The Rise of Airbnb's Full-Time Landlords
bloomberg.com
bloomberg.com
Wow, that's slimy. I assume the leases he's signing, like pretty much all rental agreements, explicitly forbid unapproved sublets or guests staying more than a few days a month. So his get-rich-quick scheme (or "business plan") is to sign contracts he knows he will break, and hope he doesn't get caught until after he has come out ahead.
Sadly, it's often a good strategy to just breaking the law or an agreement, even with the risk of being caught.
You've just described Airbnb & Uber's entire business plan.
I agree my comment above doesn't fit Uber in such obvious way as it fits AirBnB, but Uber is actually sociopathic in its DNA, starting from top-level management[0]. A lot of things they did and do were based on abuse of trust and civility.
[0] - Source: scroll down to the bottom of this page, enter "Uber" in the search bar, and browse through relevant submissions from the last two years; we've covered all the antisocial behaviour of Uber and its management here, on HN.
But ok, random issues from the top of my head:
- sabotaging competition, hiring people to do this, facilitating mass cancellation of rides by providing them with burner iPhones and credit cards
- blatantly breaking local taxi regulations
- employee/contractor issues and related tax issues
- Uber management declaring they'll set up a fund to ruin a journalist's life because the latter dared to voice criticism about the company
- God's Eye view and privacy issues
- encouraging drivers without proper insurance
- tricking drivers into (and helping them) getting loans for a new car, and then (after a year or two) adjusting payment rates so that they basically stay locked in Uber
All of them discussed at length on HN, most of them covered on the first page of search results.
By showing that some laws are bad? What's wrong with that? I don't think people should have trust in the rule of law.
No. By showing that through breaking them, having enough resources to keep the government at bay. They provide a good service and throw a lot of freebies initially to convince people they're cool, and then when people learn that their local administration is trying to ban/fine Uber, citizens are upset at the officials. Meanwhile taxi drivers ask themselves, why should they follow the law if Uber doesn't have to, and the whole startup ecosystem is looking at Uber as an example of perfect company and trying to replicate their methods.
I don't know about you, but I don't want to see breaking the law as the modus operandi of startups in the future.
> I don't think people should have trust in the rule of law.
In other words, let's just give up on the whole "civilization" thingie, pack our bags and go back to the caves we came from.
I don't think that's bad. I think deliberately breaking bad laws is a reasonable and effective means to get rid of bad laws.
> Meanwhile taxi drivers ask themselves, why should they follow the law if Uber doesn't have to, and the whole startup ecosystem is looking at Uber as an example of perfect company and trying to replicate their methods.
I think taxi drivers should ask themselves that, even before Uber and its kind existed.
> I don't know about you, but I don't want to see breaking the law as the modus operandi of startups in the future.
I don't have a problem with it if I don't like the laws that are being broken.
> In other words, let's just give up on the whole "civilization" thingie, pack our bags and go back to the caves we came from.
Following all laws regardless of their merits is hardly the defining characteristics of civilization.
"First they came..."
No one of us gets to chose which laws are disregarded. We got lucky Uber breaking the rules has a positive outcome for most of us - we get a better service and we don't have to see the immediate externalities. Most of us also haven't been burned by the problem of AirBnB subletting. But what if the next hot SV startup decides to ignore FDA regulations? Because "they're just red tape that stiffles innovation", right? And the next one ignores biotech safety? Do you want to live in the world when any entrepreneur gets to use VC money to blatantly break any law they like?
The only Schelling point here is to obey all the laws by default, and in case you don't like some, to use various mechanisms built into the government to try and change them. It's slower, it doesn't generate hot headlines in the press, but it works and it's the right to do. It doesn't work to destabilize the very society that enables your business model.
> Following all laws regardless of their merits is hardly the defining characteristics of civilization.
It isn't, but following them as a default is, and punishing actors that break the law is too. Even civil disobedience works with expectation that you do get to suffer consequences of breaking the law. Taxi laws may have some problematic parts, but they are nowhere near the category of "so stupid they should have been repelled yesteryear".
How does that apply? The first group they came for were Socialists, and I already oppose that discrimination. I don't understand how that is at all relevant to my views on breaking bad laws.
> But what if the next hot SV startup decides to ignore FDA regulations?
If they ignore FDA regulations that I think are bad, then I will approve. If they ignore FDA regulations that I think are good, then I will oppose. That's pretty simple.
> Do you want to live in the world when any entrepreneur gets to use VC money to blatantly break any law they like?
No, I want to live in a world where entrepreneurs (and indeed everyone) breaks laws that I think are bad.
> The only Schelling point here is to obey all the laws by default, and in case you don't like some, to use various mechanisms built into the government to try and change them.
I could not disagree more. There are countless laws that we probably both think were incredibly bad which were removed precisely because of organized efforts to break them.
> It's slower, it doesn't generate hot headlines in the press, but it works and it's the right to do.
I think it's pretty clear that breaking the law works better. I don't care about "generating hot headlines in the press," and I don't agree that obeying the laws is "the right thing to do."
