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Report: Airbnb Risks Becoming Napster of Short-Term Rentals

If Airbnb hopes to survive beyond its booming startup years, the company may need to re-evaluate its approach to business, seeking out more city partnerships rather than opposition. We chatted with assistant professor of urban planning at the UCLA Luskin School of Public Affairs Paavo Monkkonen, to get details on an analysis he co-authored with Nathan S. Holmes.


Paavo tells us he wrote the paper, which suggests that Airbnb could go the way of music service Napster if it isn't careful, because of recent ordinances in cities such as Santa Monica, which banned short-term rentals, and because of anti-short-term rental activism in major cities such as Los Angeles and New York City.

Reports and articles blaming high rents in those cities on short-term rentals overstate the effects of the service, but they have momentum and popular appeal, he says.

The authors note Airbnb rentals are becoming the modern way to travel, with the company currently valued at north of $24B and growing steadily in hosts and visitors. But its relationship with local governments is uneasy at best and hostile at worst because of the way the short-term rentals are perceived to reduce hotel tax revenue and limit housing.

Though it failed, San Francisco tried to pass a measure that would limit short-term rentals in the city. New York's attorney general has declared most Airbnb listings in New York City are illegal.

Airbnb has a lot of public sentiment on its side, as shown in the San Francisco vote, Paavo tells us, because it provides a great service to help provide accommodations that were not easily available before. But opposition to short-term rentals is growing and the perception of short-term rental companies as disruptors creates a real potential threat to this new industry from local ordinances, Paavo says.

Such confrontational relationships are akin to how Napster once interacted with the music industry, cutting into revenue streams for established companies. The authors write that Napster's success led to its downfall. While collaboration may have saved the company, instead it became mired in legal challenges.

Instead, the authors suggest more conciliatory dealings between Airbnb and cities could help to secure the company's future. That could mean Airbnb paying the same taxes required of hotels, creating better oversight over its hosts and even using its position as the short-term rental giant to push tourism into lower-income areas, they write.

In response, Airbnb directed us to its "community compact" released in November. In that compact, the company talks about how homesharing has existed as a right for a long time and how Airbnb works to develop partnerships with cities "that embrace the right of people to share their homes."

The compact lays out ways the company will work with regulatory agencies and policymakers, stating that the Airbnb community wants to pay its fair share and keep homesharing from being abused.

It commits to working with individual cities to help in collection of tourist and hotel taxes; building an open and transparent community and release regular economic reports; and promoting responsible homesharing to prevent short-term rentals from interfering with the availability and cost of permanent housing.