The court of public opinion is a very delicate place, and a company like AirBnB – with all of the unsubtle characters that brought it success – show just how quickly an organization can find itself on the jury’s bad side.
AirBnB was founded in 2008, marketed as a discount accommodation service for cash-strapped travellers and a way to earn quick cash from your empty house if you decided to take off for a week or two. It also gave people operating a legitimate bed and breakfast a place to list their location.
Because Millennials fit the definition of ‘cash-strapped traveler’, the company found fast success, shooting up with a near-doubling amount of guest arrivals. It seemed like the company, and the hosts operating in its space, found an untapped market for people looking for cheap accommodations that didn’t have them hiding out in a hostel.
Then the opportunists came out…
I’m going to use Toronto as the case study of the AirBnB problem. I live here and have been somewhat on the receiving end of its less savory side effects, after all. The biggest problem with AirBnB is that it encouraged a swath of would-be landlords to take condos off of the long-term rental market and turn them into micro hotels. It wasn’t enough for people to just take pick up one condo as a secondary investment property. Using HELOCs, a miniscule down payment on each property, low interest rates, private lenders and loophole after loophole, these ‘investors’ would pick up two, three, or even more condos to list on the website.
Taking supply off the market and contributing to the already high velocity of real estate buying and selling, pushed property prices in the condo space up higher. Detached house prices were already elevated, arguably for Toronto’s booming population and the rampant house-flipping culture. Condos were the starter home that buyers of years’ past would use to get their first foot on the property ladder. Condos weren’t much, but they were an affordable alternative and they were a start.
Now condo prices are surging, Royal LePage reported a 7.9 per cent median price per-square-foot increase in Toronto from mid-2018 to 2019, showing a surge in that space. The growth was nearly double the growth seen on the national level. For condo buyers, it means they are easily priced out of the market. For young people looking to move out, it meant unaffordable rents. For landlords, it means that the rents they charge couldn’t possibly meet the unattainably high maintenance costs. So all of this investing into condos made it difficult to invest into condos profitably (or at all)… unless they turned it into an AirBnB listing.
I won’t say that AirBnB is the sole reason for making my hometown an unlivable place, but short-term rentals take up a significant part of the housing crisis tapestry.
This worked out well for them, never mind the harm they were doing to the rental markets in their home cities, or that many of their listings were illegal, or how they inconvenienced and accosted their neighbours with loud, partying guests. They would argue that they were entrepreneurs, free marketers, geniuses whose investment strategy was unparalleled. They were just meeting a market demand.
Then COVID-19 happened…
I’m not going to claim schadenfreude over the immediate loss of business that these AirBnB hosts were hit with when COVID-19 stopped travel to a halt – many people on the platform were probably legitimate users who followed the rules. I will not, however, hold any sympathy for the over-leveraged investors crying the blues about not being able to pay for their two, three, or more mortgages they’ve irresponsibly taken on. I don’t feel sorry that a business model that has made it that much harder for people to live in this city is now struggling. And I certainly don’t support the potential government bail-out that AirBnB has asked for to keep these hosts afloat. Most people in Toronto, and many other affected major cities, feel the same way.
These same ‘free-marketers’ and ‘entrepreneurs’ (who probably thought they were smarter than everyone and likely stood in the way of government regulations to curb short-term rentals to help people struggling to live in the city) are now the people lining up for a government hand-out so that they keep their investment proceeds coming in.
There was also this host furious at AirBnB for changing its cancellation policies, allowing guests to cancel booking free of charge. A lot of hosts seem to be throwing their own tantrums.
What people don’t seem to realize lately is this: You’re not entitled to a return on your investment. Let me repeat: you’re not entitled to a return on your investment.
Canadians, who already have to dig deep in their pockets to live in this city, won’t be eager to dig even deeper to lend a hand to the group that helped keep their housing costs high. I certainly won’t delight in handing over a chunk of my paycheck to the people who are pushing those in my age group out of their hometowns.
If there’s any silver lining to this awful, awful crisis at all, it’s that it could possibly end this micro-hotel business practice and stem the run-up in the Toronto housing market.
To be certain, I would never celebrate someone’s loss of income because of this crisis. But I’ll reserve my sympathy for people whose business hadn’t come at the cost of many people’s living standards over the past few years.