> It isn't, but following them as a default is, and punishing actors that break the law is too.
I completely disagree. My default is to act in the way I think is appropriate, with no regard for the law except for the obvious threat of punishment if I break a law.
> How does that apply?
First they broke the laws that you didn't like, so you didn't care. Then they destroyed laws you didn't care about, so you didn't question that too. Then they started to destroy the laws you like, and by that time it was too late to stop it, because momentum was too big.
> No, I want to live in a world where entrepreneurs (and indeed everyone) breaks laws that I think are bad.
But can you be sure to always think the law is bad when it is indeed bad, and not only when you're on the worse end of it? Laws have to balance the need of the many. For instance, an owner of a chemical plant may think it's absolutely stupid and bad law that he can't dump toxic waste into the local river.
> There are countless laws that we probably both think were incredibly bad which were removed precisely because of organized efforts to break them.
Taxi laws are not among them, and here we're not talking about activists taking a moral high ground, but about a company with strong antisocial tendencies in its DNA that tries to do a money grab.
There are ways and procedures for giving feedback about the law, and even if sometimes you have to break it, it doesn't change the fact that for a civilized society, the default should always be to follow the law even if you don't like it.
> I think it's pretty clear that breaking the law works better.
And bullets generally work better than arguments for silencing people you disagree with. And yet for some reason we don't go around shooting each other over disputes.
> My default is to act in the way I think is appropriate, with no regard for the law except for the obvious threat of punishment if I break a law.
I really hope you're a god, for whom every appropriate action is the one that creates most good in the world, because you're expressing a very self-centered view. And we know very well that unrestricted following of self-interest leads to misery of everyone. That's why we have laws and social customs in the first place.
But that doesn't many any sense. That's a big leap between breaking laws I don't like and breaking laws I do like. The analogy to that quote about Nazis just doesn't exist.
> But can you be sure to always think the law is bad when it is indeed bad, and not only when you're on the worse end of it? Laws have to balance the need of the many.
Obviously there are subtle cases and cases where I don't have the necessary information to make a judgement.
> Taxi laws are not among them
Aren't they? Haven't a lot of taxi laws been changed since Uber started breaking them? I know that Uber operates legally in some jurisdictions under new regulations.
> it doesn't change the fact that for a civilized society, the default should always be to follow the law even if you don't like it.
That's certainly not a fact. It's an opinion, and one I absolutely do not share.
> And bullets generally work better than arguments for silencing people you disagree with.
I don't believe that's true except in cases where there is a large power disparity between groups.
> I really hope you're a god, for whom every appropriate action is the one that creates most good in the world, because you're expressing a very self-centered view.
It's not any more self-centered than the notion that democracy is a good way to organize society. After all, in democracies, laws are passed by people who ostensibly represent the population, and thus laws are ostensibly a reflection of what behavior people think is appropriate. Assuming you approve of democracy, you already are promoting the notion that individuals have some credible sense of what behavior is and isn't appropriate.
That's fair, but if there was trust in local government and it was doing its job well then there wouldn't be such overwhelming popular support for Uber to begin with. Many licensed taxi services allowed by local governments provide terrible service, and local governments frequently show no interest in improving quality or lowering barriers to entry for new competition as long as they are collecting large amounts of money from medallion sales. This is people voting with their wallets and telling government they don't like the ramifications of existing regulations.
The thing is, Uber isn't even really innovative. In Europe, we had a (arguably slow-going) process of reforming taxi laws going on for years. There were transportation upstarts that tackled taxi regulations through legal channels and in many places, my own country included, they managed to keep themselves on the market. Whatever tension there was between them and taxi companies got resolved in courts, regulations were updated and everyone was better off. But then Uber came and basically said, "fuck regulations, we have money to burn, what you're going to do?".
There are taxi regulations that they're ignoring, such as access to disabled-friendly options. I suspect most of the drivers don't have the correct insurance either, so if you're in a car crash you might be in for a nasty surprise.
But it does seem less exploitative than what many AirBnB hosts are doing.
"""The Uber app is built to expand access to transportation options for all, including people with disabilities, and we are constantly innovating our platform and operations to meet that demand. Today, we are announcing a new platform innovation: the ability to request a wheelchair accessible vehicle in New York City’s outer boroughs."""
IIRC there are other regulations they're not complying with, but I don't recall what they are off the top of my head.
The success of Uber and Airbnb rides on that, you are correct, but we have seen that people are generally good about working within that trust.
Every single month, millions of people take the risk you are talking about and they're fine.
People hop into cars with complete strangers (or homes of complete strangers) where there is a minimal level of security, and they're fine.
We are witnessing the capacity at which society is willing take risk with one-another, and I think we are going to increasingly see the limits being tested. Direct financial risk is right around the corner and we will see people lending to each-other on a large scale.
In case of AirBnB, it's the issue with subletting we're discussing here, which a) damages neighbourhoods quality of life, and b) antagonizes landlords and people who want to rent. It is to be expected that, as AirBnB grows popular, landlords will be much more suspicious and the contracts they offer will be worse for people seeking a place to live.
