By: David A. Smith
Jack Bellicec: What are you talking about? A space flower?
Nancy Bellicec: Well why not a space flower? Why do we always expect metal ships?
Jack Bellicec: I’ve never expected metal ships.
Arriving at the last of our four parts on this topic, we’ve seen that disruptive technology – in this case, Short Stay Rental enabled by a rapidly evolving and physically disintermediated web-based marketplace – creates an unstoppable new force and an irreversible change in urban dynamics, one that ruptures current zoning and land use strategies.
Sources used in this port
(and previous AHI posts on Airbnb and flat-renting)
Prohibition and the rent-easy (August 13, 2010)
Chez Reductio ad Gotham (August 5, 2013)
New York Post (October 16, 2014; brick-red font)
BBC News (December 26, 2014; black font)
Boston Herald (January 17, 2015; olive-green font)
Naturally, such disruption threatens the habitat of some incumbent mercantilist species, such as hoteliers (versus Short Stay Rental) and taxi medallion owners (against Uber/ Lyft), who become the vocal rallying point for last-ditch opposition – but by the time they realize they’re facing an existential threat, they’re in such a minority as potentially to be overwhelmed, and it’s time for a negotiation strategy.
Maybe we can come to terms with them
7. What will happen? How can this end?
Matthew Bennell: Listen, we’re not the last humans left. There are people who will fight you. They will find out what you’re doing here.
Elizabeth Driscoll: They’ll stop you.
Dr. David Kibner: In an hour… you won’t want them to. In an hour, you’ll be one of us.
As Pandora learned, disruptive technology cannot be returned to its packaging; once out, it can only be adjusted to. With broadband ubiquitous, servers powerful, and established high-capitalization entities like Airbnb already deeply embedded in their markets, Short-Stay Rental is a new permanent model, if only because the SSR landlords are so numerous they are now a political veto to any form of aggressive banning.
Everyone accepts that weekend or week-long flat rentals are here to stay. They bring in new tourists and are a welcome source of revenue to thousands of people.
Each of the three possible outcomes referenced in Section 5 can be envisioned.
Outcome 1: Overrun. This is happening now – cities are being overrun by Airbnb and other Short Stay Rentals.
Stop us if you can
If they proliferate unchecked, then SSR’s will penetrate every neighborhood at least until they have reached tourist equilibrium within the city, and for cities like Paris, whose businesses have long since decamped to La Defense and other enclaves, that will mean central Paris has become one big historic theme park.
You’d better decide we’re an attraction …because we’re not leaving
It only encourages them
It will also mean the death of urban zoning, or at least that the SSR form of use trumps zoning.
Outcome 2: Extermination. Some cities, like Paris, are trying to exterminate SSRs by prosecuting individual landlords in hopes of frightening the herd. It won’t work; it’s like swatting flies.
Truly to kill the phenomenon, one must attack not the users but their source – the company itself, just as the attorneys general did with the tobacco litigation, the Obama Administration with the big banks. Undoubtedly Airbnb has long considered this possibility, and done everything it can to insulate itself against legal liability – I’m sure the unread fine print in an Airbnb listing agreement is a masterpiece of drafting – but as we’ve seen with the tobacco companies, or the big banks, perfect legal protection is no defense against an ambitious politician with a populist agenda.
By analyzing Airbnb bookings for private stays between Jan. 1, 2010, and June 2, 2014, Schneiderman was able to get a snapshot of how the service works in New York. The report revealed several key findings.
1. Gentrified neighborhoods like Greenwich Village, Soho, Chelsea and the Lower East Side accounted for more than 40% of Airbnb hosts’ revenue, or about $187 million.
2. More than 100 lessors controlled more than 10 different apartments that were rented out regularly through Airbnb. Together, these hosts booked 47,103 reservations and earned $59.4 million in revenue.
3. The most prolific user administered 272 unique listings, booked 3,024 reservations and made $6.8 million in revenue.
“Few Airbnb hosts appear to have filed the paperwork with New York City necessary to remit hotel-room-occupancy taxes,” the report said. “Nor did Airbnb collect any of the hotel taxes owed for the reviewed transactions.”
That’s good, but even better will be when Attorney General Schneiderman sues the company (or even indicts its principals) as an accessory before and after the fact of each violation of NYC’s registration and occupancy laws would enable the city to pursue a single-payer enormous judgment.
(He would certainly not be the first New York Attorney General to pursue a high-profile prosecution mainly to build public visibility and run for governor.)
He went from AG …
… to mayor
He went from AG …
… to governor
To just-start his campaign of vengeance and ambition, all Mr. Schneiderman will need, one may callously observe, will be a tragic circumstance arising in an Airbnb flat that will allow the attorney general to claim the moral high dudgeon.
