Up to a third of Airbnb's price gap with hotels is due to tax treatment | Hacker News Reader

Up to a third of Airbnb's price gap with hotels is due to tax treatment

ft.com

68 pointsszx124 comments

This is the relevant quote, and not that clickbait title:

> The VAT on most Airbnb stays can be as little as 0.6 per cent because the UK only levies the tax when businesses sell more than £83,000 per year — a threshold reached by very few Airbnb hosts. It is otherwise only payable on Airbnb’s booking and service fees.

So the problem is that many "small business" pay less taxes than big companies, which seems fair. The main difference is that thanks to Internet, those small business now can be aggregated into a platform while still operating independently, which is basically awesome.

Yes, and AirBnB could be charged for the difference in tax. This would preserve the advantage for small business and treat them the same as a large hotel chain.

Hotels are heavily taxed because tourists and business travellers can't vote. In many cases cities like London and NYC are non-fungible goods, so if you want to go there you just have to pay the taxes. If they ever get high enough that hotels can't book rooms, the businesses should lobby the government to lower them.

could you add in your analysis of airbnb or how it relates to what you've written - you've left it entirely out of your paragraph and I can't draw an immediate conclusion.

(Though maybe you were adding information about hotel taxation without any thoughts about airbnb or how it relates.)

It is related to AirBnB because there is an argument that the tax is unfair to consumers to begin with.

It is designed to screw over foreigners.

Tourists use a cities resources that the residents(former, current, and future) paid for. Would it be better they paid an income tax and received voting rights?

Visitors use a ton of resources--they should pay for them. E.g. think about all the money that goes into security for Times Square.

Most cities seem to love tourism, to the point that it's considered an industry and has its own advertising.

Tourists pay sales tax and indirectly pay other taxes through businesses that cater to tourists.

You cant set sales tax at different rates for tourists, so you have to make up for this difference elsewhere if it is determined the sales tax contribution from tourism does not fully compensate for the costs.

The tourists are a net benefit for cities. If anything, they should pay LESS taxes, not more.

Cite? Seems like a very broad generalization.

I probably agree that tourists are a net benefit, but like any transaction, they receive a good (experience of visiting a city), and pay a cost (part of which is to the city and its citizens); seems fair.

That being said, not all cities like tourists. Ever tried to go to the beach in New York? They are all private, you have to be a member of a club with beach access. That definitely cuts down on day trip tourists. Some cities in Florida with beach access have added taxes and regulation to keep spring break tourists away. The cost of those tourists was too high.

http://www.washingtontimes.com/news/2015/jun/3/florida-sprin...

Almost everyone is a net benefit for cities. That doesn't mean they should escape taxes.

"Escape taxes" is a bit harsh. If the tourists are a net benefit, who cares if it's perfectly fair or not?

If you are really concerned about this inequity, you need to also consider the services that tourists don't use, such as schools, and most of the roads outside of tourist-trap areas.

I really am interested in jdavis703's view.

I read jdavis703's comment very carefully and I don't agree that this is the argument that poster was making!

They wrote

>so if you want to go there you just have to pay the taxes. If they ever get high enough that hotels can't book rooms, the businesses should lobby the government to lower them.

That doesn't have any indignation (unlike your comment). So it's certainly not precisely what was meant. I don't want to put words in jdavis703's mouth, I want to hear how they say this relates to airbnb or what the policy change should be.

I read their comment as being basically acceptant of high taxes (" If they ever get high enough that hotels can't book rooms, the businesses should lobby the government to lower them.") -- but it does't go on to say "For the same reasons, airbnb should also be taxed at a very high rate, and should also lobby to lower said very high rates only if they can't fill rooms anymore." (not a quote)

In fact it could say, "high hotel taxes are good for the locals, who are the ones who make these decisions." (not a quote) It could be read that they think airbnb should also have the same high rates. (But perhaps the correct reading is the opposite, that both hotels and airbnb should not have any high taxes.)

Anyway I'd like to hear it from them :) I like their analysis in descriptive terms and I'd like to hear from them how it applies to airbnb or what should be done to both hotels and airbnb, in their opinion.

There are no special hotel taxes in London. Hotels pay the same taxes as most other businesses.

London hotels don't pay extra taxes. The taxes that have been proposed - £1 per night - seem modest.

http://www.telegraph.co.uk/travel/destinations/europe/united...

https://www.theguardian.com/uk-news/2015/jan/07/london-touri...

This is, as the local authority says, partly to clean and police and etc areas that are very popular with tourists.

Hotel occupancy rates in NYC are 90%, compared to 65% elsewhere in the USA, so if we were to try to draw a causal conclusion: high hotel tax rates cause high occupancy.

This is a bit of a deceptive headline. The immediate sub-headline is "Up to third of price gap with hotels is due to tax treatment, FT finds", which is a pretty massive difference.