In case of Uber, they blatantly break the law and have enough money to get away with it. This destroys the trust other taxi drivers have in their local administration ("Why are you letting them get away with it? Why do we have to follow law?") which, as we've seen over the last year, leads them to desperate, stupid-ass protests and gridlocking cities. That antagonizes taxi drivers and general population, the latter then loses trust in the administration which, for some obviously completely unreasonable reason, tries to ban the great Uber.
Many see the taxi-driver cartels for what they are, and act in the interest of the general populace by removing the restrictions. This restores trust in the administration.
And whether Airbnb actually damages the quality of life in neighborhoods is not proven, and I highly doubt landlords will get more suspicious. Insurance providers for vehicle owners and homeowners aren't making noise, so the risk is only to incumbents' business models.
How I'm conflating the two? Taxi drivers get desperate because they can't compete with someone who's breaking the law, and they don't have the money to ignore the law themselves. The genera population gets annoyed because they see government trying to mess up what seems to be a perfectly good service for them.
> Many see the taxi-driver cartels for what they are, and act in the interest of the general populace by removing the restrictions. This restores trust in the administration.
If by "many" you meant governments here then I agree. Governments that see the cartels and remove the problematic regulations are seen as a good thing. But, at least in Europe, it's often the case that those regulations arose for some reasons and are beneficial to the public. The government is reluctant to touch those.
> And whether Airbnb actually damages the quality of life in neighborhoods is not proven, and I highly doubt landlords will get more suspicious.
It's not proven in general, but it is in particular cases, by the sole virtue of reports and journalist investigations. Nobody is accusing AirBnB of only profiting off damaging things - but we have enough evidence to notice that those destructive deals are a big part of their business.
> Insurance providers for vehicle owners (...) aren't making noise, so the risk is only to incumbents' business models.
Why would they make noise? They just add a "no Uber" clause and get to happily keep their money when a person who didn't notice (or elected to ignore) that particular point gets into a car crash while driving for Uber.
At least you're right about the trust between management and leasees degrading to the point that it has to be specifically called out on contracts. Anyone know what percentage of AirBnB is rentals, and how that would impact their revenue if they're phased out in 10 years?
"Anyone know what percentage of AirBnB is rentals, and how that would impact their revenue if they're phased out in 10 years?" I'd love it if this data were accessible, but, alas, Airbnb has been very secretive about that (if they even have that data; they might be sticking their heads in the sand and playing dumb if/when their clients are busted for breaking the laws).
If you were able to tie HOA or other community org bylaws to property addresses, you'd be able to get the data you're looking for.
I have mulled at a startup idea to report AirBnB listings to HOAs that prohibit short term rentals (property compliance), just haven't gone down that road yet.
Quite frankly, you have zero predictive ability to outperform the market, particularly over an extended timespan or multiple credit cycles.
Furthermore, even if you were to "average out" / index your portfolio of P2P loans, your transaction costs would be way higher than simply going through a financial institution that streamlines that process for you so as to minimize transaction costs.
Aside from legal reasons, this is one reason stocks and other financial instruments aren't sold P2P. Considering transaction costs are probably the biggest controllable variable affecting your portfolio's returns, particularly over time, I just can't see how this makes the cost of borrowing go down for the system as a whole.
How could an individual operate similarly?
edit: Also Napster's business plan. Can't win 'em all!
You can do your due diligence with one tenant. When that tenant airbnb's the property and brings in say 50 other occupants over the course of a year, you are now in a completely different zone.
If we have an agreement that I give you $5000 or you can punch me in the face, and I choose to take the punch in the face, that's not breaking the agreement. You didn't get "cheated" out of $5000. I chose an option that was specifically outlined in the agreement.
If at any time the penalties are less than the cost of adhering to the terms of the contract, it's only rational to break the contract and pay the penalty.
Let's say you had an employment contract where you get paid $100k/year, but if you leave before 5 years, you have to pay a $50k penalty. 3 years in, you get a job offer for $500k/year. Are you going to stick to the contract because you need to obey "the rules", or are you going to pay $50k and take the much higher paying job?
The rules that are broken here aren't in the contract, they're about the contract. So if it's rational (in economical sense) for me to break a contract, then I should break it[0] and then pay the penalty. The problem with people subletting on AirBnB is that they don't show up at their landlord's doors immediately after the guest leaves, ready to pay the price. They just keep cheating the other side until they get caught.
In your employment example, it would be as if I worked remotely at the first job, then joined the second company and didn't tell my former employer - just logged hours for doing nothing, hoping he doesn't notice (maybe it's a big company).
[0] - that how it may work in Serious Business, but contracts between regular people are usually entered with an assumption that both sides want to follow them through; to break them on purpose based on cost-benefit calculation means one is an asshole.
