One Woman Against AirBnb is a Hollow Victory in New Orleans

New Orleans   I wanted to share what I hoped was a simple story of one woman’s persistence prevailing over a giant, rogue company and the ineffectual enforcement by a city of its regulations governing the company.

That story had as its activist, community hero a woman named Ada Phleger, a young attorney in the Federal Public Defender’s office in New Orleans.  Phleger had lived in the St. Claude neighborhood, where Fair Grinds Coffeehouse second location sits on the border.  She had lived in the area for eight years and moved into her current house recently.  When she moved there recently there were two whole-home short-term rentals on the block.  Then there were three.  She drew a line to fight when the fourth emerged, so began to try to beat the permit before there were guests.

The company is both on AirBnb and managed by Boston outfit, called Heirloom or Stayloom, owned by Frank and Dan Glaser, for some owners and on its own account.  They claim 100 properties in New Orleans, Boston, and New York according to research by The Lens, the local on-line news service.  Sixty-seven of the properties are in New Orleans.  The Lens, following up on Phleger’s fight, found the addresses on 34 with 19 having either no permits or expired permits.

Phleger’s fight was Biblical.  She kept reporting them to the city for violations and then having to get videos when photos of guests were not enough, the months drug on, and guests piled in with no enforcement action.  Finally, in frustration she used her mother’s AirBnb account and hosted a dinner party there for a family birthday party to prove it was being rented and to photograph the inside, establishing that no owner lived there.  Finally, the city canceled their permit since none of the requirements were being met.  There were stories in the local papers and on television one woman’s victory over corporate and governmental ineptness.  She was interviewed by NPR.

All good, but…

Reading more deeply in the stories and the Lens reporting, there’s no question that Phleger was a freedom fighter here.  That piece of the puzzle remains in place.   Some of the other pieces though don’t fit as well.

The city was not as inept and unresponsive as it seemed.  The initial regulations appear to have been Swiss cheese with as many gaping holes and, even worse, they were written so vaguely that the information AirBnb and other operators were supposed to provide was opaque and didn’t allow real enforcement.

AirBnb had touted the deal with the former administration of Mayor Mitch Landrieu as a pacesetter in the industry, attempting to establish that they could work with a city and play by the rules.  They did eliminate 3000 listings, but after that it seems they drove a truck through the holes in the regulations, which also allowed outfits like Stayloom doing mass-rentals to exploit the language as well.  All of which made the city look like chumps, re-enforcing the conservative narrative of ineffectual local government, when a closer look tells the old story about the devil being in the details, regardless of the headlines.

The local councilwoman claims that regulations close some of the loopholes.  Now, the question might be whether or not New Orleans – or any city really – can keep up with a floating crap game, supported by visiting consumers and some homeowners trying to make their own mortgages, and exploited by rapacious companies with money to gain and little to lose.

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Computerized House Flippers and Conflicting Interests

New Orleans       It was bad enough when Wall Street sharpies like Blackstone started buying tranches of foreclosed houses in the suburbs to paint, rent, and then cash out.  Now, algorithms are being deployed for house flippers.  What could go right or wrong with this picture?

A story in the Wall Street Journal claimed that metro Phoenix is ground zero for the future of home purchases.  More than 5% of the home sales in 2018 involving 5000 properties were made by companies launching computer driven, algorithm powered approaches to the market.  Opendoor, a San Francisco startup, Zillow, the listing and area pricing web giant, and Offerpad are breaking this ground.

The Journal walked the reader through the new world:

“At the edge of the city’s stucco sprawl, a beige, three-bedroom house with a gravel yard sold last month for $240,000.  The seller, Opendoor Labs, Inc. paid $215,000 for the house in January, replaced carpet and repainted, and put it back on the market.  A computer told the company what to offer and how much to ask.  There was no need to schedule a showing with a real-estate agent.  Prospective buyers of Opendoor homes can download an app to unlock the door.”

Wham, bam, thank you Alexa, Siri, or whatever they call their thing!

What is it about Phoenix?  The city can’t catch a break.  First, the sketchy boom and then the bust over a decade ago, and just as things begin to even out again, here come the techies.

Sadly, real estate agents and realtors are a bit like taxi drivers in the love-hate relationship they maintain with consumers.  There are over two-millions of them and 1.3 million are actually licensed realtors with access to multi-listings and supposedly a code of ethics.  Even if you like your person, you know she only gets her slice if you buy or sell, so her self-interest and yours are always in conflict, and her advice always comes with many grains of salt.

Many consumers would be delighted to bring the Airbnb model to home buying, although that’s sobering for more than just the loss of jobs.  Airbnb now slants its algorithm to favor listings at its demand price and destinations.   What is there to keep Zillow from favoring the houses it owns on its listings compared to the rest of the field?  Nothing!

Add to the mayhem this disruption will bring is the fact that algorithms will undoubtedly not be limited to purchase and sales prices, but also to rents, which is surely what Blackstone is doing for its 80,000 properties.  Tell me that won’t accelerate gentrification and community mayhem.  Is there a better argument for rent controls? I can’t think of anything else off hand that will stop predatory practices.

Looking at the Uber model, we would have to predict that it would just be a matter of time before the fixed agent price of 7% or whatever would fall like a house of cards.  The companies win and base their business model on volume, which almost always favors price cutting, and that’s the easiest piece to cut.

Hey, you might say, it can’t happen here.  Opendoor is now in 23 cities and is targeting another 27 by next year.  Zillow claims it will be buying 5000 houses per month. Think again!

We need to get ahead of the e-world coming to home and apartment purchase and rental or the consequences could be huge.

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