(Side note: Usual "Google the headline" trick works on FT.com's paywall)

Also, the much higher VAT rate paid by most hotels in the UK compared to most AirBnBs (17% vs 0.6%) is not because AirBnBs are illegally avoiding the tax, but simply because most hotels, but few AirBnBs, cross the business-size threshold where the higher VAT kicks in.

its not a "higher VAT" threshold, you do not have to register for or charge VAT at all if your business earns less than £85,000 (you might want to if you pay out a lot of VAT though). This is unusual in the EU, most countries do not have this exemption I don't think.

Canada has the same thing. You have to collect more than 30,000$ in income before you need to collect taxes for it.

Thanks. Yes, those percentages must be averages, with most Airbnb's paying zero.

Thank you, we've updated the title.

FYI, HN's handy little "web" link, below the title, does exactly that (i.e. Google the headline)

"around a third of the $100 saving you make over the price of an average hotel room"

Up to 30USD of the 100USD I save compared to a regular hotel? PER NIGHT? In that price range, $30 are a mere tip.

Yes, in a London hotel in 2015:

> On average, guests paid $220 a night for a hotel room in 2015 before VAT, while Airbnb hosts received $142, according to the Hotelschool report, which was calculated in dollars. After taking account of hotel room VAT and Airbnb fees (assuming a 10 per cent guest fee and a 3 per cent host fee, plus VAT) the prices were $264 for the hotel room and $164 for Airbnb.

It's almost as if AirBnB, Uber et al get by on skirting the law other people have to follow.

"Skirting the law" is loaded language that makes it sound as though they are doing something illegal. They are not.

It's true, though; the reason companies like AirBnB and Uber are so vastly superior to the entrenched competition is that they don't have to deal with all the ridiculous and pointless red tape that makes taxis so horrendous and American hotels so insanely expensive.

I'm not sure how anyone can recognize that overregulation makes taxis, hotels, etc. so truly awful and then turn around and suggest that the solution is to also overregulate everyone else who managed to escape from that utility-sucking tarpit of bureaucracy and waste.

I think you may have swung a bit too far to the other side. There are certainly credible entities that did believe Uber and AirBnB was/is doing something illegal. They've certainly both been cited for violations, taken to court, etc...successfully.

As usual, the truth is somewhere in the middle.

"Loaded language" makes it sound like these are fully legitimate businesses on the receiving end of undue criticism. But then you point out how these businesses are operating in the same market, but avoiding the market regulation, almost as though they are operating in a quasi-illegal state.

Why do you believe the regulation of these markets is particularly onerous? Can you provide some specific examples?

> Why do you believe the regulation of these markets is particularly onerous? Can you provide some specific examples?

Have you ever stayed in a hotel, and have you ever stayed in an AirBnB? For me, in both cases, the answer is "many times", and the overwhelmingly clear conclusion is that AirBnB offers a vastly superior experience to staying in a hotel for a vastly lower cost. If you look at regional hotel regs; it's clear where the difference is going. Resort taxes, occupancy taxes, inspection and certification fees, etc. For all their costs and alleged benefits, they don't actually manage to make the hotel experience any better or safer than staying in an AirBnB.

You're right those taxes make no direct difference to the accommodation. They're not supposed to. The taxes pay for the city and public amenities, like the street outside the hotel, and maybe the city's stadium and sports teams. How do the AirBnB's neighbors feel about having renters use their streets without paying? Or about enjoying the prestige of being in a city with multiple pro sports teams, without helping with that bill?

If the product is better, even after paying equivalent tax and regulatory compliance costs, the yes, that is a deserved victory for AirBnB that I would support and encourage.

The problem, is that it is impossible to compare the two products if a large part of the appeal is lower cost due to regulatory arbitrage.

If an AirBnB host decided to operate a brothel, some may deem that to be a superior product to a standard AirBnB host...not really a fair comparison.

Which hotel regulations do you think are overly onerous and ridiculous? Most of those regulations were put in place to protect communities and customers, not the hotels themselves. Zoning laws prevent tourists from overrunning resident communities where people don't want them. Safety and health regulations ensure that customers won't get injured or sick during their stay. Taxes help cities pay for all the improvements, services, etc. that residents want.

And yes, Airbnb is skirting the law in the loaded sense of the term. They basically encourage illegal rentals and then refuse to police them until cities like NYC force them to. They might not be directly in violation of laws themselves, but they're definitely knowingly enabling their customers to do illegal things.

Your last point is important. Enabling others to break the law can, and often is, breaking the law.

> Which hotel regulations do you think are overly onerous and ridiculous?

The many extra taxes and tariffs on guests. Occupancy taxes, tourism improvement fees, etc, that the city is only able to capture by abusing its control over the hotels.

It's easy to pass laws that don't affect people who live in your area because nobody is that motivated to stop you. Hotels and other legitimate businesses suffer because the city stole (took because it could, for no good purpose) money from the guests that they'd have otherwise spent on services they actually wanted.