What does that have to do with this? Someone who rents a property with the intent of subletting through Airbnb is not paying a penalty to break the contract so that they can enter a new one with different terms. They are still bound by the original contract. I'm not talking about the details of the terms, simply pointing out that your analogy of leaving one job for another does not apply.
Or look at it this way: everyone on this site knows that the basic problem with programming is that machines execute what you wrote to the letter, and do not know about what you meant. That leads to bugs, because our descriptions rarely capture our intentions precisely enough. But we, as humans, most of the time know the intention of the instructions we're receiving. Every time we force something to be evaluated formally instead of socially, we're robbing ourselves of the increased efficiency our minds give us. It's a trade-off, and it's often worth it - but it should be done only when we gain something from it.
In the AirBnB subletting situation we gain nothing - contracts gets more complicated to cover new abuse vector, and end result is the same except we've just lost flexibility and efficiency by codifying another part of our interactions.
The tenant has a stronger incentive than usual to maintain the apartment as impeccably as possible, pay rent promptly in full, and screen AirBnB guests to minimize risks, since the lease can be cancelled with little warning if they're discovered.
There's clearly a demand in the market for AirBnB. The landlord could easily cut out the middleman and list the property there themselves if they wanted to. If they want to write lease to cut themselves a portion of the profits while letting the tenant do all the work of managing the AirBnB guests, there are probably people who would take them up on that offer as well.
Yes, contracts might get some extra words, but they're not written in stone. We can read the words and negotiate to change them to our liking for the mutual benefit of both parties.
Actually, contract law spells out the penalties for what happens when one party doesn't adhere to the terms; a contract may opt to do so for certain cases, but doing so doesn't make it a "good contract", there are costs and benefits to doing so, and whether it makes sense to do so depends on the context of the contract, the types of violations being addressed, whether the parties envision continuing the relationship after the violations addressed, and other factors.
To use a sort of residential analogy, if you have a wild party and your carpets get stained from spilled drinks and dirty shoes, you can probably give them a good cleaning and they'll be almost like before, no noticeable wear unless you really look for it. Overall, the carpet would still be good for its expected lifetime of say 10 years. But, do that every weekend and the carpet will need to be replaced within a year.
Property rental agreements (and prices) have all kinds of assumptions in them. If the agreement is based on the idea of one tenant moving in, staying for a bit, maybe having family over during the holidays, and then moving out it would be structured a lot differently than a tenant who wants to be a junior landlord.
But if you really think it's OK, let's make that face-punching deal. Just don't be too surprised when I show up wearing spiked brass knuckles - you didn't say anything about that in the contract, so it's OK, right?
1. the rent gets paid on time
2. the property is kept in good condition
If those two things are satisfied, they have little incentive to go finding reasons about why their tenant who always pays the rent and keeps up the property should be kicked out. The other terms of the contract are just proxies for achieving those two outcomes. If the tenant delivers on both, they haven't "weaseled out" of anything.
Last time I checked, AirBnB was a publicly accessible website. It should be trivial for a landlord to see if their property is on there and enforce the penalties if it is. Another comment mentioned that landlords are inserting language into leases that they get the profits from AirBnB if it's used. That seems like a reasonable response to me.
A guy who's subletting his place on AirBnB in clear violation of his contract is an asshole. A douche bag. I'm calling our figurative guy names not because I need to vent out. I'm providing a social disincentive for such behaviour. The vaguely defined terms like "asshat" are actually part of the way society incentivizes one to behave in a particular way. Mostly, it incentivizes cooperation (as in Prisoner's Dilemma) and disincentivizes defection. In the West, such incentive structures are individually much weaker than economic ones - but still, when they are aggregated, they form a powerful force. Services like AirBnB and Uber unfortunately slowly erode social/cultural incentives, turning citizens into competitors instead of cooperators.
> Another comment mentioned that landlords are inserting language into leases that they get the profits from AirBnB if it's used. That seems like a reasonable response to me.
And this is the bad outcome. The end result is the same as before AirBnB subletting became a thing, but now the contracts have additional clause that will probably be phrased vaguely enough to destroy some use cases that would be beneficial for both parties. That's the bad result I'm talking about - the side that's being cheated won't just lie down and admit defeat, they'll take up arms and defend themselves. In the end things are worse for everyone involved.
> Wagging your finger and moralizing is only going to convince people who probably weren't going to do it anyway. If you want to change behavior, you have to change the incentives.
I am changing the incentives (in a very small way - armchair activism, I know). I'm trying to highlight the problems in hope that some readers who may not have noticed them before will notice them now and opt out of contract-breaking subletting, and will discourage others from doing so as well. It's working the foundations.
They erode the incentives that maintain the interests of the status quo, but they provide strong incentives to cooperate. They introduce competition to taxi services and hotels, but they increase cooperation between consumers and Uber drivers, and AirBnB hosts and guests.
Maybe AirBnB provides an incentive not to cooperate with the landlord in his desire to restrict how many guests you can have and how long they can stay, but it provides a strong incentive to cooperate with people who need a place to stay and can't afford a hotel.
