The AirBnB business model is legal until localities pass laws against it. The hotel and hotel union lobbies are pushing for most of these “laws”.
The District of Columbia recently proposed legislation that would “wipe out much of the home rental business.” According to the Foundation for Economic Education, the proposed measure would “[require] owners to
- submit their properties to a full inspection to ensure compliance with fire, health, building, and zoning codes, and ensure that the property complies with Americans with Disabilities Act requirements;
- send a notification letter to neighbors about their intent to rent out their property;
- operate the license under their personal name and not through a corporate entity;
- be present throughout the visitor’s stay; and
- only advertise through a hosting platform like Airbnb if they have a business license.”
This type of legislative language, though, captures more than just listing available rooms through online platforms like AirBnB. It also captures bed and breakfasts. It is, to use a legal term, overbroad.
When a proposed law captures more behavior than it is supposed to capture, the law is considered overbroad. In the case of the proposed D.C. legislation banning home sharing, it is overbroad because it effectively outlaws bed and breakfasts, which have been legal for a number of years and popular with tourists.
Overbroad laws reduce consumer choices as well. Currently in the district, as well as a number of states, consumers have the choice of staying in a hotel, a bed and breakfast, or utilizing a platform such as AirBnB or HomeAway. When a state, or the D.C. Council, votes to enact an overbroad law, it effectively removes competition by banning both bed and breakfasts and home sharing options. Consumers are left only with the option of staying in hotels.
If successful, consumers will not only loose options, they will also be forced to pay more for housing. Hotels will no longer have to compete against bed and breakfasts or those sharing their homes.
A quick search on AirBnB’s platform reveals a number of rooms available for a weekend at the end of June. The prices range from $58 a night for two occupants to $170 per night, with a median of about $140 per night. All of the rooms listed with a per night price above $100 have a four star rating, or higher. Similarly, a search for the same weekend on Hotels.com results in a number of hotels within a mile of Washington’s “city center.” Only a couple of the rooms listed fall under $100 per night. Both those hotel room receive a rating of 2.6 or lower. The price for most rooms falls between $140 and $400 per night, with the average hotel costing about $170 per night.
Consumers who choose to rent rooms through AirBnB versus selecting a hotel do so for a variety of reasons. They list cost savings and amenities, such as access to a washer and dryer, a kitchen, or family friendly as the primary reasons for selecting the option. When those consumers are tourists, they typically spend the money they save on food or on shopping.
The proposed legislation does not just harm consumers. It also harms district residents. The average Washingtonian increases his or her income by roughly $5,000 per year by offering a room through AirBnB. That extra income may be enough to afford a vacation, a car payment or to pay one’s taxes. With wages stagnating over the past few years, room sharing may provide home owners with much needed income relief.
These proposed laws have very little to do with consumer safety. Instead, they are lobbied for by industries that do not want competition from little guys—from individuals who own their own homes and from consumers who would prefer to stay in a house versus a hotel.
AirBnB and other similar home sharing platforms can save consumers significant sums—sums they could spend on dinner or other activities. It can help residents earn spare income, rather than letting rooms sit idle. As states listen to the hotel and hotel union lobbies rather than consumers, they move to make legal conduct illegal. They move to make home sharing more expensive. They move to restrict consumer choices at the behest of the hotel and hotel union lobbies.