The hotel should only be billed for services delivered. If the guests consume a lot of water the hotel needs to pay for it, etc. If that rate is below cost, it should be raised.

The extra tax is just a "because we can" and is one of the things an efficient economy will route around.

> they're definitely knowingly enabling their customers to do illegal things.

They're enabling a primarily legal operation - people renting things. It's not their job to police which units are legal to rent and which are not.

I could buy legal things at Costco and commit a crime with them and it's not Costco's duty to stop me.

oh, you're a 'taxes are theft' guy.

Oh, you're a "snarky dismal" guy?

And in America, we all are. Taxes taken without representation, for no good purpose, are theft.

Otherwise you'd be good with a 100% tax rate, right?

The way we ensure good laws, and reasonable taxes, is to call out all unreasonable cases.

All taxes have an effect on domestic parties, even if they apply to tourists, so those domestic parties will be the ones fighting against. I think national hotel chains are capable of advocating their interest, as is AirBnB.

I don't think I have ever seen an example of someone imposing a tax "just because they can". Indeed, there are very real limits, at all levels of government, to the power to levy any tax. While this is a very complicated area of law with a lot of history of debate and change, the basic premise, is that taxes have to be tied to a reasonable social interest (general welfare), can not be arbitrary or capricious or designed to harm a specific party etc. If your state or local community doesn't limit taxing authority, then be part of the change you want and pursue a limit.

> I think national hotel chains are capable of advocating their interest,

It's not hotels the tax hurts, so I don't think they would have advocated very hard. In fact, to the degree that tax pays for anything related (inspections, etc) they would support it as it would externalize their costs.

> I don't think I have ever seen an example of someone imposing a tax "just because they can".

Of course not, but because it reflects positively on them and yet doesn't impact the pocketbooks of their constituents. Which amounts to "because they can."

> If your state or local community doesn't limit taxing authority

Copyright is limited - to any finite duration. So yeah, there are limits. Our goal as a society shouldn't be to tax everything to the limit though, but to cover externalities to avoid burdening others.

In this case the people presumably using the resources (the tourists) are being taxed, but only indirectly on their hotel stay. This unfairly doubly-impacts a local who needs a room and it ignores the usage costs of those tourists who don't stay in a hotel, or rather saddles the hotel using tourist with the RV-tourist's share.

The fact that the tax badly fits the supposed problem is an indication that it's just a cash grab with any justification tacked on.

> then be part of the change you want and pursue a limit.

The "you're in a democracy so it's all your fault" answer. Fwiw, the first step of change is identifying and discussing the issue.

I'm not saying the answer isn't to change broken governments, but first you need to realize that the system exists to produce this state. We didn't end up here by accident and to fix it will require a reasonable alignment of incentives.

> Most of those regulations were put in place to protect communities and customers

I don't have much of an issue with communities using zoning rules to prevent AirBnBing. That's a separate issue from top-down hotel regulations.

The cost of "protecting" me from hotels is several orders of magnitude higher than the value I get from these "protections". Of course, most of the cost of hotel regulation is hotel taxes (which are big revenue sources for tourist destinations and have nothing to do with hotel safety) and bureaucracy. The claim that all regulations have something to do with safety is popular among proponents of a given regulation, but of course it's manifestly false.

> Safety and health regulations ensure that customers won't get injured or sick during their stay.

I think you're putting a bit too much stock in the effectiveness of regulation; in particular, municipal health authorities taking your money does not make you immune from disease. I'm also quite capable of looking at something and telling if it's dirty, which is the process I use both for my own household and for AirBnBs. It seems to work quite well (and inexpensively).

It would be helpful to cite some of the things you are arguing. What basis do you base your opinion that hotel protections are several orders of magnitude than the value?

Out of curiosity, what do you expect me to do here? Would you like me to research your regional tax code and break down exactly why hotels are more expensive? Have you ever stayed in a hotel? They'll usually at least break out the obvious things like occupancy taxes.

Just an example of your choice to show the multiple orders of magnitude that the regulation costs over your perceived value.

If you die in a fire, that might feel like an order of magnitude greater than the $3 tax you could have paid. So even if you are right, that the total social cost of the tax exceeds the total harm of a few deaths, we as a society can determine that this is an acceptible trade off and spread the risk of a truly aweful outcome for 1 person over a larger group and impose a small cost on each.

Have you ever read the analysis Ford Motor Co. did when they were determining the cost of adding a safety feature to the Pinto (it would cost $11 to add a feature to prevent a low speed rear end collisions, as low as 25mile/hr from spraying gas into the passenger cabin and lighting everyone on fire, the total cost of the safety feature for all Pinto's: $140m, the cost of an expected number of 180 deaths, and 180 injury (and resulting law suit payments): $50m). In the absence of regulation or judicial liability (which is also a regulation, but one with more uncertain cost making it harder for businesses to plan for and comply with), companies would make this exact analysis all of the time.

