By Connie Kwong
San Francisco-based Airbnb, a home sharing platform on which renters and homeowners rent out rooms or properties to travelers, has joined the ranks of Uber and Lyft as a dynamic innovation that fundamentally changes how people interact with technology and with each other. Thanks to Airbnb, travelers worldwide have a greater variety of lodging options to choose from that gives them the opportunity to meet locals, and at prices competitive with hotels. Meanwhile, hosts can also make extra income. In a blog post on the company’s website from July 2014, CEO Brian Chesky proudly lauded its corporate culture by writing: “Belonging is the idea that defines Airbnb … Airbnb is returning us to a place where everyone can feel they belong.”
Yet, why does Airbnb have such a tense relationship with the city it calls home, San Francisco, otherwise known as the heart of the tech industry that is so essential to the Bay Area’s identity? On Nov. 3, San Francisco citizens voted on the controversial Prop. F. Although the ballot measure was defeated 55-45, let’s consider what would have been the implications if it had passed. Under Prop. F, the government would have imposed tougher restrictions on short-term rentals by limiting them to 75 days per year, requiring property owners to submit quarterly reports to the San Francisco Planning Department, and requiring private rentals to pay hotel taxes. It would also have allowed residents of the building where the residential unit is located, the owner of the unit, people who live within 100 feet of the union, and certain housing nonprofit organizations to sue hosts for violating the law; this provision raised many legitimate concerns about invasions of privacy.
Prop. F was strongly supported by the hotel industry. Meanwhile, San Francisco rents are at an all-time high, with median rents for one-bedroom units weighing in at an alarming $3,670. The housing supply simply has not kept up with the influx of people moving to San Francisco over the last 30 years. What’s more, the city’s byzantine and bureaucratic zoning and housing codes have created an extremely politicized and heated conversation on what is to be done. The gravity of this situation is further magnified by the fact that only 36.6 percent of San Francisco residents are homeowners, compared to 55.3 percent statewide.
Airbnb spent $8 million to defeat the initiative, arguing that Prop. F would have hurt middle-class hosts who benefit from the income boost of renting to travelers. While it’s true that Airbnb has enabled many hosts to make extra money, Prop. F’s supporters countered that the measure really sought to curb another category of hosts, known as “commercial hosts.” Many landlords are evicting long-term tenants from rent-controlled apartments in order to turn their units into Airbnb de facto hotels. Likewise, many people rent out second homes that could otherwise house long-term tenants. This exacerbates the on-going problem of the lack of affordable housing. Consequently, it’s increasingly difficult to see how Chesky’s claim that Airbnb stands for the principle of “belonging” is even applicable to the troubling dynamics of the San Francisco housing market.
But what’s even more troubling is that Airbnb’s consequences are hardly limited to San Francisco. A report published by the Los Angeles Alliance for a New Economy found that Airbnb creates an incentive to take units off the rental market. By conducting a case study on an apartment complex in Venice Beach, it found that, under a traditional residential configuration, term renters would provide a return on investment of 5.6 percent. By contrast, under an Airbnb hotel configuration, the return would more than double to 13 percent. The fact that the company has experienced legislative clashes with other cities, such as New York, Boulder, and Barcelona, clearly evidences the company’s national and international reach. Every city faces its own unique economic and housing problems, and it is likely that Airbnb’s continued growth will lead to greater discussion about how to regulate home sharing given the diverse sets of circumstances.
There are two important things we need to recognize about the sharing economy. First, we cannot deny that it comes with positive economic and social benefits. A working paper from Boston University observes hotel industry performance metrics in response to Airbnb host entry, and finds that the decrease in hotel room prices benefits all consumers, not just consumers in the sharing economy. Other research finds that the sharing economy can be a crucial pathway to environmentally sustainable economic development. For example, Airbnb can help absorb increased tourist activity without having to build new hotels. Second, and more importantly, we’re only just at the earliest trial-and-error stages in figuring out how to regulate the new technology industry. One essay in Tech Crunch stresses that
the reason the tech industry has grown so powerful over the last decade is because it is seeping into every area of our lives … we are not just tech. We are tech-meets-education, tech-meets-healthcare, tech-meets-civil engineering, tech-meets-organic-food, tech-meets-interior-design, tech-meets-agriculture, tech-meets-law, tech-meets-healthcare-in-the-developing-world, tech-meets-microfinance, tech-meets-AIDS-research and so on.
The key element of the sharing economy is that it’s embedded in processes that are arguably more social than they are economic, and the Airbnb controversy perfectly captures that. While San Francisco is not the biggest market for Airbnb’s guests and hosts (European rentals make up 50 percent of the company’s revenue), the company has certainly made itself known in its headquarter city as a polarizing source of either contempt or praise.
So, if corporations play a huge role in society, it only makes sense for us to be concerned with how they affect people’s lifestyles for better or for worse. In other words, the heart of the issue between Airbnb and the city of San Francisco is really about corporate social responsibility. It’s dangerous to think that there’s a starkly defined tradeoff between growing the economic pie versus creating more equitable shares of it. We should be concerned that one company’s innovation has the power to affect many people’s ability to call a place home. Additionally, the same Tech Crunch article mentioned above laments about the growing economic inequality in Silicon Valley:
Our prevailing rhetoric changed from one of ‘service’ to one of ‘changing the world.’ There is a big gap between the two. The word ‘service’ is deferential and empathetic to those around us, and ‘changing the world’ is individualistic and full of hubris. We have to remember that with or without us, the world will change. That is its nature.
The disruptive nature of innovative technologies hardly exempts them from society’s criticisms and well-founded concerns.
And perhaps Airbnb has actually taken note of this, despite its electoral victory in defeating Prop. F. Last week, the company published a “Community Compact,” pledging to work cooperatively with cities to prevent Airbnb’s business model from harming long-term housing availability through approaches specific to each city’s unique needs. Under this new doctrine, the company has agreed to pay a fair share of hotel and tourist taxes, provide city officials with anonymized information regarding hosts and guests in the community, release Home Sharing Activity Reports in cities with high volumes of Airbnb activity, and promote responsible home sharing education practices. In a blog post summarizing this new initiative, the company even explicitly states, “We strongly oppose large-scale speculators who turn dozens of apartments into illegal hotel rooms. Illegal hotels are not in the interests of our guests, our hosts, our company, or the cities where Airbnb hosts share their space.” This should sound like good news to tenants who are worried about being the next to be evicted as a result of their landlords’ efforts to build Airbnb hotels, but we would be wise to remain somewhat skeptical about the company’s overall socioeconomic impact. After all, San Francisco’s housing shortage crisis was born long before Airbnb entered the scene in 2007. Any successful legislative efforts to regulate home sharing will not conclusively solve this crisis unless the city comes up with viable plans to build enough new housing. Also, in this trial-and-error stage of the new tech industry, we should be wary that cooperation between government and business can either lead to positive outcomes or to corruption. While we live in a society first, and an economy second, sharing economy companies like Airbnb straddle this divide, consequently complicating it. Only time will tell if the company keeps its word about paying its fair share to not only the San Francisco community, but the global community as well. Still, no one can deny that the sharing economy is growing astronomically, and, more likely than not, is here to stay.