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The Pitched Battle over Airbnb Regulation Intensifies

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The Pitched Battle over Airbnb Regulation Intensifies

April 20, 2017

In the past year Airbnb has faced a series of pitched regulatory battles. In addition, it has been the target of a Federal Trade Commission investigation centered on the company’s effects on housing costs.  The hotel industry has been trumpeting these developments as victories to its members, calling the FTC investigation and the recent restrictive bill signed by Gov. Cuomo “notable accomplishments.”

Documents obtained by The New York Times reveal the extent to which the hotel industry became focused on erecting a series of regulatory barriers. These would limit the viability of Airbnb and remove a source of increasing competition. The presentations detailed a “multipronged, national campaign approach at the local, state and federal level.” 

The industry’s  strategy includes an effort to get comprehensive legislation enacted in key locations, and to advance a misguided narrative that common-sense regulations are needed to rein in a lawless short-term rental market run amok.

The American Hotel and Lodging Association, just one arm of the industry’s lobbying apparatus, has an annual regulatory budget of $5.6 million. If it can leverage that to influence policymakers to enact legislation that makes major markets off limits to Airbnb, it would represent a tidy return on investment.

In its quest to thwart Airbnb, the association has made formidable political allies: home associations that want to limit the availability of short-term rentals in their backyards, and labor unions that count thousands of hotel employees as members. These groups all have a vested interest in keeping out Airbnb, and will continue to dedicate substantial resources to furthering their regulatory agenda.

When the regulatory framework becomes too expansive and intrusive, hotels focus on trying to influence federal and state legislators instead of convincing consumers.

The rhetoric of this regulatory effort often frames the goal as simply levelling the playing field between hotels and short-term rental companies. However, the divergence in strategies reveals that the real overarching aim is to limit this emerging form of competition.

As the Times report explains, the hotel association simultaneously accuses Airbnb of dodging local hotel and lodging taxes in some markets, and tells policymakers to refrain from collecting these taxes from hosts in others for fear of further legitimizing Airbnb. The only consistent line is that Airbnb is a competitive threat and needs to be removed.

Unfortunately for travelers who might want to take advantage of the options Airbnb and other short-term rental platforms offer, the lobbying efforts of the hotel industry have started to bear fruit. 

Senators Schatz, Warren, and Feinstein sent the aforementioned letter to the Federal Trade Commission seeking an investigation into Airbnb’s effect on housing costs “after working closely with [the association] for several months,” according to the document.

According to an analysis from the R Street Institute, 32 of the 59 cities in their sample imposed some form of restriction on short-term rentals. Regulations in Atlanta, Denver and Oklahoma City render short-term rentals “effectively illegal” and another six cities, including Los Angeles, make them “practically impossible, though theoretically legal under very narrow circumstances.”

In some places the regulatory burden might be so prohibitive that even major short-term rental companies such as Airbnb will be driven out. With more than three million listings in 65,000 cities, Airbnb will be able to weather the regulatory storms better than newer, less-established peers. The hotel industry’s regulatory blitz could force out these fledgling competitors that would put pressure on Airbnb, making it easier for the company to dominate the short-term rental sphere.

In the report from R Street the authors fail to find any discernible pattern in what factors are predictive of how cities regulate this industry. It could be that a major factor is the degree of success the hotel industry had in its lobbying efforts. If the remarks and presentations from the hotel industry are to be believed, they will double down on this legislative strategy in the coming year.

Hosts and travelers alike who benefit from the options provided by short-term rental platforms would be harmed by further regulations. Some of the complaints of the hotel industry, that Airbnb reduces prices around major events, open up new affordable options to people who might otherwise not be able to attend.  This delivers substantial benefits not just to customers of Airbnb but to anyone who visits during this period and faces lower prices. 

Hosts are also disadvantaged. Many use short-term rental platforms to supplement their income or replace lost earnings. In some cases hosts can only afford to live where they do because they have the option to rent out their home from time to time.

Instead of doubling down on efforts on to influence regulation, hotel associations should renew their focus on improving their product and developing new ways to appeal to consumers in the marketplace.

 

Charles Hughes is a policy analyst at the Manhattan Institute. Follow him on twitter @CharlesHHughes

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