The first was how AirBnB, the do it yourself hotel company, had raised enough venture capital to make it's market valuation $10 Billion dollars.
The second article was from the San Francisco Chronicle about how landlords in The City are evicting tenants who use AirBnB to make extra cash on the side by renting rooms for a day or more to people passing through.
A first precept of story telling is that there should be a hero and a villain. This story, however, defies that axiom. Everyone is a good guy and everyone is a villain.
On the face of it, AirBnB should be viewed as an exemplar of the new "sharing economy". They use the internet to connect those who need a product or service with those who have a product or service. They take a cut of the price for doing this. Hey, an internet company that actually makes money! All the venture capitalists want in on something like that, so the value of the company soars. Stock and stock options will make the founders and employees wealthy people. Teslas for everyone!
Those who rent out their rooms and apartments get help with the exorbitant rents they must pay to live in the Bay Area. Rents, I'll be quick to point out, that are so high because of the stocks and stock options Web 2.0 has brought to the housing market. What's the harm, they will say, after all it's we who are incurring the liabilities of the possible harm done to our living spaces. We clean up the place afterwards. We put up with people who maybe aren't as advertised in their online profiles.
Then there are the people who actually own the dwellings the folks above are renting out. We call them landlords. They are the ones who pay the property taxes and the insurance and the money to keep up the building. In return, in many communities, they are prevented from raising rents to market rates by Rent Control laws. Before we go any further let me say I own residential properties that I rent out. It's because of that that I can say there are plenty of other ways of getting a return on your real estate investment besides the rent you collect. I believe in rent control because it's good for the community.
I also believe in something called a contract. In fact I sometimes find myself wondering if contracts are the only thing keeping civilization alive.
The contract in this case is a lease, the document that lies at the heart of the landlord/tenant relationship. It defines what is expected of both parties. I have yet to see a lease that didn't have a boilerplate clause about the tenant not being allowed to sublet the space without the approval of the landlord. Subletting is the act of allowing a third party to occupy the space in return for money.
In other words, exactly what these folks on AirBnB are doing.
It doesn't matter if you're talking about subletting for years or months or days or even hours (actually the last brings up a whole other set of laws having to do with the oldest profession), if you take money to allow someone who is not on the lease to stay in the property, you've broken the lease. Under the terms of the lease you can be evicted. And in an irony that only could come about in our modern society, the tenant who is willfully breaking the lease can charge whatever he wants while the person who actually owns the property can not.
But I said there were no good guys in this tale, so the landlords must be looked down upon for going directly to a nuclear option over what amounts to a small infraction. OK, you find out your tenant has the place up on AirBnB. I think a strongly worded warning amounting to a cease and desist is called for before you send the marshals with an eviction notice. The bottom line is that you have the contract on your side. Maybe that letter could lead to the tenant cutting you in on the profits. But those who are using the listing just as an excuse to evict someone so the rent can be raised have a special place in hell waiting for them.
Which brings us to the question of AirBnB as a company. Are they encouraging a person to violate their lease, or "interfering in a contractual obligation" as the lawyers are wont to say? And if so aren't they guilty of the same skulduggery Napster in the early days of downloadable music or The Pirate Bay with bit torrents were found to have been? Sure there are folks listing on the site who own the property listed and can do with it what they want, but I'd be willing to bet it's a small number in comparison to the renters. AirBnB should not be allowed to hide behind the flimsy curtain of "we're just a marketplace". eBay takes illegal software listings down, bit torrent sites routinely scrub themselves of child pornography, and Twitter can edit out offensive tweets. AirBnB should not be granted a clemency from contract interference illegalities.
Especially once your valuation goes north of $10B.
There is another contract that I quibble with AirBnB about. This is the social contract that exists between a citizen and his/her community. Yes, I'm talking about taxes. The occupancy taxes, the business taxes, probably the income taxes, and dozens of other fees go uncollected or paid by these part time hoteliers. Like it or not that money is going to have to be made up, whether through raising other tax rates or curtailing services. Hey, like that nice smooth pavement of the street your house is on? Pay up. It's estimated that AirBnB owes San Francisco alone $1.8 million dollars in unpaid occupancy tax. That's 0.0018% of their valuation, or the corporate equivalent of spare change. What's particularly galling about this is that they claim they don't have the technology to add individual community's occupancy tax rates to their booking engine. You must be joking! Then they go on to add that at any rate it is not their responsibility to collect all these individual taxes, but rather the lister's, because, wait for it, "we're just a marketplace".
I am a great proponent of small business. I think we'd all be a lot better off with more small businesses and fewer giant multi-nationals. If you want to go into the business of renting out rooms to travelers then I don't believe anyone should stop you from doing it, in fact I would encourage you to do it. But you need to accept the fact that your community has enacted laws and taxes that you need to abide by. Don't like them? Work to have them repealed, but until they are repealed, abide by them. Because people who truly are in the business of renting rooms to travelers, aka hotel and motel owners, don't have the option to ignore those rules and regulations. If they do, they lose their business.
AirBnB is far from the only member of the "sharing economy". Please feel free to substitute the following as the company in question: Lyft, Uber, eBay, Etsey, SnapGoods, RelayRides, TaskRabbit, Liquid, Zaarly, Lending Club, Fon, PoshMark, You want to be a taxi driver, go be a taxi driver. You want to sell furniture, go sell furniture. You want to be a personal assistant, go do it. You want to sell handmade arts and crafts go do it. But in any of these cases make sure you abide by the rules that everyone has to abide by. There is a name for someone who doesn't abide by the rules.
We call them villains.
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