
The Rise and Fall of a Multimillion-Dollar Airbnb Scheme - ryan_j_naughton
https://www.nytimes.com/2019/02/23/nyregion/airbnb-nyc-law.html
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zaroth
Having stayed in AirBnB-type listings when traveling with my family, it’s
clear to me that there is a huge market need for short term home rentals, and
we should figure out how to do this without stomping on neighbors or pricing
out locals in the process.

There are a lot of positive externalities to families and larger groups coming
to a city and spending their money.

When I need 3 adjoining bedrooms and a space that will take dogs, a hotel is
going to cost an absolute fortune in comparison or be actually impossible to
find.

Here’s to hoping there’s a happy medium to be found with the right combination
of technology and regulation.

For example, what about a condo bylaws which granted the right to rent a unit
but with a 20% per night fee which goes to reducing condo fees for the rest of
the building. There’s a reasonable number which covers the externality.

As far as housing stock is concerned, that’s perhaps a trickier problem. I
think it’s probably easier to quantify how many units are not available for a
local rental and harder to quantify the economic positive value of the rental
to locals, and so it’s an easy scapegoat for property prices which were
probably overly high to begin with.

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brianwawok
How though? What is the proposal to not hit NIMBYism?

I am generally very liberal with what I think homeowners should be allowed to
do. But an apartment or condo next to, or above mine with a rotating crew of
guests? I shouldn't need to put up with that unless I agree to it in writing
before starting my lease.

There IS existing space marked out for hotels. If it were a profitable
business, why has no one starting build hotel 'houses' to rent for visitors?

The reason is IMO price, it would be very expensive to rent out a hotel
"house". The reason the AirBnB is cheap is that you are making others eat your
negative externalities (i.e. the guys under you get to deal with 2am
stomping).

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beerlord
No, the reason is that to-date there had not been a global platform available.
AirBNB benefits from a massive global economy of scale. I can use the same
platform in America, Germany, Australia, Bulgaria.

First one to scale wins.

~~~
kuhhk
Wasn’t VRBO available (globally) long before AirBnB? I thought AirBnB just
stole the idea and had the VC capital to scale it

~~~
brianwawok
Correct, VRBO has been around a while. They do not aggressively go after
getting units in towns that do not allow short term rentals, like AirBnB does.

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kirse
Always interesting to see when the disruptor becomes the disrupted (AirBnb's
One-Host One-Home policy), and then suddenly bending the rules is an issue.

You'd figure AirBnb would remember their days of being a rebellious teenager
and provide legal assistance to these enterprising disruptors. Then again,
maybe there's an AirBnb shell corp legal defense fund.

~~~
duxup
I'm not sure there is much legal support that would change much. Unless they
can somehow get someone decide that the laws in question don't apply or are
not appropriate laws.

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ryanmarsh
_“We’re not criminals,” he said at his lawyer’s office, while puffing from a
Juul he kept in a black leather pouch fastened to a chain around his neck. He
shrugged: “I don’t own a yacht or a big penthouse.”_

So you’re only a criminal if the haul is large?

~~~
CodeWriter23
No. What he’s saying is NYC focuses on prosecuting criminals like him who
don’t have Wall St. level financial and legal resources to fight back with.

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lordnacho
Why doesn't the city just make a law that fines Airbnb if they offer something
they don't like? Is that impossible or did I miss it?

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tnolet
No, Paris just fined AirBnB $14M.

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ddebernardy
... which (unfortunately?) is a rounding error for AirBnB.

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crowbahr
It is, but they could continue to do it.

Losing 14M a year on a market could be a problem eventually. Especially if the
fines increase with recurring issues.

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jakelarkin
financial illiteracy is a real problem in journalism. You can't really judge
how egregious/successful these guys were without knowing the annualized NET
revenue of this business.

~~~
kaikai
I'm sure that will be a hot topic during the trial

~~~
astura
And we don't even know if those numbers have been released to the public yet.
(they probably haven't since expenses take a while to compile, whereas
deposits into a bank account are easy to count)

Eevenue is a useful measurement of how large the operation was.

There is some information about profit in the article:

>The rent for one apartment was $3,225, but it was on Airbnb for $250 a night.
Hypothetically, Mr. Beckman could cover a month’s rent by filling it with
tourists for about two weeks. In just a few months, Mr. Beckman had booked
more than 500 guests and generated about $84,000 from the building at 78 East
119th Street, according to the city’s lawsuit.

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matchbok
More bad behavior that is encouraged by the AirBnb leadership. Disgusting.
They could solve this problem overnight with their software but choose not to
because it makes ~70% of their revenue, while at the same time claiming they
are a "home-sharing" site.