I would assume you would be willing to pay $11 for the safety feature right? Thus, given the asymmetric information that benefits Ford, and prevents consumers from demanding that as a mandatory feature or an "upgrade" option, it seems like an acceptible regulation to impose.

See https://users.wfu.edu/palmitar/Law&Valuation/Papers/1999/Leg...)

> "I think you are putting too much stock in the effectiveness of regulation..."

Except that clean water regulation very clearly prevents disease. Have you heard of the origin of clean water regulation in London? One researcher traced a cholera epidemic to a single well, city water services and related regulations were a direct result of his effort and advocacy.

https://en.m.wikipedia.org/wiki/1854_Broad_Street_cholera_ou...

Before that, in 1849, 8,000 people died in NYC from cholera from water: https://dec.alaska.gov/eh/dw/publications/historic.html)

Last time I checked people aren't dying in NYC from unclean water. I am also confident that the utility of 8000 people dying greatly exceeds the cost of providing clean water.

Hotel taxes support infrastructure and city services. And things like proper safety and fire regulations in hotels ensure that guests know where fire exits are, that fire extinguishers are available and operational, that smoke detectors are present in the proper locations and functioning, etc. All of those things cost money. AirBnB offers none of those things. It took a string of deadly hotel fires in the 70s to get regulation up to speed. I wonder what it will take with the illegal hotel rental market.

I'm not coming from any experience in this comment, but I'm wondering if AirBNB rentals will ever have such extra regulation since there are no long-hotel hallways, no fire-escapes, elevators, etc... simply because these are already residences - are we to suggest we need normal homes to be safer than they already are? If these places are "unsafe" in this regard, shouldn't it be improved whether or not they are being rented on a nightly basis?

Law usually needs to be tailor to the specific facts of a situation. Here there is a clear difference in a building being used as a residence with a small and consistent set of people using it as opposed to a much higher volume of guests using it for a business purpose. Just think about the increased risk of accidents, fire, or crime introduced as multiple guests stay in a space: they will increase the risk of crime by bringing valuables in rotating shifts, increased risk of fire as some guests will smoke or bring faulty electronic devices; I could go on, but the point seems clear. Higher traffic use results in greater risk. These factual differences should be taken into account when writing an insurance contract (a form of "law") or regulation (also a form of "law").

Fire escapes aren't required merely to look cool, they provide a second form of egress from a hotel room in the event of e.g. a fire, which is a common requirement and not relevant to houses which will have other forms of secondary egress. Even so, my non-hotel apartment has a fire escape because the hallway through the front door is the only other path out of the building.

My wife and are getting licensed for foster care, and this week I'm installing several smoke detectors and CO detectors. We're required to have a minimum of one CO and smoke detector per floor, and an additional smoke detector in each bedroom.

Was our house acceptably safe without those? Probably.

Is it going to be better now? Certainly. It's a bit of work installing 7+ devices, but I understand that we've reduced a lot of risk.

Same thing with the fire extinguishers and other safety equipment we'll have to pick up.

Rental units here have somewhat similar requirements, and I think short-term rentals should have similar safety features.

That's probably just changes in the regs since the house was built, not that foster children (or tourists in the case of a hotel) are more fragile than others.

Good standards are good, double standards are not.

Right, but my view is that certain "qualifying events" should trigger public interest requirements for more safety.

Buying a house? Make sure stuff is up to code, get an inspector, but it's on you.

Housing kids for the state? There's a public interest in making sure they're safe.

Renting out a room or building? Safe thing (and there are already regulations here that are stricter than those applying to private he owners)

Renting out a room or house short term? Again, same thing. This should at least be the same as a long term rental.

EDIT: anyway, my original point was that there is precedence for safety regs even if you don't have long hallways or tall buildings.

You're in an unfamiliar place and a fire breaks out. If there are no working smoke detectors and you're asleep, you'll probably die. You're making a meal on a stove and you accidentally start a fire. Is there a fire extinguisher... anywhere? If there is, is it even working? If there's a fire and it's smokey and your main route of exit is cut off, do you know how to get out a back way? Is there even a back way? Nobody is checking for these things when you rent an unregulated room from a random stranger on the internet.

If you own your own place and are lax in your upkeep, fire prevention, fire detection, and safety measures, it's likely you who will pay the price. If you're renting your place out as an illegal hotel, you're affecting unsuspecting guests.

> Hotel taxes support infrastructure and city services.

So restaurants that don't charge the extra foreigner-tax are destroying the city infrastructure? Or are their regular taxes expected to cover it?

Why not with hotels? Why can't they simply be assessed the real cost of supporting their usage?

