• Subscribe

Limiting AirBnb Is One More Way The Rich Squeezes The Middle Class

This article was originally published on August 9, 2016 in The Federalist.

The New York legislature recently passed a bill subjecting residents to fines upwards of $7,500 for listing whole-apartment rentals on Airbnb. Although laws forbidding short-term rentals have been on the books since 2011, these additions—celebrated by powerful hotel groups—will dish out expensive punishments and restrict financial opportunity, all for renting out private property.

I can sympathize with how many New Yorkers must feel at the prospects of this bill passing. I fall into the same class of person this law would stifle: an average citizen with some unused space who would no longer be able to freely rent out my own home.

I joined Airbnb as a host in 2012 and the arrangement worked perfectly: I had extra room in my apartment that would just sit empty when I occasionally travelled for weeks at a time. Renting out was especially helpful during the holidays. Guests wished to visit nearby family but wanted their own space, while I needed cash for gifts and wanted to spend time with my own family. Airbnb’s review system let me see who I was allowing into my home and insured potential property damage up to $1 million.

In the end, it was a low-effort, consistent source of alternative income. The property was insured, the taxes were paid and documented, and I felt secure. It was a modest middle-class victory.

What a Great Win-Win for All Parties
By the next year, I started renting out a West Virginia farm I own with some friends. It’s become our most reliable source of income, helping us pay down our mortgage and granting some financial leeway to expand our operations. All this made possible by using property we already owned.

A couple of years later, as the director of operations for a nonprofit organization based in Washington DC, I have established a small business account with Airbnb. This has been a convenient and economic way to book frequent conference and meeting trips: we save $200-$300 per person, per trip. If I book ten trips for just two employees through Airbnb, I’m already cutting expenses by thousands. That makes a big difference for a small nonprofit with a limited budget.

With New York’s new regulations, consumers, businesses, and homeowners alike would no longer have the liberty to take full advantage of their unused assets as I did. For example, residents will now have to be present to rent out what is categorized as “Class A” housing (permanent residences). This includes “tenements, flat houses, maisonette apartments, apartment houses, apartment hotels, bachelor apartments, studio apartments, duplex apartments, kitchenette apartments, garden-type maisonette dwelling projects, and all other multiple dwellings except Class B multiple dwellings.”

In Brooklyn and Manhattan alone, roughly half the commercial properties are Class A. Therefore, if people want to rent out their apartment while they leave town for a few weeks, they’re out of luck—and so are their potential guests.

Entrepreneurs Are Assets, Not Threats

Contrary to criticism that a few power brokers dominate Airbnb rental markets, Airbnb’s Head of Global Public Policy has stated that “almost 90 percent of [their] hosts have only one listing and it’s the home they live in.”

Instead of painting the Airbnb market as a thorn in the hotel industry’s side and a loss for hotel tax revenue, city councils and state legislatures should see it as a potentially greater source of tax revenue. With a clear-cut tax code, the 50 largest cities in the United States could net revenues in the ballpark of $200 million. With a growing market cap and the advantage of affordability, Airbnb is bound to grow, rake in even more tax revenue, and attract tourism that cities would not have been able to accommodate otherwise.

Wealthier homeowners have been able to profit from their properties for years. Summer homes in the Hamptons or the south of France rented for nightly, weekly, or monthly rates are easily rented out by those property owners who can afford sizable property management firms’ fees. Airbnb has made it simple and economical for those traditionally barred from the short-term rental economy to participate in transactions.

More than 16,000 Airbnb hosts have stated that their supplemental rental income has helped the stave off eviction or foreclosure. Laws like the one passed by New York’s Assembly and Senate deny this opportunity to the middle class, and permit only the select few to profit from their unused property. Signing this bill into law also signs away an important economic opportunity for the middle class.