I don't see any landlords ignoring economic incentives and offering below-market rent in the spirit of "cooperation". Indeed, they are quite happy to kick out rent controlled tenants at the earliest opportunity in order to bring in more money, regardless of how many people call them an asshole or a douchebag.
> And this is the bad outcome. The end result is the same as before AirBnB subletting became a thing, but now the contracts have additional clause that will probably be phrased vaguely enough to destroy some use cases that would be beneficial for both parties.
That's just pure speculation. Until we see the language we have no idea what cases it destroys or doesn't, or how vaguely worded it is. If there's a use that's beneficial to both parties, it should be possible to find a party who's willing to agree to it in order to receive that benefit, if the market is allowed to operate.
> I am changing the incentives (in a very small way - armchair activism, I know). I'm trying to highlight the problems in hope that some readers who may not have noticed them before will notice them now and opt out of contract-breaking subletting, and will discourage others from doing so as well. It's working the foundations.
If there is in fact a problem, it should be easy enough to point out the facts of the damage that's being done without resorting to calling people names like douchebag and asshole. Such insults usually come out when there isn't any logical argument to be made.
Yes, the point being that they give value to one group (their clients) while dumping externalities on everyone else. This is not something that society is supposed to tolerate; the company doing that should either stop dumping externalities or at least pay everyone else to compensate (taxes are one way of achieving that).
I'm not denying AirBnB/Uber are providing a valuable service to their customers. They do. They provide excellent and inexpensive service. At a cost for everyone else. Hence as I wrote in my original comment, it's burning trust to produce dollars.
> That's just pure speculation. Until we see the language we have no idea what cases it destroys or doesn't, or how vaguely worded it is. If there's a use that's beneficial to both parties, it should be possible to find a party who's willing to agree to it in order to receive that benefit, if the market is allowed to operate.
I didn't want to elaborate on that in order to keep the comment relatively short. But it's not "just a speculation", it's the obvious consequence of allowing the market to cooperate. If everyone bans AirBnB specifically in the contract, the existence of competition on the market implies that renters will soon have a problem with WaterMattressAndSupper. In order not to turn a contract into ever increasing blacklist, the point will have to be phrased vaguely.
> If there is in fact a problem, it should be easy enough to point out the facts of the damage that's being done without resorting to calling people names like douchebag and asshole. Such insults usually come out when there isn't any logical argument to be made.
There are arguments to be made, and there are being made. A lot of practical and economical ones. I was just trying to point out that insults like "asshole" don't mean "I have no arguments so I'll curse you instead". They're shorthands for "you're breaking an implicit social contract".
Having short term guests hurts the neighborhood? How? So every neighborhood with a hotel in it is automatically a dump?
Read through the rest of the comments thread then. There are plenty of examples, and there are even more if you scroll down to the bottom of this page and type AirBnB in the search box.
> At least if an AirBnB guest is a jerk, they'll be gone in a couple days.
And then a next one comes.
> Having short term guests hurts the neighborhood? How? So every neighborhood with a hotel in it is automatically a dump?
It does, because short-term guests have no incentive to care about the quality of life in that neighbourhood. Notice that you can't put a hotel anywhere - there are zoning restrictions exactly because short-term guests tend to create some problems, and many people decided they don't want such an establishment in their areas. AirBnB subletting is basically ignoring the will locals expressed about what they do and do not want in their neighbourhood.
> Tracy Smith lives two houses down from one of Martin’s rentals, a short walk to the popular Rainey Street restaurants and bars. She says she’d rather see kids in the backyard of Martin’s property than guys playing beer pong
Sorry, lady. You don't get to decide what happens in other people's backyards. I don't consider busybodies who want to enact housing discrimination based on age and marital status as having a valid concern we should support with legislation.
Another comment below complains about tourists being drunk and noisy and making groceries more expensive. I live in DC. Every year tourists descend on us like locusts. They clog up the public transportation, they don't know how to drive in traffic circles, and they're generally in the way and obnoxious. Still, that's part of the price you pay for living somewhere with lots of interesting things that people want to come see. There are plenty of boring, cheap places with no tourists or other short-term visitors.
> And then a next one comes.
Yes, and in an all probability, they won't be a jerk. Most people are normal, reasonable human beings.
> It does, because short-term guests have no incentive to care about the quality of life in that neighbourhood.
But the hotel has every incentive to care about the quality of life in the neighborhood. They also have far more resources compared to the average homeowner to influence the local government to e.g. increase police patrols or provide better street sweeping or whatever.
Zoning areas by use type has created its own enormous set of problems, from ever-increasing traffic, pollution from forcing people drive everywhere they need to go, increased water usage to support ornamental lawns, poor storm water management, tremendous infrastructure investments necessary to support low-density suburban areas where the property taxes can never repay the investment, and on, and on.
These are real externalities that are far more serious and damaging than "maybe a noisy person will be next door for a couple nights". So, people's decision that they don't want "such an establishment" in their area, ultimately creates its own set of costs that the rest of us have to bear.
