Why No One is Buying into the AirBnB Pity Party

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.

10 thoughts on “Why No One is Buying into the AirBnB Pity Party

    1. I use Airbnb because if I didn’t my hotel would lose business. I hope that all these cut rate illegitimate business go out of business. Our business is hard enough without having to compete with these cut rate profiteers.

    2. I think that you are a spiteful little twat! There are thousands of hosts worldwide, like me, who were dedicated to creating affordable, high quality, stylish homes away from home and wonderful experiences for families to stay. Those families would otherwise never have been able to afford to travel and pay overinflated hotel prices. Airbnb helped me pay the mortgage for my own home, helped me get myself out of depression after I lost nearly everything I worked for, after crisis of 2008. I started with just my spare bedroom amd gradually rebuilt my life as I forged a new rewarding career, redesigning holiday lets, meeting great people from all over the world,many of whom became repeat guests. People notoced how good I was at this and started giving me their empty flats to design and manage. The flats, were never going to be available on long-term rental market anyway. They were usially second homes of people who often moved abroad for a job, who wanted a flexibility of having an income from their property but also being able to come and stay themselves whenever they would come to London. I didn’t become rich through this. I simply rebuilt my life, when I thought my world crumbled for good. I was doing ok and was happy. Paid off my debts and even made some savings. Managing Airbnb flats was hard work but I loved it. Hence 7 years Superhost with 100s of 5* reviews. There were 1000s of hosts like me. We worked hard, we enjoyed it, we paid taxes. What you also forget in your vitriol filled one-sided view, is that Airbnb opened a whole auxiliary job market, as companies providing services to hosts like me, from hotel quality linens, to cleaning, toiletries, key security, etc etc employ 1000s of people who otherwise would be on benefits. All those people will be queueing for benefit handouts instead of contributing to country’s taxes, if Airbnb and holiday let market falls. When I was buying my first ever flat at 35, London properties were just as unaffordable in comparison to salaries, as they are now. But unlike You millenials, who think that you can just sit on the beach with your laptops „working” and you will earn enough to buy a condo, I worked my arse off in 14- hr days at a gruelling job at the bank to earn enogh for a deposit. I didn’t fly out to Ibiza for weekends, buy endless fast fashion or eat put every night. I libed like a monk for solid 2 years to save up and that is how I bought my 1st apartment. So stop this selfish hatred towards us hosts, fuelled by feeling sorry for yourself that you can’t afford a condo in prime location Toronto. Roll up your sleeves, like I did, buy in a cheaper neighbourhood 1st and work your way to that prime location. Every city needs tourism for prosperity. They stop coming, cities loose massive revenue. And If all those small auxiliary businesses fall with fall of Airbnb, that you so wish for, things will only get worse. So think beyond your own needs and think about 1000s of people loosing jobs. Spoiled millennial brat!

      1. Tamara, your opening sentence speaks volumes, I hope all Air BnB hosts can take the losses on the way down just like they had profits on the way up. I there going to be a bailout in my TFSA speculation portfolio? No I don’t think so, you sound like you would love Lemon Socialism. Privatize profits and Socialize losses, while distorting House prices.

        Steph, Great Article! thank you

    3. Unfortunately, the condos that come off AirBnb won’t be used for affordable housing they will be used for luxury housing because of their high cost. The people you should ‘blame’ are the developers charging so much per unit. The anti-Airbnb lobby was supposed to be a poverty coalition but they were really a hotel lobby that didn’t want low prices for millenial tourists. Also the Landlord Tenant Board often sides with non paying tenants and landlords have had to charge more to make up for their losses.

  1. I have to agree with the writer on this one. I’m an Airbnb host myself, but we were willing to let our guests cancel before we knew Airbnb wouldn’t ding us. We lose a lot of rentals to the condos that opened up on the beach. Only one couple lives in the building of 9 condos. The rest are Airbnb micro hotels. I noticed recently that two are now for sale. It’s getting difficult for new buyers in our market too on the gulf coast of Mississippi.

    I’ll be furious if Airbnb gets a bailout. It’s a high risk high reward business. They shouldn’t be allowed to forego the risk!

  2. This opinion piece has been posted to the “Metro Vancouver Housing Collapse” Facebook group; feel free to join and share in the information/discussions along with 8,769 others since 11/11/17.

Leave a Reply