If there was a cost associated with hosting an out-of-town guest, why is it a percentage of the room rate? Of course, the answer is "because it can be." Takers gotta take.

> Hotel taxes [also support ...] things like proper safety and fire regulations in hotels ensure that guests know where fire exits are, that fire extinguishers are available and operational, that smoke detectors are present in the proper locations and functioning, etc.

No. The room rates support that. The hotel doesn't keep the taxes so none of the taxes go to helping make the hotel safer.

> AirBnB offers none of those things.

Neither do a newspaper's classified ads.

Whose laws should they support? The guests? The hosts? The country the servers are in?

Should the newspaper have a similar burden? If I sell a car should they have to inspect the car first to make sure I'm not trying to pass off a lemon?

Hotel taxes go to support things like inspections that ensure things like exit signs, fire extinguishers, smoke detectors, CO detectors, secondary exits, etc are all up to code on a regular basis.

Which should be paid for by the hotels and reflected in the room rates, not hidden in tax.

I'm also sure it doesn't cost $45 per room night to inspect a hotel room in SF, so the tax is out of proportion. Which is expected because the people it impacts don't have representation to change it.

And to the degree they can avoid it, it is only by the broad brush of avoiding the city entirely which has negative effects on merchants in business which don't unload their costs onto others.

> Hotel taxes support infrastructure and city services.

As a tourist, there's no reason I should have to provide an inordinate level of support to the regional regulators. I'm happy to pay sales tax like everyone else, and the costs of property and utility taxes are already built into the cost of my stay.

> And things like proper safety and fire regulations

Residences already have to obey regional safety and fire code.

> All of those things cost money.

That's true, but you're already paying for that in an AirBnB, because as I said, it also has to follow regional fire code.

You seem to be under the false but unfortunately common impression that all, or even the majority, of regulations have anything to do with improving consumer safety.

> It took a string of deadly hotel fires in the 70s to get regulation up to speed.

The false premise here is that residential building code is not already "up to speed".

> As a tourist, there's no reason I should have to provide an inordinate level of support to the regional regulators. I'm happy to pay sales tax like everyone else, and the costs of property and utility taxes are already built into the cost of my stay.

I support our local infrastructure via my income tax as well as my property taxes in addition to my sales tax. You don't pay income tax, so you are charged the latter.

> Residences already have to obey regional safety and fire code.

They obey basic building codes. They may not have working smoke detectors or fire extinguishers. Secondary exits may easily be blocked by storage, furniture, etc.

> That's true, but you're already paying for that in an AirBnB, because as I said, it also has to follow regional fire code.

Nope, it doesn't. AirBnB rentals are unregulated and have none of the fire safety mechanisms or inspections of licensed hotels.

> You seem to be under the false but unfortunately common impression that all, or even the majority, of regulations have anything to do with improving consumer safety.

You seem to be under the incorrect assumption that these regulations weren't implemented specifically because hundreds of folks in the 70s were killed in hotel fires because they were unregulated.

> The false premise here is that residential building code is not already "up to speed".

A building code that a structure was built to decades before has less bearing on how safe that dwelling is today without smoke detectors, working fire extinguishers, marked exits, available secondary exits, etc than you seem to think it does.

Remember, just because you're responsible and have a working smoke detector, CO detector, and fire extinguisher as well as secondary exits that are easily accessible doesn't have any bearing on the random stranger you rent from on AirBnB. They may just not care and you'll be none the wiser.

Public safety regulations are not pointless red tape. They are created after real tragedy that shows a clear need. In fact, fire regulations in NY first applied to apartments, while hotel owners fought for decades to avoid the regulation require it fire escapes (Read the following for more information http://www.uvm.edu/histpres/HPJ/AndreThesis.pdf )

Even after fire escapes were mandated hundreds of people died in a factory fire ( see https://en.m.wikipedia.org/wiki/Triangle_Shirtwaist_Factory_... ). I hope you are wiling to concede that these regulations, while imposing a real burden on businesses and landlords, were designed to correct a real and very persistent problem. Is your position that we would be better to just ignore fire and other safety rules for all hotels?

In light of a clear rationale for such regulations, we must ask why one business should get to play by a different set of rules than another? Free market competition does not work if the only advantage is regulatory arbitrage. That would be like a race between two cars, one that has a 40 mile/hour speed limit, the other no speed limit. Which car would you pick?

The only argument that I would concede is that perhaps AirBnB is closer to an actual bed and breakfast, so those regulations should apply, but I would guess that class of regulation is generally more strict than what they are subject to now.

> Public safety regulations are not pointless red tape.

This is the typical refrain of people who are trying to pitch pointless red tape; "it's about public safety!"

Of course, 90% of regulations in any given industry have nothing to do with "safety" and everything to do with sustaining the bureaucracy that created them. Even those regulations that are nominally intended to increase safety are often counterproductive, and cause more utility loss than they prevent.

