Industry NewsLandlords Running Unregulated Airbnb Hotels

Landlords Running Unregulated Airbnb Hotels

A growing number of commercial landlords are using Airbnb to run unregulated hotels in major cities, a new study released by the American Hotel & Lodging Association claims. The report, which was conducted by researchers at Penn State University’s School of Hospitality Management, shows that nearly 30 percent ($378 million) of Airbnb’s revenue in 12 major U.S. markets comes from full-time operators, who have rentals available 360 days a year.

According to the study, each of these operators averaged more than $140,000 in revenue during a 13-month period (September 2014–September 2015). The cities with the largest number of full-time operators include New York and Miami on the East Coast and Los Angeles and San Francisco on the West Coast. Individuals or entities renting out two or more residential properties on Airbnb account for 17 percent of hosts in the 12 cities studied, the report also found. This growing segment of multi-unit operators drives nearly 40 percent of the revenue in those markets, which equates to more than half a billion dollars a year, said Dr. John O’Neill, professor and director of the Center for Hospitality Real Estate Strategy at Pennsylvania State University, who directed the research.

“Professional operators are growing in every single market we studied,” O’Neill said during a press conference. “While they are a small proportion of hosts, they generate a disproportionately large share of revenue.”

While the hotel industry thrives on competition, AH&LA believes new players in the market like Airbnb are obligated to play by the same rules, said Katherine Lugar, president and CEO of the association. “All too often, these corporate landlords are using Airbnb and other platforms to dodge taxes, skirt the laws, and flout basic health and safety standards,” she said.

Airbnb challenged the report’s findings, claiming the majority of its hosts are middle-class individuals who occasionally share only the home in which they live. “This report uses misleading data to make false claims and attack middle-class families who share their homes and use the money they earn to pay the bills,” a company spokesperson told multiple news outlets.

Lugar pointed out that the study is not focused on individuals who occasionally rent out their homes to earn extra cash. “A significant and growing part of Airbnb’s inventory is run by entities who are certainly not ‘sharing’ at all. Rather they’re corporate landlords engaged in clear commercial activities,” she said. “In many cases they are running illegal hotels and they are not adhering to the same laws that even the smallest of legitimate beds and breakfasts do.” Lugar said companies like Airbnb, which is valued at more than $25 billion and has more than 2 million listings worldwide, want “the face of Main Street and the wallet of Wall Street.”

The explosion of commercial operations poses serious policy challenges in communities with respect to neighborhood safety and security as well as the supply of affordable housing, Lugar added. “With this new data we are respectfully calling on officials of every level of government to ensure that commercial lodging occurs on a level and legal playing field. We ask them to take action to protect consumers, neighborhoods, and communities alike. And to ensure this unregulated and in some places illegal activity comes to a stop.”

Ellen Davidson, a staff attorney with the Legal Aid Society’s civil law reform unit in Brooklyn, discussed the impact corporate landlords have on affordable housing in New York City, where two-thirds of the housing stock consists of rental units. Instead of signing traditional long-term leases with low-income tenants, more corporate landlords are renting their units on Airbnb, Davidson said. This not only takes units off the market, but also drives up rent prices. “What Airbnb has done is create a dangerous underground market that gives hundreds of New Yorkers the ability to become illegal hotel operators,” she said.

The problem is not limited to New York City; Airbnb and illegal hotels pose a threat to housing markets nationwide, Davidson said. “Affordable housing is the bedrock of our communities, but with increasingly limited supply and consistently higher rents, that foundation is rapidly crumbling.”

The data used in the report was sourced from Airdna, which tracks Airbnb revenue and operations and provides pricing and revenue data to Airbnb operators. The research team analyzed more than 400,000 lines of data with over 9.5 million variables for the study. Cities included in the sample were New York, Chicago, Los Angeles, Philadelphia, Miami, Houston, Dallas, Phoenix, San Antonio, San Diego, San Fran, and Washington, D.C.

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