Today, Explained - Airbnbanned

Episode Date: October 20, 2023

To Airbnb, or not to Airbnb, that is the question. Wired’s Amanda Hoover and the Atlantic’s Kate Lindsay have the answers. This episode was produced by Siona Peterous, edited by Amina Al-Sadi with help from Matt Collette, fact-checked by Laura Bullard and Serena Solin, engineered by David Herman, and hosted by Sean Rameswaram. Transcript at vox.com/todayexplained Support Today, Explained by making a financial contribution to Vox! bit.ly/givepodcasts Learn more about your ad choices. Visit podcastchoices.com/adchoices

At the beginning of the month, Brian Chesky, the co-founder and CEO of Airbnb, said something you don't often hear co-founders and CEOs say. He said his house was a total mess. Chesky told a Bloomberg reporter that the foundation of Airbnb was basically broken, that the site was 10 times as big than it was eight years ago, and there weren't enough pillars holding up its 7 million or so listings around the world. Prices out of control, inaccurate listings, bad customer service, all this coming from the CEO. But Airbnb's problems aren't limited to its service.

There have been Airbnb bans and restrictions passed all over the world, the latest in one of its biggest markets in its biggest country. We're going to hear how that's going and if this beloved service can work a bit better for everyone on Today Explained. BetMGM, authorized gaming partner of the NBA, has your back all season long. From tip-off to the final buzzer, you're always taken care of with a sportsbook born in Vegas. That's a feeling you can only get with BetMGM. And no matter your team, your favorite player, or your style, there's something every NBA fan will love about BetMGM. Download the app today and discover why BetMGM is your

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Please play responsibly. If you have any questions or concerns about your gambling or someone close to you, please contact Connex Ontario at 1-866-531-2600 to speak to an advisor free of charge. BetMGM operates pursuant to an operating agreement with iGaming Ontario. Stand clear of the closing doors, please. The next stop will be today explained. Today explained will be next. Stand clear of the closing doors, please. The next stop will be today explained. Today explained will be next. Stand clear. According to the CEO of Airbnb, New York City accounted for roughly 80% of its business around 2010.

Compare that to 2023, when New York City just last month placed a severe restriction on short-term rentals, decimating Airbnb's business there. Amanda Hoover has been on the Airbnb-t for Wired. We asked her how New Yorkers are feeling about their new law. It's a mixed bag. Airbnb hosts are very upset. They view this as something that is taking away a source of revenue. Some of these

people, you know, aren't necessarily big landlords, but have one unit they rent out or rent out their place while they're away, and they're no longer able to do that. I'm very concerned about being able to afford our home and our expenses without the short-term rental. I really want to be able to support our family. This is putting me in a rock, between a rock and a hard place. You have housing advocates that are saying that this is something that could free up more housing stock and help to compete with some of the really high rents that are creating housing shortages. Commercial operators who take thousands of units off the market that should be going to permanent New York residents and turn them into rooms for tourists who are here one or two nights.

That has to end because it has encroached on our supply of affordable housing, which is diminishing daily. Take us back a little bit to why New York City is doing this. Yeah, they're doing this, you know, for the same reason that housing advocates are interested in this. Rents are very high in New York. Getting apartments is very competitive. We actually offered six months in advance $24,000. Despite offering that, we got rejected. We found out the competing bid was a person who offered to lease all five, six units. And they're turning it into Airbnb rentals.

There were tens of thousands of short-term rentals that, in theory, people could live in full-time. And that would make it, in theory, a bit easier maybe to find an apartment. That's the city's stance in limiting it. As well, though, short-term rentals tend to bring noise and trash and even parties and potential danger to residential areas. So there's a bit of pushback on that end as well, and we see that around the country. That time I had to go break up a party at my Airbnb in the middle of the night