> Is your position that we would be better to just ignore fire and other safety rules for all hotels?

Are you really under the impression that the competitive advantage of AirBnB comes from ignoring fire code? That's insane for multiple reasons, but mostly that all residential buildings (including AirBnBs) have to obey fire code already.

> In light of a clear rationale for such regulations

You're making two false assumptions here; one is that most regulations even nominally have a "clear rationale", and the second is that regulations that appear to have clear rationales to some self-interested regulatory group actually do. Most people, including regulators, don't bother to look beyond first-order costs imposed by proposed regulations. It's quite likely that many safety-oriented regulations claim a great deal more lives than they save, since the increased economic burden of those regulations sucks up resources that would otherwise be used on e.g. healthcare or personal enjoyment. On an individual level, the difference is very smal, but multiplied over the millions of people who are affected by the regulation it adds up to a lot of man-hours and lives lost.

> That would be like a race between two cars, one that has a 40 mile/hour speed limit, the other no speed limit. Which car would you pick?

The unlimited car is clearly superior, so you're not exactly helping your own argument here.

Actually no, owner-occupied residential buildings do not have to meet codes, under the liberal belief that it's OK for a person to subject themselves knowingly to certain hazards. However it is not OK for that owner to subject others to those hazards, which is why hotels and rental properties have to meet those codes even as the codes change. Therefore it is a regulatory advantage of AirBNB that unregulated residences are offered up as hotels without meeting the codes.

> Actually no, owner-occupied residential buildings do not have to meet codes,

You are just straight up incorrect. No two ways about it. I'm actually a little surprised someone could have this little exposure to the residential regulatory bureaucracy. Maybe that's why you can support it.

Here are some (not all) of the residential building codes that apply here.

https://www.tdhca.state.tx.us/single-family/training/docs/14...

http://www.sanantonio.gov/DSD/Resources/Codes

Those are the codes for building a new building. The codes change but the buildings don't have to. You can occupy a 100-year-old building in San Antonio if you feel like doing it. No regulatory bureaucracy will be concerned.

Any time you do a renovation you have to bring everything up to code. No one is going to stay in a rotting 100-year-old house that's never been renovated.

So again, do you acknowledge that, while these regulations many not be appropriate and should be changed, regulations of this type may be ok?

You said in a lot less words the same thing I just finished typing.

To expand on your point, I have friends who have been occupying a nearly 100 year old house for 30+ years who in the last 2 or 3 started renting it on AirBnB. I lived there while in college for a few years as well. It had live knob-and-tube wiring [1] whose asbestos sheathing had long since flaked off or were ready to flake off at the slightest touch and many other not-even-close-to-current-code issues that were 100% legal due to it being grandfathered in. When doing renovations (prior to being an AirBnB) a lot of these issues were fixed but had the city not forced them to add extra exit lights and fire extinguishers and smoke alarms, people would have been staying there with absolutely no idea about any of this.

Unfortunately it varies it seems whether or not BnB's (air or not) are subject to extra regulation, even if its not the same as a large hotel.

[1] https://en.wikipedia.org/wiki/Knob-and-tube_wiring

> When doing renovations (prior to being an AirBnB) a lot of these issues were fixed

Exactly. Any house that has not been renovated recently enough to adopt modern safety regs is unmarketable.

> but had the city not forced them to add extra exit lights and fire extinguishers and smoke alarms, people would have been staying there with absolutely no idea about any of this.

So you're complaint is that in a hypothetical universe where rennovations didn't involve bringing buildings up to code, AirBnBs would be unsafe? That's true, but irrelevant. We don't live in that universe.

Renovations don't automatically involve bringing buildings up to code. Renovations aren't required, either.

But we live in the universe where you can 100% guarantee that all AirBnB's have up to date building codes because they've been renovated? Do you not see the issue with that logic? Can you not imagine a circumstance when a house was renovated right before a major change in building codes and didn't have to be renovated again prior to being a AirBnB? I'm not entirely sure you aren't just trolling at this point.

Of course, this doesn't really matter since as has been stated by myself and others: normal building codes that are sufficient for a homeowner are not necessarily sufficient for other occupants who are paying to stay a night there, but your logic is terribly flawed anyways and it must be pointed out.

> Any house...not renovated..is unmarketable.

Only because there is (i) enough modern housing stock (with safety reg compliance) to provide other options, (ii) knowledge sufficiently available for the public to know the difference, (iii) strict and consistent enforcement to over come the collective action problem.

I would welcome any evidence or analysis showing a free market would create sufficient incentive for home builders and landlords to voluntarily adopt this level/kind of fire or personal safety standards. To me the market would clearly incentive most structures be build at the lowest cost. I would gladly stand correct, I don't have enough knowledge to know what the facts would support.

Read mcguire's post above, the point is that residential fire codes are insufficient and less safe for a property that is being used as a bed and breakfast, and the industry group that represents bed and breakfast operators says it puts them at a cost disadvantage.