AirBnb needs to go into the trash. They consume resources and push costs onto
the community and neighbors, while making millions.

~~~
smallgovt
> They could solve this problem overnight with their software

Can you expand on what the software solution would look like here? I'm curious
why the hotel lobby doesn't scrape Airbnb and report all the properties that
are breaking regulation.

~~~
matchbok
Eliminating all listings without a host present would solve 99% of these
problems. That's what the site sells itself as, anyway. Problem is there isn't
much money to be made there.

Or just do a tiny bit of host/property verification. Again, too much money to
be made from illegal/unzoned hotels.

~~~
smallgovt
I see. So, the legality of short-term rentals in NYC hinge on the presence of
the host during the rental. And, that's not easily detectable by just scraping
Airbnb.

I still think it'd be straight forward to scrape reviews off Airbnb that have
telltale signs of the host not being present e.g. lockbox mentions. Filing
complaints/lawsuits against even a small minority should create a chilling
effect for everyone else who's running illegal hotels.

~~~
xkcd-sucks
Or, in a high density environment like NYC, prediction from scraped listings
plus an actual person who verifies the host's absence and records it. Work on
contract for... "The hotel industry consortium", idk how that works. It sounds
fun if the market is big enough

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ErikAugust
No paywall, no JavaScript, reduces page load ten fold:
[https://beta.trimread.com/articles/127](https://beta.trimread.com/articles/127)

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smallgovt
I can't help but feel bad for this guy. The city will try to make an example
out of him while all the other rule-breakers will get off scott free.

There are hundreds if not thousands of other business schemes just like this
one going on right now on Airbnb.

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jimrhods23
I don't really thing what this guy did was a bad thing: He had positive
reviews, multiple maids to cleanup after guests, and willingly broke leases
and lost money when there were complaints.

~~~
cortesoft
Sure, the people renting from him loved it; the neighbors, however, had to
suffer. The reason we have hotel regulations is to help mitigate the
externalities that hotel operations put on the nearby community. This guy was
bypassing all of those.

There are more people involved in the transaction than just the renter and the
rentee.

~~~
asdffdsa
Same thing with uber and taxi operations right?

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jacques_chester
> _Airbnb condemned the exploitation of its platform_

Actions -- or inactions -- speak louder than words.

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alexandercrohde
I don't like how the article implicitly takes the city's side. Breaking
monopolies is usually a good, just like uber and taxis.

~~~
duxup
Is there a monopoly to break? Are all hotels in NY owned by the same group?

There are other issues as well of course, that Airbnb guests (and the owners)
who are running a hotel don't care at all if their guests bother the
neighbors, leave trash outside, etc.

It might be New York City, but it's also a community deciding how things are
laid out and work, how they gather taxes, and etc in their city.

~~~
notmyaccount
If all the hotel, taxi, etc. owners group up to create a cartel to keep the
status quo and not to disrupt the market, then that is also not exactly good.

The choice of a community does not necessarily mean that it is the right
choice.

~~~
notahacker
I'm not convinced the people with resources to make $20m in hotel revenues
from 18 shell corporations are the little guy being stamped on and the
neighbours being buzzed by people wanting hotel service are the Big Bad
Corporation here...

~~~
notmyaccount
I am not saying that they should go on breaking the laws. The laws are clear.
But at certain times, the laws have been deliberately lobbied to create a
hindrance for any new players in the market. Like in this case, applying for a
permit to rent out apartments should have been much easier than the current
cumbersome process is.

Like NY Taxi Medallions. Before Uber, Lyft or other ride-sharing apps, there
was only 13,587 yellow cabs in the city of 8.5 million people. Currently,
there are an estimated 100,000 cabs in the city which resulted in a drop of
medallion prices from $1.4 million in 2014 to just $140,000 now. It was an
artificial bubble created by the taxi drivers community (and government) to
keep the medallion price inflated. It is easy to see why they were against
ride-sharing apps.

Or California housing zones. We all know that California has a housing crisis
and one of the potential solution is to have multi-story buildings. For that,
we need easy rezoning of residential zones to allow multi-story building
redevelopment. However, most of the community members refuse to allow for that
since it would bring down the rent and property prices. So the community is
not interested in allowing easy development of multi-story buildings.

~~~
jacques_chester
Breaking the law because you find it morally repugnant is one thing.

Breaking the law for a buck is a very different thing.

~~~
notmyaccount
Haha. I mean yes I kinda agree with what you said.