while I was eight months pregnant with twins. Who's Jeffrey? Where's Jeffrey? And there's another piece of this. You know, some people are engaging in what they call Airbnb arbitrage, which they aren't the homeowners. These are people who lease units from landlords with an agreement or maybe sometimes without an agreement that they'll then be listing it on places like Airbnb. And they act then as the property manager. They furnish it. You see a lot of these very bland styled apartments that just look like Ikea showrooms. But you can charge so much more per night generally with a short-term rental than you can with a long-term lease. If you're in your 20s or 30s and not making at least $10,000 a month, stop scrolling. I had heard about rental arbitrage and decided to give it a try. At 20 years old, how did you even get

all these Airbnbs? What's the deal? So we use the arbitrage method where we, you know, contact a landlord or like... So then they profit and then they go and take that money and, you know, get another lease. So some of these people do this with tens or dozens of places. You know, people claim to make tens of thousand dollars a month in revenue doing this. I'm going to show you how I made a million dollars with mental arbitrage. Part three of making $65,359 a month from Airbnb arbitrage. When did New York first get savvy to all this Airbnb arbitrage? The latest rule isn't necessarily aimed only at

Airbnb arbitrage, but the city and Airbnb have for a couple of years gone back and forth. More recently is this registration law. You know, there are older laws on the books the city say prevent short-term renting. It's just been very unenforceable ever since Airbnb became such a massive presence. In 2022, they passed this Local Law 18, which requires Airbnb hosts or short-term rental hosts to register with the city. To get that registration, though, you cannot be listing entire apartments. You have to be listing a room in your home where you also will be home at the time that the guest is there. You can list, you know, for a maximum of two guests. So that cuts out a big piece of the market. There's no more entire apartment rentals.

And a lot of people, you know, we're really doing that as opposed to a hotel. You have a much smaller group of people that are willing to share a home with somebody. We're in New York City. Everything is super small. And the rules don't really make sense. If they're saying that I have to share my apartment and they have access to every room in my house and I have to have access to theirs, I'm not sure of too many travelers that are going to feel comfortable with that. And then there was some delays in enforcement, but starting on September 5th is when the city began working to verify that properties that were listed are registered. So it's been like a month and a half since New York City started enforcing this law. Do you know how it's going so far? What we know, what we see as we look around is that there are people moving to different platforms that are still looking to do these whole unit short-term rentals. I've found many on Facebook Marketplace and different Facebook housing groups that are for short-term rentals. I've found many on Facebook Marketplace and different Facebook

housing groups that are for short-term rentals, sublets, things like that. I've also found some of these on Craigslist where the Craigslist description says like, this is an Airbnb, you know, still using that language that people so associate with short-term rentals. There's also another website called Howfee where tons of hosts have signed up in the past couple of weeks. You see a lot of people based in New York City that says they started in September or October. And this is more of a peer-to-peer housing platform where people would pay directly. So it kind of skirts that booking platform accountability that this law meant to enact. So it's really hard to say

how many people in total are doing this. I've found definitely like dozens are still doing this through these other outlets that are not formal short-term rental platforms like Airbnb or VRBO. How does New York feel that people are just scrambling to other sites to continue to violate the spirit or maybe even the letter of their law? And then how do sites like Facebook, Craigslist, or Halfie, which I'm just now discovering exists, feel about people coming to their sites to now flout this law? When I was writing a story about that, you know, I didn't get comment from the city. They didn't have a response for me to include. I did speak with Halfie, as I've reported, you know, they kind of maintained that because they aren't processing payments, you know, they aren't

subject to some of these regulations, but still say that they're working with the city to try to follow the law and see how the regulations fit into their platform. But a lot of these are very hard to police. You know, it's pretty hard to catch a line in a post in a Facebook group that's private. I've seen people that just are posting saying, I'm looking for a weekend in November, like in this neighborhood, who has something. That's a lot harder to track than an Airbnb listing. It sounds like, Amanda, from your telling of it, that New York's kind of having to reinvent the wheel here in terms of thinking about how to enforce this law

and how to actually achieve the ends it's seeking here. But other cities have tried this, right? Many cities have tried some version of regulating short-term rentals. Sometimes it's a registration. Sometimes it's a ban on the number of nights per year you can list an entire apartment. Here in the capital, hosts are usually restricted to hiring out their properties for 90 nights a year. Sometimes it's, you know, certain zones.