Just want to point out that the parent post cited specific evidence, with links to a fairly reputable source (wikipedia), to support their claims, which your counter-post lacks.

What is your point? I'm making an argument that can stand or fall on its own. Dropping links that don't add any semantic value is a cheap trick to buy the appearance of a strong argument, but doesn't change the meaning of anything in the post. The GGP post just added some links to stories about historical building fires, which we all already knew existed and added nothing of substance to his argument, but it still managed to convince you that it boosted the credibility of all the other unrelated stuff he said.

> I'm making an argument that can stand or fall on its own.

Not when your argument depends on that 90% number being correct. Some people might read that and say "wow really, 90%?" and that might actually persuade them. When you make a quantitative statement that has no backing its not up to you whether it stands on its own or not - if your numbers are not correct then it does not. You could say "some" instead of 90%, but you can't even say "most" without some kind of proof to back it up but you don't even do that, you just pick a really high number that would be very persuasive to anyone who doesn't question whether or not that number is true. Its lazy at best and intentionally misleading at worst.

Read the links. They are not eye candy, they have actual substantive data and detail that support the premise I am making.

Do you have citations for any of this? Where are you getting your 90% numbers?

The parent post doesn't cite specific numbers about how many regulations were put into place as a direct result of a tragedy but they do directly cite some examples, which you do not.

Nobody (literally, anti-regulation straw man arguments not withstanding) opposes pointless regulation and nobody would be opposed to periodic reviews of existing regulations to ensure they are still applicable. The problem is that anti-regulation arguments tend to demonize nearly all (if not all) regulations as being burdensome. Having arbitrary rules [1] about regulations does nothing for progressing the conversation. If you want to be taken seriously you need to cite examples of these regulations, its easy to find ones that are directly related to past tragedies, it should be as easy to cite your examples?

> Are you really under the impression that the competitive advantage of AirBnB comes from ignoring fire code? That's insane for multiple reasons, but mostly that all residential buildings (including AirBnBs) have to obey fire code already.

I don't think you are taking into account two things:

1) The fire codes for residential homes and for hotels are very different. It makes sense that they are, they are very different structures but that doesn't mean that people who stay in an AirBnB shouldn't expect some extra safety features like emergency lighting and more smoke alarms, fire extinguishers etc. If you were staying on the 2nd floor of a house that you did not live in and there was a fire and there was no power or emergency lighting or exit signs or fire extinguishers and only 1 smoke alarm on the other side of the house and you had to find your way out in the complete dark how would you feel?

2. There are a lot of grandfathered-in houses out there that have 1 fire alarm, no CO alarm and totally out of date electrical wiring. These same big old houses also have a high chance of being the kind of place that is used as an AirBnB (in my experience).

There is (like always) a reasonable middle-ground here - AirBnB's should be subject to more regulation than normal homes because a howeowner (unlike a tenant) knows the home, has chosen to live there and accepted the possible risks and has the opportunity to ensure the home is up to current codes (even if it is grandfathered in). However it makes little sense to apply the same regulations a huge hotel building with massive occupancy with a (typically) 1 to 2 story structure that you could likely escape much easier due to the size and due to the fact that a worst-case scenario has a much lower deathtoll (even if a single death is a tragedy).

[1] http://www.forbes.com/sites/waynecrews/2016/11/22/donald-tru...

I agree that the regulations should be tailored to the facts; it isn't appropriate to apply the same fire code to a small home (even where it is used for AirBnB) that applies to a large hotel building.

I would add in support of your argument that AirBnB should not have an economic advantage as a result of the different regulations. I do think commerce benefits from having fair and equal playing field / rules and suffers when companies can benefit from regulator arbitrage.

Read my sources and tell me this is not a consistent problem. Oakland just experienced a similar tragedy.

> "This is a typical refrain.." Saying this is a common refrain doesn't make it false. It just shows that you have no counter argument...

> "Of course, 90% of regulations have nothing to do with "safety" and everything to do with sustaining the bureaucracy that created them... Do you have any actual support for this premise? Read the thesis I cited, read almost legislative history for any safety regulation and you will see regulators citing specific data on harm to safety and how the regulation would improve safety. For that matter google a basic traffic study for an intersection and you will see the same type of analysis. Please don't pretend that regulators and law makers don't give a shit or try to do their jobs well; our institutions, and the people that run them do care and to a good job. I think the progress humanity is better now that it was when these institutions did not exist. They are not perfect, but the cynical view that they are solely focused on preserving their own position is not consistent with easily verifiable evidence of their intent expressed in writing. I would also note that many government employees could make more in the private sector which implies they are incentivized by some other means.