And before Airbnb claims it’s too big to fail, perhaps it should consider Enron or Arthur Andersen.
That brings us to the third possible outcome, one whose outlines appear to be emerging.
Outcome 3: Redefinition and modus vivendi. As between the SSR networks, exemplified by Airbnb, and their host cities such as Paris or New York, each can be killed by the other.
A sufficiently outraged city could enforce its current zoning, fine every Airbnb landlord, start a massive class-action lawsuit against the company, and put the full power of government against the pernicious threat.
Bill Gates giving deposition testimony in US v. Microsoft
For instance, think Microsoft v. European Commission, or US v. IBM, filed on the last day of the Johnson Administration and then enduring for over a decade:
The case went to trial six years later and dragged out for another six years. The trial transcript contained more than 104,400 pages, and thousands of documents were placed in the record. Then, in January 1982, after 13 years of litigation, at a cost to the Government of between $1 million and $2 million for each year, the antitrust division dismissed the case as being ”without merit.” One of the longest and costliest antitrust cases in history, a case the authors of this book describe as ”a juggernaut out of control,” ended with an embarrassing whimper.
On the other hand, a sufficiently outraged consumer service could use its marketing, advertising, legal, and buyer power to vilify the elected officials seeking to ban the company, and could almost certainly ensure they’d be voted out of office or pressured to abandon their extinction threat.
It’s Mutually Assured Destruction, unprofitable for the company, unpolitical for the elected officials.
Shall we play?
The cities know they’re on the wrong side of technology, and that the technological disruption has destroyed their ability to stamp out the infestation. Now they’re stuck with it.
Small species (viruses, bacteria, insects) can be diseases, parasites, or symbiotes, and evolutionary biology is full of examples where Small Species A invaded larger Animal B, then found ways not to attack the body it invaded but support and even protect it. Eukaryotic cells evolved out of symbiosis of prokaryotic cells into protoplasm; gut bacteria do the same thing on a larger scale. Birds and bees pollinate plants, which pay for their reproduction with nutrients. It’s called mutualism. Dogs and horses have much better reproductive and survival rates than their non-domesticable cousins coyotes and zebras.
A rich man’s oddity: Walter Rothschild and his one-of-a-kind zebra carriage
And while the business model of plagues is flashy, in the long run human gut flora have the better arrangement.
Just think of us as a specialized biological value chain, okay?
Species (like Airbnb) can be domesticated (by cities) in mutualism arrangements (regulatory and tax structures) if they meet seven criteria:
1. Serves both the master and the animals. Notwithstanding shortsighted or sectoral people who see only the invasive species, not its benefits, Short Stay Rentals improve cities because they boost the economy (bringing in tourists, jobs, and businesses) at the same time that they increase the effective utilization rate of the built residential environment. Thus there’s a clear mutualist case for enabling SSRs so long as they are domesticated. And for the companies like Airbnb, cities are prime territory – essential territory – where there’s a vast and reliable volume of newcomers seeking accommodation, and a large enough built environment of properties to provide continuing supply of flats to rent.
2. Cannot be picky eaters. Airbnb tolerates a wide range of possible hosting sites and landlords.
3. Reach maturity quickly. The web has enabled Airbnb, Uber, and Lyft, to get to critical mass within a city before elected officials can create to them.
“We should not deny thousands of New Yorkers the chance to share their homes, pay their bills and stay in the city they love,” Airbnb said in a statement.
4. Willing to breed in captivity. The companies need to ‘take the bridle’ and accept the structure of regulation as a basis for further expansion within a city and to other cities.
6. Cannot have a strong tendency to panic and flee. Once a company has dominant position and market capitalization, it will want to remain on good terms with its host city.
“We need to work together on some sensible rules that stop bad actors and protect regular people who simply want to share the home in which they live,” said Airbnb’s statement.
7. Conform to a social hierarchy. The companies have a corporate structure, including CEO and board of directors, so there is a governance system already in place.
In the case of the Short Stay Rentals (invasive species) versus their cities’ zoning (host organism), mutualism must be the outcome, something along the following lines:
Yet, even as there may be a mutualist endgame for the Short Stay Rentals, cities must beware: Invasive creatures come in many species:
A lawsuit filed by taxi owners claiming Boston and state officials are violating their rights by allowing ride-sharing services like Uber and Lyft to skirt regulations they must follow faces an uphill battle, legal experts say.
“I think they would have a very difficult time proving they were being treated unequally,” said Janice Griffith, a law professor at Suffolk University. “It’s very difficult to overturn regulations that a state makes.”
She betta now. Much betta now
Mr. Tong: No, no… she all right. She betta now. Much betta now.