If they are zoned residential, they're trying to ban short-term rentals from coming to that part of cities and keep them more in places where tourism is popular. Dallas City staff told council members today that defining short-term rentals, like those listed on Airbnb and Vrbo as lodging would eliminate about 95% of the rentals operating in the city. That would make them illegal in residential neighborhoods, but legal in these commercial areas colored pink.

It's a constant fight and it's really creating like a patchwork of rules for the platforms to be dealing with and for hosts and guests as well. They can see very different offerings, you know, depending what city they're searching in. And this kind of brings us back to the reason Airbnb was such a success in the first place. Cities like New York City are incredibly expensive to stay in. If you can even find a hotel you can afford. And if that hotel is not on the high end, it's going to suck. The very producer of this episode, Siona Petros, became aware of this short-term rental ban because she and a friend were traveling to New York and they couldn't find an Airbnb anywhere. So they ended up paying nearly a grand for an overpriced hotel. Yeah, I don't know what's worse, the fact that we actually paid that much money

or the fact that that was the cheapest option that we could find. Still don't know how I feel about it, but it was a good weekend though, at least. I know the chief concerns here are with New Yorkers, but how is this gonna affect thousands upon thousands, if not, I don't know, millions of people who visit that city every year?

Yeah, it's definitely maybe a deterrent for some people. If people had trips booked past December 1st on Airbnb, they might be dealing with their trip being canceled now if that place hasn't registered and doesn't comply with these rules. Hotel prices may even go up. Some analysts have been saying recently because there's going to be increased demand back on hotels. So it's going to be a bit trickier if people navigate. And if you're coming here with a family, you know,

with children, a lot of people have found it's much more pleasant to stay in a neighborhood and in an Airbnb where you have a washer and a kitchen, things that you don't generally get in hotels. So there are still ways you can like rent homes like that, but they might be a bit more expensive and you might have to do it for a bit longer. So it does most immediately, I think, affect visitors and hosts as well. What this might do for the housing market is a little bit less clear. It's a city of 8 million people and we're talking about housing units in the thousands. So it's not like immediately all the rent in New York is going to drop because of this.

That was Amanda Hoover from Wired. Read her at Wired.com. When we're back on Today Explained, why even without an Airbnb ban or restriction, hotels are looking a lot better to a lot of people these days. I've lived in and grew up in the Hudson Valley of New York State my whole life, and Airbnb has completely ruined the economy up here. During the summer and weekends, I feel like a stranger in my own hometown. It's getting out of hand. I rent my home while I'm working out of state, and I rent it out at a very reasonable rate to people who are working in the service industry.

I'm completely in favor of a ban or restrictions on Airbnbs and the like, because I think they're a huge contributor to the housing shortage in this country. Airbnb is great if you've got a big group of people looking to stay in one house together. Airbnb is not the answer when you and one or two other people are looking for a cheap alternative to a hotel room. Just get a hotel. Love the show. Support for Today Explained comes from Aura. Aura believes that sharing pictures is a great way to

keep up with family, and Aura says it's never been easier thanks to their digital picture frames. They were named the number one digital photo frame by Wirecutter. Aura frames make it easy to share unlimited photos and videos directly from your phone to the frame. When you give an Aura frame as a gift, you can personalize it. You can preload it with a thoughtful message, maybe your favorite photos. Our colleague Andrew tried an Aura frame for himself. So setup was super simple. In my case, we were celebrating my grandmother's birthday and she's very fortunate. She's got 10 grandkids. And so we wanted to surprise her with the AuraFrame

and because she's a little bit older, it was just easier for us to source all the images together and have them uploaded to the frame itself. And because we're all connected over text message, it was just so easy to send a link to everybody. You can save on the perfect gift by visiting AuraFrames.com to get $35 off Aura's best-selling Carvermat frames with promo code EXPLAINED at checkout. That's A-U-R-A-FrAMES.COM, promo code EXPLAINED. This deal is exclusive to listeners and available just in time for the holidays. Terms and conditions do apply. I got, like, wrestled awake by my partner, like, don't freak out, don't freak out, don't freak out, don't freak out. So I had to kind of like put my hand over my mouth and wake up and see, oh my gosh, this man is in this bed with my partner and me, the man who owned the house, who rented it to us in Airbnb.