The landlord rents out a property at an expected degree of risk. They make this determination by screening the renter and drafting an appropriate rental contract (or vice-versa).
If a renter plans to sublet out to 20 individuals every given month, risk skyrockets for everything from theft, pet damage, smoke damage, fire, etcetera. The landlord's home/rental insurance may not even cover these scenarios. Had the landlord known about this increased risk, they may have chosen to increase the deposit, amend the rental contract, or chosen another renter altogether.
3. The property is not used in a manner which creates unexpected costs for the landlord aside from the property maintenance issues addressed in #2, such as exposing the property owner to liability it is not prepared for.
(Note that lots of things that can be done with property create potential liability for the landlord and not just the tenant-in-possession.)
> The other terms of the contract are just proxies for achieving those two outcomes. If the tenant delivers on both, they haven't "weaseled out" of anything.
No, in addition to other concerns (like my #3) that you may have forgotten, if the tenant usurps the landlords prerogative of deciding what steps to take to protect the interests the landlord has in the property, the tenant is weaseling out of something. If the tenant wants broader discretion to decide how to achieve the landlords interests without weaseling out of their agreement, they can negotiate that discretion into the lease and pay the landlord whatever premium the landlord demands for that transfer of trust.
If there are actual costs in the form of damage that actually does occur (violating #2), then the landlord has ample grounds to pursue the tenant to recover those costs. People don't get compensated for things that might have happened.
Liability to the government or an injured third-party for events occurring on the property for which liability exists for the landlord and not exclusively the tenant-in-possession; this can exist with no damage to the property.
Further, again, given that the landlord would no doubt charge more for giving the tenant greater discretion to choose what risks to take on behalf of the landlord (even when considering damage to the property alone), breach of contract to take greater risk than is allowed in the contract is a harm to the landlord, because it denies the landlord the opportunity to choose to rent to a different party who would pay for the privilege that the usurping tenant is taking without paying for it. This is a harm that actually happens, not a thing that might have happened.
I don't see how it's the tenant's duty to inform the landlord about the most profitable way to rent out their property. If the landlord wants the opportunity to rent to a different party for a higher amount with more risk, they should go find a different party and make that offer.
Ultimately it's up to the landlord to enforce the terms of the lease. If they aren't going to do it, then they're going to get taken advantage of. If a tenant stops paying rent and you don't evict them, don't complain about not getting your rent. You have a legal remedy available to fix the situation.
If you don't want your property on AirBnB, check AirBnB and make sure it's not there. If landlords started doing that and breaking these leases within the first month or two, this would quickly become unprofitable. They have all the power in this situation.
If the terms of the contract don't sufficiently compensate you when a tenant breaks the lease, change them so that they do. I'm sure plenty of landlords have a story about how they got burned by a poorly worded lease. The smart ones learn from their mistakes and move on.
edit: thank you for explaining banks to me; I'm talking about stealing my parent-comments' money for a year without them noticing, and investing it.
The money in your bank account isn't really there. Technically some of it is there but how much depends on your government's regulation -- it will probably be somewhere around 15%. The rest is just a number in their database and the actual money is given to their financial department to play the market.
They provide you banking services and give you a terrible interest rate, they pocket the difference, you have near zero risk since you're insured, and both parties are happy.
Obviously in your example the thief runs the risk that their victim will notice at which point the thief will be subject to all the attendant penalties. I'm not saying there shouldn't be penalties. The penalties have to be severe enough that they are not worth the risk of being noticed. If they aren't, some people are rationally going to decide to take the risk.
But you have to look at the perverse incentives such attitude creates. If it's ok to break contracts as long as the victim doesn't notice, it pushes one side to be very shady, and the other to be hypervigilant. Also, people make mistakes and most of the time the victim notices quite soon. That's why we invented values of "honesty" and "integrity", which include not breaking deals even if the other party doesn't notice. Upholding them reduces the amount of resources we need to spend on protecting ourselves from one another.
This is exactly why it's a poor gamble to make in most circumstances.
I'm not offering prescriptive advice. I'm not advocating that someone should steal or break contracts. I'm merely describing reality. If the reward outweighs the risk for someone, they'll come along and do it. That's a simple fact. Pretending it doesn't exist and we should all just be nice is only going to cause people to lose money. Either decrease the reward or increase the risk until that isn't the case.
People put locks on their doors and keep their money in banks instead of in a big pile on their front lawn. Why? Don't criminals know it's wrong to take things that don't belong to them, even it it's sitting right there in plain sight for the taking? Why don't we just depend on the values of honesty and integrity? Wouldn't that be so easy and great?
Locks are pretty easily defeated, but they provide enough of a hassle and increase the probability of detection enough that it's not worthwhile for most people to bother. If all your valuables are sitting on the lawn, some people who would never kick down your door might run up and grab them. Why? Are they "assholes" and "douchebags"? Maybe. But the incentives and penalties also shifted so there's less risk, increasing the probability that someone will find it worthwhile to take the chance.
