• October 2018
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What is the state of Airbnb’s regulatory position in U.S. markets? Is there still meaningful risk?

The regularly position of Airbnb continues to get stronger as time goes on for a few reasons:

Airbnb does a great job at giving back to the community and its hosts. From pulling off community service projects, to providing free housing to victims of natural disasters, Airbnb certainly hired some talented PR professionals. Airbnb is also conscious of the perpetual view that it harms the hotel industry. This is due to a well funded coalition of landlords and hotel industry leaders who spends millions on a campaign attempting to tear Airbnb apart. In an effort to combat this idea, Airbnb has spent considerable funds to complete studies on this proposition, which all seem to show a miniscule, if any, effect on the hotel industry. In an interesting move in England, Airbnb has teamed up with a college to transition the school’s empty dorm rooms to Airbnb rental rooms. The college is open to this “higher ed initiative” because of its underfunding. This shows how Airbnb is constantly thinking of creative ways to engage the communities it conducts business in. When a company demonstrates compassion and interest for its local communities then that only pressures the local politicians to buy in as well.

Airbnb is establishing relationships with local leaders. Because occupancy laws in the U.S. are managed on a municipal level, Airbnb is making an effort to “win over” those local governments. In fact, Chris Lehane, Airbnb’s Head of Global Policy and Public Affairs spoke with hundreds of American mayors in at the U.S. Conference of Mayors in January 2016. Lehane made a convincing pitch, saying that if the 50 largest US cities were to team up with Airbnb to collect taxes, they could have received an estimated $200 million in taxes as a whole from Airbnb last year. To date, Airbnb has brokered these voluntary collection agreements in more than 100 cities around the world. On April 12, Newark, New Jersey’s became the latest municipality to sign a tax agreement with Airbnb. Which brings me to my next point.

Airbnb is facilitating the payment of taxes. Many governments are putting up a front when it comes to sharing-type startups because leaders simply don’t know how to regulate and tax them. Well, Airbnb has taken it upon themselves to ensure the local governments are receiving their fair share of taxes from each stay. Although most governments have come out and said Airbnb itself is not responsible for paying the taxes, Airbnb reminds hosts in its Terms of Service to abide by all applicable laws  and taxes. In some instances Airbnb even supplements a host’s tax obligation. Thus, local politicians are becoming more open to the idea of Airbnb because it is making an effort to pay taxes even if they aren’t liable as an entity.

Meaningful risk remains but not as much as say Uber, and that’s due to:

The uncertainty of local laws moving forward. I’m not jumping on board with the argument that Congress is going to step in and make a move. Although Congress is controlled by lobbyists, the ride/housing share companies, like hotel companies, have a bunch of money to throw their way to avoid meaningful regulation. Also, Airbnb’s service remain on a local basis more than say its compadre Uber, which greatly implicates the Commerce Clause when a customer requests a ride from NY to NJ. Moreover, unlike Uber, Airbnb doesn’t have to deal with the whole employee/employer distinction that continues to pose problems for Uber.

However, just like a the group of mayors seemed to band together to agree on the tax system with Airbnb, they could always do the same in opposition to Airbnb. There’s no hiding the fact that there have been some problems along the way for Airbnb. I believe that if these problems continue to grow and intensify then politicians may think twice due to the safety concerns that follow Airbnb. But then again I’m sure Airbnb would respond by adding more safety features by vetting hosts. You just never know what could happen next for a seemingly unregulated industry.

Airbnb’s fearlessness. Typically seen as a strength for a company, I think Airbnb’s boldness could pose problems for them. This is reflected in Airbnb’s presence in Israel. Recently at the TechCrunch Disrupt conference in New York, a protesterinterrupted a speech by holding a “Airbnb Hosts Apartheid” sign on stage. Airbnb’s expansion into Israel is controversial for a few reasons. One reason is because some of the hosts are located on illegal settlements. Another is that there are reports that hosts are refusing to rent to Arabic sounding names. The latter is what I think could eventually balloon for Airbnb. Just like hotels and landlords are prohibited from discriminating from prospective customers, Airbnb (and its hosts) may start seeing some discrimination suits if they don’t start monitoring the possible prejudicial treatment by its hosts. Yet it’s quite possible that Airbnb falls through the cracks of any anti-discrimination statute by virtue of being neither a hotel or landlord.

I hope you enjoyed my thoughts!

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