Today Explained is back and we're joined by Kate Lindsay, who recently wrote a piece for The Atlantic titled Airbnb Really Is Difference Now. We asked her what it used to be like. So in 2007 in San Francisco, the founders of Airbnb kind of had this idea that during these big ticket events like political conventions, they could step in when hotels would kind of quickly sell out of rooms or the prices would be too high. That summer everybody was talking about the Democratic National Convention

which is going to be held in August 2008 in Denver. It's where Barack Obama was going to receive the Democratic Party's nomination for presidency. So what the founders did was they were like we're literally just gonna put a few mattresses on the floor of our apartment. We'll also provide breakfast and we'll like charge for that. They had upgraded the venue to the stadium that holds 80,000 people. And what we looked up in Denver,

there's only 17,000 hotel rooms. So we knew right away there was gonna be a problem, that there's gonna be a need for alternatives. It blossomed from there in terms of like, if you're someone who has a spare room or even a couch or an apartment over your garage you know this space in your home they kind of realize this is untapped money you could be making money off of it. And so we rushed to build this website in three months and again we launched it two weeks before the event. We were lucky there

were a lot of locals who were looking to get out of town and make some money. And so within the first week, we got 800 people to put up their properties on our website. I was actually an Airbnb host for several years. I would say my experience was overwhelmingly positive and it really helped me pay the rent on a very expensive house that I really couldn't afford. It was just like couchsurfing.com, but for money. Right. And so it kind of, you know, it solved two problems. It gave hosts sort of easy way to make extra money without changing too much about their lifestyle. And then guests also could get a cheaper room. And then sort of as Airbnb firmed itself up, it really kind of became, you know, not only do you get this room, but also you

get sort of a host who literally lives there and can give you recommendations. It was very much sort of a personal experience, very much an alternative to hotels. I stayed at an Airbnb in Washington, D.C. multiple times because I come there every year and loved staying with the same family again and again. And we would go out for drinks and dinner or sometimes we would get wine at home and they would cook dinner. So it was just a spectacular experience. Look forward to going back again this year. So I started learning Polish two years ago. This summer I had a long, immersive stay there for over a month.

My experience was incredible. And Airbnb was a key part of that because it put me right into the middle of regular life there. And I really got a great feel for what it's like to live in Poland. So dziękuję bardzo. So what happens is Airbnb is a marketplace. And so the way it started was a lot of just regular people saw the original conceit and followed it to the letter. They were like, oh, here's my room, here's my couch, here's sort of this apartment over my garage. It did well and obviously like really quickly kind of blew up. But anytime something like that happens, it becomes successful. Anyone else with more resources can come in and use the platform in the same way, but

take advantage of it. In tech companies, the way that they were funded, you know, they can't just do well and stay the same. They have to keep growing. And so in the case of Airbnb, that kind of has just meant slowly over time, they've just started to grow in the same direction as the hotel industry, which is what they were trying to replace. I think a big way that this sort of started to move

in a more commercialized direction is people who had second homes or vacation homes, things like that. They realized, oh, I can rent that out on the platform. And so it's not just a room and it's an entire home, which like full disclosure is usually always what I opt for when I use Airbnb. So it's not that it's a bad thing, but it's not Airbnb's original conceit. You know, the host isn't there. It goes from a host kind of welcoming you in, showing you around, giving you recommendations to, you know, key this into the lockbox to get the key. The recommendations are on the table. It's very impersonal.