Someone who would never rob a bank might steal a sandwich if they were starving. Did they suddenly give up on the implicit social contract? No, the possibility of dying of starvation just became a larger risk to them than whatever penalty might exist for sandwich thievery.
In practice, I think the AirBnB subletters are just exploiting a temporary knowledge gap between the landlords and the AirBnB guests. With enough articles like this one, landlords will wise up and close the gap, either listing their properties on AirBnB themselves, or checking occasionally that their properties aren't listed there and shutting down the lease if they are. The subletters obviously have no leg to stand on, legally. Once they have a few evictions for breach of contract on their record, they won't be able to get a lease anywhere anymore. More's the pity for them, but that's the risk they took.
>and someone will somewhen, way before the heat death of the universe
Probably. But then again, by definition we have no knowledge of crimes that nobody notices. There could be an untold number of crimes that have gone unnoticed.
Every contract starts with the assumption that both parties are inclined to perform as stated. Viewing a contract as "putting a price tag on bad faith" is a very good way to get hit with treble damages in court.
I see. So you're not a real lawyer, you just pretend to be one on HN.
Second, I didn't bring up treble damages, the comment I was replying to did. I was simply drawing a logical conclusion based on the information they provided.
In either case the leases and the vetting process become that much worse for everyone else. Maybe the landlord starts doing random inspections to check for this. Basically everyone else's life gets a little worse. Tragedy of the commons, this is why we can't have nice things, etc etc.
You are ignoring the practical realities of landlord-tenant relationships.
Let's say you rent an apartment from me and I add a liquidated damages clause to the lease. It states that you will owe me $50,000 if you are found to be subletting your apartment using a service like AirBnB. Unless you have $50,000, the liquidated damages clause is effectively worthless and you can easily choose to break the lease ("my landlord can't get blood from a stone"). If I increase the liquidated damages to $100,000, the deterrent effect likely doesn't increase.
Rental agreements have already ballooned into legal tomes no first-time lessee could ever understand. If they now have to spell out penalty for a variety of different breaches, they will become much worse (why not a single, higher penalty? That will get abused to extort tenants who commit minor violations...)
IMO it should not be about contracts. You should enter agreements in good faith and there should be social consequences for doing otherwise (reputation ruined, ... etc.). Be excellent to each other.
Exactly this! The consequence of letting people abuse trust on massive scale is more complicated contracts, which is a worse outcome than if everyone just agreed to act in good faith.
If social consequences were sufficient, we wouldn't have invented this whole legal system in the first place.
Social consequences are not good for everything, but there are a lot of areas when there are better than economic approach. The problem is that economic incentives are much stronger than social, so the latter can be easily destroyed by the former. The classic example would be the fact that you absolutely, positively don't want to pay people for donating blood - it immediately leads to contamination of blood banks, as people replace the sense of duty with an opportunity for free cash, and thus stop caring about things like not donating blood when they are sick.
Since social incentives are fragile, you want to defend them in the areas they work better than economic ones - hence the opposition to AirBnB.
Do they happily turn themselves in, or are they relying on a yet to be established, landlord sponsored snitch industry providing state of the art tenant surveillance services to smoothen the transaction?
There is a difference between an agreement that grants a choice, and an agreement which includes specified obligations and a specified predefined payments due for particular breaches. They are not equivalent, and the breaching the obligation in favor of accepting the preset consequences in the latter case is still breaking the agreement.
And, anyway, the security deposit discussed upthread is neither a predefined payment for breach nor an option in lieu of performing some other obligation in most rental contracts, its a deposit in advance against potential liability for damages owed by the tenant to the landlord; so your response seems to be a non-sequitur on several levels.
There's always a choice. People aren't automatons. We can't pull strings and make them do what we want. All we can do is offer incentives and penalties. If those aren't aligned in such a way to produce the behaviors we want, then they need to be adjusted. Don't get mad at people for responding in a logical way to the incentives that exist. Fix the incentives or deal with it.
I'm curious how you think people adhere to contracts then. Mind control? Magic? How else could they possibly do it except that they choose to?
I doubt that other tenants wish to live in a hotel/motel. Or that many landlords want to be reduced to being property managers for ersatz hotels -- at rental-level incomes.
As soon as anything of value (including possession of the property) transfers based on the misrepresentation, AFAICT.
The thing we're trying to figure out is if this approach can scale. Currently his second apartment is leased by his fiancee, who is out of the country for school. Beyond 2 or 3 apartments I'd imagine this approach would get a bit dicey.
That's an interesting take on the philosophy behind private property rights.
1 - Make it illegal for Airbnb style services to operate in that area, including making a website available, advertising the service, taking listings in that region, etc
2 - Threaten to jail or heavily fine senior employees if law broken
3 - Offer a legal route which involves an audit trail of bookings being supplied to the local gov
4 - Use audit trail to deal with rule-breaking landlords
VC's place tons of bets, knowing that most will crash and burn but hoping that a few percent will win out and cover all the other loses.
In the professional AirBnB host world, they place tons of bets, the vast majority pay out small amounts (individually) with the hope that they don't get any of the BAD guests that wipe out gains across their network.
