In London, Airbnb Surprises by Being Humble
(Bloomberg View) -- Despite their reputation as argumentative, litigious and impatient with regulation, "sharing economy" companies sometimes voluntarily go along with local rules to avoid even worse regulatory problems. Airbnb announced that, starting next spring, it will follow a directive in London that would make it impossible for hosts to rent out entire houses or apartments for more than 90 days a year.
That's surprising for Airbnb. Like Uber, the other pillar of the "sharing economy," the San Francisco-based company has battled or ignored cities' attempts to regulate it. This year, Berlin, which is experiencing an acute housing crisis, banned the short-term rental service, threatening landlords with fines of 100,000 euros ($106,650), but Airbnb has kept listing Berlin properties. Self-policing is something new -- it may just be a reaction to London Mayor Sadiq Khan's suggestions that national legislation should be passed to restrict Airbnb's growth, or it could be the beginning of a new trend toward more reasonable behavior.
Authorities in cities with housing shortages have long contended that Airbnb and its competitors make things worse by taking residences off the long-term rental market. That argument has come up in London, Berlin, Barcelona (where rents rose 33 percent in the last three years). Airbnb has countered that the housing shortages are not its fault, and backing up that assertion with data. In London, it has cited a recent study by the Institute for Public Policy Research, a left-wing think tank, which found that homes rented out on Airbnb represent only 1 percent of the city's total private housing stock. Even in central areas -- the City, Westminster, Kensington and Chelsea -- Airbnb uses only between 3 and 4 percent of housing stock.
It seems logical to accuse city authorities of singling out Airbnb for political reasons or because of pressure from hoteliers. After all, a Boston University study found in 2014 that growth in Airbnb listings resulted in falling hotel revenue. In London, Airbnb is a significant competitor to the hotel industry, according to a PricewaterhouseCoopers report. It's not a killer app, though: Despite the competition, the U.K. capital's hotel industry keeps growing, albeit at a little more than 2 percent a year. There are about 150,000 hotel rooms in London; though a whopping 40,000 homes were rented out through Airbnb in 2015, most of them were only available for a short time, not 365 days a year like hotel rooms.
There's room for Airbnb and other companies like it -- Onefinestay, Travelmob, Tripping.com -- in any big city. They are a nuisance to hotel chains, and taking even a few thousand apartments off an overheated market makes it that much worse. A short-term rental on an old, quiet residential block with its own traditions is a mild nuisance. But it's not a catastrophe to the world's biggest and most popular cities, not even a major problem. London, Berlin, Barcelona could just leave Airbnb and its imitators alone. There are two reasons they aren't doing so.
The first is that Airbnb doesn't solve any major problem for these cities, either. Arguably, it attracts more tourists, but then Barcelona, for example, doesn't want any more tourists: Locals are tired of their crude merrymaking and the price increases in their favorite watering holes. Likewise, Uber doesn't solve a problem when it enters a big city -- it just adds another option to many existing ones.
The other reason is that the sharing economy companies create bumps on what is otherwise a level playing field. Hoteliers and taxi companies jump through the required regulatory hoops, pay their fees and taxes. The Silicon Valley greats decline to do that and fight tooth and nail in the courts when the local authorities and the law-abiding competition object. In Europe, the concept of fairness is more important than in the U.S., especially where leftist parties rule. London, Berlin and Barcelona all have leftist mayors and city governments.
The likes of Airbnb and Uber need the big cities to grow and tell a compelling story to investors. The big cities don't really need the "sharing economy" companies. That realization should determine the relationships between the cities and the companies: The latter should try to be as unobtrusive as possible. Airbnb's intention to require London hosts to abide by the city's rules is a step in the right direction. Removing the Berlin listings and negotiating the rules of re-entry would be another one.
More such voluntary steps are needed from Uber and others. More litigation and public indignation, on the other hand, would be unhelpful.
This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.
To contact the author of this story: Leonid Bershidsky at email@example.com.