I got in this little room. It was summertime here in Florida. The AC didn't come in there. The room was over 90 degrees. The fan didn't work. There were cockroaches, ants, and there was a fly in the room. We walk in the Airbnb, and we did notice that there were cameras throughout the entire house, not just by the door, like was disclosed in the listing. The place was just trash. It was so gross. But there was nowhere else. So we

stuck it out. Later that night, the host starts messaging me saying that I was going to be kicked out immediately. She also said she was going to send her brother-in-law to come check on us and kick us out. Since then, I have never used Airbnb again. Now it's so normal to whatever it is, the sort of price I'm looking for, tack at least a hundred extra dollars on top of it. It used to be less common because hosts were, you know, just running out of room. They would clean themselves. But now that it's become common to do whole properties or that the whole, you know, industry has become so commercialized.

I don't think I've seen a listing without a cleaning fee in years. But you have seen listings where they ask you to clean before the cleaner shows up. Pretty much all of them. The issue with that is that the cleaning fee number is kind of arbitrary at this point. Like obviously there are many hosts that are pricing it accurately because they do use the cleaning service. But, you know, I spoke to a spokesperson at NerdWallet who had been involved in a study, sort of talking to hosts. And in many cases, the cleaning fee is there to kind of offset any discounts on the daily

rate. So what will happen is in order to compete with these places that have more resources so they can list their properties for less money, these regular hosts are also listing their properties for less money so they can compete in the search. And then they'll make up the difference by increasing the cleaning fee because there doesn't seem to really be any proof that they have to provide of how much the cleaning costs. It's just a number they can set. And so I think that has just contributed to this larger confusion, frustration with cleaning fees because they feel arbitrary. They are somewhat arbitrary. And you have to clean anyways.

So if Airbnb is just a hotel now, I feel like they should just incorporate their cleaning fees into the actual price and people will be a lot less mad about the sticker shock. Right, and so one thing they have done to kind of address this problem is there's a new toggle. When you search, there's now an option to just show total price and it includes the fees.

That's kind of one way to get around if you want to get the full picture. But, you know, I think in general, if Airbnb is going to be more like hotels, things like the cleaning service of hotels, those are staff. Many of them are in unions or they have wage requirements. They have hours, things like that. It's just ironic, really, because it's just if it wants to sort of solve these problems, it's going to have to accept that Airbnb is just kind of a different hotel platform. Where does this leave us? Because Airbnb is still wildly popular, but in some cities they're trying to restrict it. But I guess in other cities, it's still just the Wild West of short-term rentals.

Is Airbnb ever going to like self-regulate to just say, here's a new policy that'll fix this problem? Yeah. So Airbnb does seem to be making some efforts to kind of go back to its original vibe. They introduced something which is kind of a rebranding of their original concept. It's called Airbnb rooms. The whole point is you're booking a room in someone's larger home. You get provided like a little booklet on that host. It's really meant to foster sort of a relationship going back to

the unique way Airbnb first started. It's one of those things where it's like, it's going to be hard to put the worm back in the cans because so many of these property owners and management companies have figured out a way to make a decent living off of just kind of renting out properties. Externally, I just think we're going to see a lot more regulation and hopefully a little bit more unified regulation. So we're not just having like wildly different specific rules for each city, not even each state, each city. And it'll start to be something that it's a bit more consistent, which ironically is exactly what kind of happened to the hotel industry. That was Kate Lindsay. She writes an internet culture newsletter called Embedded. You can find it at embedded.substack.com. Our program today was produced by Siona Petros. She had help from Amina Alsadi, Matthew Collette, Laura Bullard, Serena Solon,

Tian Nguyen, Patrick Boyd, David Herman, and you. Thank you for calling in with your Airbnb stories. I'm Sean Ramos from the rest of the Today Explained team includes my co-host, Noelle King, duh, but also our executive producer, Miranda Kennedy, Hadi Mawagdi, Amanda Llewellyn, Isabel Angel, John Ahrens, Abishai Artsy, Victoria Chamberlain, Miles Bryan, Rob Byers, and Halima Shah, who is somehow only turning 30 today. Happy birthday, Halima. We use music by Breakmaster Cylinder in a totally non-exclusive way.

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