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Should You Worry About Airbnb?

Should You Worry About Airbnb?

The company sometimes seems to be in a race to stay ahead of regulatory shortfalls. For example, Airbnb recently asked all properties listed on the site to prove they have working smoke and carbon monoxide detectors installed by the end of this year. Also, all transactions are handled through the site ahead of time. On top of that, the company does verify the identities of its hosts using a blend of methods, including links to social networks, driver’s license scans, photos, and contact information. With these measures in place, Airbnb hopes it can keep the personal and financial risk to guests relatively low.

Nonetheless, because there is no centralized brand control, the reviews from users who have stayed at an Airbnb property, while generally positive, are as mixed as the properties themselves. Negative reviews cite everything from finding there’s no hot water in the villa in Southern France to a blogger’s discovery of nude photographs throughout the apartment she rented in Seattle’s Queen Anne neighborhood.

“Airbnb has done a good job curating what’s written about them on their own website,” says Joe Spinnato, president and CEO of the Hotel Association of New York City. “But you don’t have to go too far on the Internet to see lots of really horrifying stories of guest experiences, from prostitution rings, to trashed apartments, to sexual assaults, in Airbnb units. And part of the reason it’s more attractive for people to engage in this kind of behavior in private apartments is because they’re private—there’s no front desk and few cameras.”

But perhaps the greatest risk to participants in the Airbnb model is faced not by the guests but by the hosts. The company made news in June 2011 when one of its hosts, a San Francisco homeowner, returned to find her guest had destroyed her apartment, even sawing through walls to get at locked-away valuables. The company responded by reimbursing her for all the damages and then some, then instituted a $1 million guarantee to cover host losses in the future. But the damage to the company’s fragile experiment in trust was considerable.

“With a single booking,” said Chesky in the 2011 statement, “one person’s malicious actions victimized our host and undermined what had been—for 2 million nights—a case study demonstrating that people are fundamentally good.”

Then there are the third-party victims of errant guests—neighbors. A rash of noise complaints in San Francisco led David Chiu, president of the city’s board of supervisors, to call for action. In a statement citing “significant growth” in the use of web-based room sharing, he stressed the need to protect rent prices and address the emerging “quality-of-life concerns.”

There’s even a ballot initiative in the works that would reward San Francisco residents who turn in their Airbnb-host neighbors with up to 30 percent of the fines levied against them. The measure needs 10,000 signatures to get on the November ballot, which backers, including the city’s former planning commissioner Doug Engmann, argue is necessary to protect the city’s housing stock.

Thinking of a community in more fiscal terms, Estis Green points out that hoteliers and registered B&B operators are required to pay a variety of taxes and licensing fees. “That tax revenue supports the community,” she says. To the tune of more than $1.3 billion in annual city and state taxes from New York City hotels alone, Spinnato adds, and it provides 180,000 middle-class jobs.

Additionally, the building codes, fire inspections, food service licenses, zoning requirements, and raft of other regulations governing the hospitality industry go all but ignored by Airbnb hosts, many of whom are not even aware that either innkeeper or landlord/tenant law applies to them. It often does. Case in point, Spinatto says that there are “serious questions” as to whether Airbnb or its hosts have the proper liability insurance to cover their guests.

Until now, the gray market for room rentals, through sites like Craigslist or between acquaintances, never posed a serious or persistent threat to the established hotel industry. But low online room rental rates are made possible, largely by the fact that hosts aren’t burdened by the same regulatory weight as traditional hotels, even though, by law, they ought to be.

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