Cutesy Story Bears No Resemblance To Current Business Model

Sir, Over lunch with Airbnb chief Brian Chesky (Life & Arts December 27), Tim Bradshaw refers to Eric Schneiderman, who is investigating Airbnb's business practices, as New York City's attorney-general. Mr Schneiderman is New York State's attorney-general. A minor instance of sloppiness, to be sure, but facts matter, and the Lunch omitted facts that your readers need to know.

The cutesy founder's story that Mr Chesky proffers — "renting out airbeds in his shared apartment" —bears little resemblance to Airbnb's current business model. In its most profitable global-city markets, including New York, Airbnb makes money not through quirky folk wanting to rent out space in their living rooms to other quirky folk, but through property owners and tenants transforming entire empty apartments into de-facto hotel suites.

Besides being incontrovertibly illegal —New York zoning laws requires 30-day minimum occupancy of residential homes, a bare fact that Mr Bradshaw vaguely elides — this practice takes permanent housing from New York's scarce supply and transforms it into transient housing. This strategy is not disruption of failed regulations, but disruption of a democracy's right to set and enforce zoning laws, a governmental power only an anarchist would deny.

One would think that a newspaper devoted to finance and economics would note the economic externality involved in Airbnb's business model. As two-thirds of New York housing is rental housing in apartment buildings, a property owner or tenant who transforms his apartment into a shortterm stay unit exposes fellow residents in his building involuntarily to the dangers that transient occupants bring. There is a reason why hotel chains invest in expensive and redundant security systems. People behave differently when travelling and they expose themselves to different risks.

Mr Chesky claims "Airbnb is actually helping less-well-off residents" by allowing them to make money to afford to stay in their homes. A New York renter may indeed feel like a genius if he pays $1,500 in rent for an apartment and can earn $6,000 a month by turning that apartment into a hotel room. He is only a genius, though, until his landlord inevitably figures out that he can cut out the middleman altogether. The idea that the tenant adds any value to this transaction is a useful illusion for Airbnb — nothing more. It is the urban property that holds value, not its leaseholder.

This piece originally appeared in Financial Times

This piece originally appeared in Financial Times