Airbnb’s Gray Market is Collapsing

Citizen Wealth Financial Justice

Pearl River     There were some pieces of the Airbnb business model that had appeal.  Homeowners that were willing to open their own homes to visiting guests seemed like it could build relationships and even, dare I say, community, especially when visiting foreign lands. Our family had that experience staying in Mexico City one Christmas and another time in a rural area of New Zealand, where we were clearly helping an elderly woman hang on to her place while we sat in a hot tub looking at a cow pasture.

Having a source of income for moderate income and working families also benefited not only the struggling homeowner, but brought some income into the community.  I stayed in the basement of a home in the same neighborhood I was working in Milwaukee last year for hardly twenty dollars a night, keeping me off of couches and out of hotels, and providing relief to both nonprofit budgets and a young guy trying to make his mortgage.  Even better, it later turned out that the organizer I was working with knew the guy, and they had worked together in the past.

Unfortunately, most of the Airbnb business model was not as advertised.  The business press talks about their “gray market,” but that’s a kind expression for a series of practices that attacked communities, rather than building them, by ignoring regulations and accelerating gentrification and distorting property values.  The mom-and-pops were replaced by predatory rental practices, owners with multiple properties or “mini-empires,” as the Wall Street Journal called them, and unsustainable developments propped up with the expectation of short-term, hotel-like rentals.  In New Orleans a former meat plant down the street from us was presented as a high-end condo conversion, but in fact the city permitted 72 of the 77 units as allowable short-term rentals.  How is that not a hotel?

Now in the pandemic time, as one resident said, “they must be losing their ass.”  Indeed, and they are not the only ones.  This business model is being bled out by the collapse of tourism.  The Journal reported that,

AirDNA estimates that a third of Airbnb’s U.S. listings for entire homes or apartments—excluding shared rooms—are by hosts with a single property. Another third are run by hosts with between two and 24 properties. The remaining third involve hosts with more than 25 properties.

The math is simply, and it adds up to two-thirds of the properties on Airbnb being a lot more than an extra room offered in a neighbor’s house.  These hosts are hurting, having made “a deal with the Devil,” as one said.

The company is hanging them all out to dry, desperate to save itself even with a smaller footprint.   According to the Washington Post, they are now trying to institute CDC-protocol cleaning procedures, pimped up by a former US Surgeon General as a consultant, and requiring a 24-hour vacancy period between rentals for those who agree, or a freezing the app for a 72-hour break for those hosts who do not follow the new system.

For big hosts desperate to make mortgage, insurance, tax, and other payments to stay alive, the new rules by Airbnb will shatter their calculations.  Expect to see many of them trying to get tenants, sell their properties, or simply going under.

Airbnb will try to save itself with this do-over, but it also offers beleaguered communities a chance to finally take back control of their housing, rental, and hotel markets and bring them into the light, rather than allowing them to be exploited in the dark with Airbnb’s help and support.


Please enjoy Memphis Rain by The HawtThorns.

Thanks to WAMF.