, also carries a lot of weight in elections. In the 2012, they endorsed four candidates in the City Council election, and all four candidates won.
But the newest, and wealthiest, player in the city’s politics is Santa Monicans United for a Responsible Future (SMURF). Funded by major hotel and real estate management companies and developers, they raised $400,000 in the 2012 election. Second in fundraising was SMRR, at about $100,000. SMURF endorsed four candidates in 2012, and three went on to win.
That’s what we were looking for. Rent control advocates, hotel developers and a union. And they conveniently managed to back city council candidates who immediately moved to legislate airbnb out of business. Isn’t that a tidy arrangement? Good work by Watchdog Arena in digging this story up. It’s not terribly shocking, but it’s rather depressing nonetheless.