You make your money on how well you screen tenants and on the "purchase" of property. [i.e. Long term lease or purchase ]
I don't know that will happen but it's certainly a possibility with the prices now only being possible because supply hasn't yet caught up with demand.
That's like trying to stop your town's speeding problem by writing more parking tickets.
Do you mean rent control and rent stabilization? As far as I can tell, rent-controlled units make up something like 2% of all units.
True, but that is actually a great deal of lost income for the landlords in those cases. Anecdotally, of the number of people I've heard of living in rent controlled apartments, I've never heard of rent over $500, including 2 and 3 bedroom apartments in primo neighborhoods. Numbers like that are just _absurd_ given what I'm paying for my 1 bedroom in an "up and coming" neighborhood in queens
Getting rid of rent stabilization, which is roughly half of all rental units in NYC IIRC, would have a huge effect, both positive and negative.
My prediction is that after a few years of adjustment following its end, the average paid rent would be about the same but the average advertised rent would be much lower.
All renters would equally feel the misery of rising rents, so I'd expect the political landscape would be very different with regards to feelings towards building more housing.
Rent stabilization is similar. It would raise the property values in rent stabilized buildings. It would also raise rents in the rent stabilized buildings.
Where it would hurt is market rate apartments. They would likely see rents fall over time given the market is no longer bifurcated.
To ease the transition, a phase out would probably be in order, but given that a phase out can be terminated it would probably have to be one big shove out the door.
I looked into this a bit when I had trouble finding places to stay during Art Basel last year and decided to look up sales data for properties I tried reserving on AirBnb
I know a girl who rented three 1-bedroom apartments around Santa Monica. She would live in whichever of the three was fetching the least interest on AirBnB that month and put the other two up. Those two units were occupied about 10-15 days a month. After all expenses she netted about $1000 cash and free rent for herself every month. In return there were two more units taken off the market and the price of actual residential units driven up ridiculously.
L.A. Mayor Garcetti came to speak at our office last week and he said that there is one housing unit west of the 405 (demarcation of west L.A.) for every 4 jobs west of the 405. Turning so many housing units into short term rentals is making this far worse. I support Santa Monica's law even if it means that I cannot rent my apartment out while I am traveling this December. I don't want to live somewhere that only techies can afford.
Asking around, people talk about one guy who own 50 cars.
At Airbnb, it's easy to find some hosts with 10+ properties.
That being said, I think this is a natural outcome. People will invest in Uber and Airbnb and others, just as they invest in taxi licenses, hotels and restaurants.
Sorry, but people don't want to live next to a hotel. These laws exist for a reason.
Shatford's going to be a bit upset when they subpoena AirBnB, I think.
They may want to wait a bit to enforce to really rack up a big bill since the law only came into effect in June.
Where I am from, American (and other rich tourists) make simple things such as groceries ridiculously expensive, and obviously the housing too. There's no peace to be had at nights, with loud beer-addled tourists shouting around well into the morning.
This will a) hopefully make clear to more people how such behavior is not cool and make them understand that 'but your people make their LIVING off us, you should thank us for that' is not really a good argument, and b) make more programmers realize that we are not machines, and you cannot 'hack' law/people like you can 'hack' into a machine. This will either end with people more conscious about their externalities on other people, which would make life better for everyone, or making life awful for everyone (if this continues) which would eventually make more people realize that what they _really_ care about is other people. The pure _homo economicus_ is a species you would rather not have in your neighborhood.
I'm pretty sure the worst that can happen is an unsafe property leads to someone's death, and then, hopefully, the people involved going to jail.
The worst that could happen[0] is someone does an unauthorized rental to a terrorist whom then uses a nuclear device to end all life on the planet.
0 - "The worst that can happen" is often used a little bit too freely ;)
I think the big losers here, outside of hotels, are renters. As someone who is trying to rent/buy in popular areas of the country (Cambridge, UK), I can see how houses will no longer come up for rent - which sucks, as the article points out.
I guess there could (hopefully) be a point where there are so many professionally rented homes that it no longer represents such an attractive proposition and the first movers enjoying these fat years of high revenues eventually lose out.
Either that, or Airbnb will become the new way to rent, who knows...
Not sure if they'd want to get into that, but it would be a huge new market. It's also a market that might benefit from some "intermediation", in the interests of information symmetry and fairness.
But goodness me, the rental market does need an overhaul!
Making no comment on the effect of such operations on housing costs or other such matters, AirBnB, like Uber, has succeeded by making a uniquely good user experience, even as they flout regulations and the law in general.
A conversation-starter I like to use on my hosts is to ask about their bad experiences with tenants, and most of them tend to have fairly boring ones, usually about some hard-to-please guest or another. I've yet to hear of one of the drug-fuelled late-night orgies that discussions on AirBnB seem to hold as commonplace, even from hosts who have been renting dozens of apartments for years.
Then again, I do tend to stay at apartments that are available monthly, which may make a difference.