Further, you have the causality exactly backwards. Regulations and related bureaucracy are created to address a problem, and will continue to exist as long as that problem exists. There were no nuclear regs/bureaucrats before there was nuclear technology. Should we get rid of the city fire department the second there isn't a fire in a city? Or the military the minute we are not at war?

However, I will acknowledge that you are right that bureaucracy can become entrenched, and we should protect against that by insuring proper legislative, judicial and executive oversight. We should also set up other necessary checks and balances, and create cultural norms that prevent individual and systematic corruption. Your answer, to just eliminate regulations, wont solve this problem it will just shift the power and corruption to the private bureaucracy of corporations.

> "Are you really under the impression the competitive advantage of AirBnB comes from ignoring the fire code?..." Yes, it is my position that AirBnB has a cost advantage relative to hotels because it doesn't have to (i) comply with regulations, including but not limited to, fire regulations, (ii) pay taxes to compensate for the maintenance of government provided infrastructure that experiences increased wear and tear as result of higher traffic and use of public services (like fire and ambulances), (iii) doesn't have to cover liability insurance for injury experienced buy guests because it doesn't own the property.

> "You're making two false assumptions, one is that most regulations... have a "clear rationale"..." Read the court cases and legislative sessions where these regulations are debated in depth and tell me that there isn't a "clear rationale" when they are enacted. They often have detailed statistical reports.

> "...second...that regulations that appear to have clear rationales to some self-interested regulatory group actually do. Most people, including regulators, don't...look beyond first order costs..."

What evidence do you have to support that regulators don't look beyond first-order costs? Or are you just making that up?

You are right that some regulations have unintended consequences; and when that happens, regulators should collect data, design a superior regulation and change it. That happens all the time and I would support such a process. What is your alternative? To get rid of all regulation and only focus on maximizing utility? That would result in an absurd outcome where there is no law and there are not enforceable contracts because every law and every contract imposes a cost to utility of some party.

Let's get one thing straight, I am not arguing all regulation is good. I am arguing that if society has determined that a regulation is necessary, then ALL parties should follow the same rules, that's it. If society revises a regulation in light of unintended costs, then great.

> "the unlimited car..." You are ignoring the purpose of my argument. My point is that pretending like AirBnB / Uber are superior to traditional competitors because they offer better service rather than competing unfairly by ignoring regulations (and their associated costs) is like saying a car with an unlimited speed limit is faster than on that has to obey 40mile/hour; it is ignoring the essential question which are: which car will win a race with the same rules. If commerce is a competition, companies need to compete with the same rules or we are guaranteeing victory for anyone that breaks the law.

As to that last paragraph, some specific quotes from the article:

"Airbnb has also bowed to pressure over planning concerns in residential areas, by agreeing to help enforce annual rental limits. But consumer protection is another emerging issue. David Weston, chairman of the Bed and Breakfast Association, criticises Airbnb for not ensuring compliance with fire regulations. “I think the public assumes some sort of checking if you are booking with a big global brand,” he adds.

"By contrast, members of his association with as few as three letting bedrooms have been required to install fully wired fire alarms and fire doors. “We have had instances of people having to spend thousands of pounds,” he says. “It is extremely galling to find that fast-growing competitors are not complying with anything.”

[...]

"Airbnb rejects criticism of its fire safety measures, saying the Chief Fire Officers Association has confirmed that the advice it offers hosts is proportionate to the requirements of a family home. It encourages hosts to install safety features and, for a limited period, has offered a single free smoke/carbon monoxide detector — although it does not oblige hosts to fit smoke alarms. Its website says hosts have the option to fill out a safety card detailing emergency exit routes and locations of fire extinguishers, but this is not compulsory."

"Proportionate to the requirements of a family home" and "the option to fill out a safety card" do not thrill me as someone who has been run out of a room by a hotel fire.

I agree that abiding by the regulations of a family home is not sufficient given how factually different the use of the property is and would also point out that this clearly enables a lower price as the hosts don't have to pass this cost along to AirBnB customers.

I would also point out that the is likely asymmetric information here, where, as you point out, consumers either don't know or assume that the fire safety standards are inline with industry norms. Regulation should definitely be designed to correct information imbalances between customer/seller.

> as though they are doing something illegal. They are not.

Of course they are. And Uber has been fined/sued/charged hundreds if not thousands of times for doing just that. The penalties have proved insufficient to deter them from their illegal racketeering operation, however.

Maybe we should be asking why some industries are heavily taxed and others are not

Just look how successful the products are (not talking about the companies) without heavy government intervention. Both of those would not exist if they had followed laws designed a (half?) century ago for different types of businesses. And customers love those services.

Rather than finding a common working ground that keeps customers happy that outnumber those unhappy with it by 100:1 and instead updates laws like improving landlords protection from Airbnb renters, improving access to employment insurance and health care to self employed contractors, etc it's easier to blame tech billionaires for being greedy.

Tech billionaires are greedy.

Customers love Uber because it's prices are currently subsidized by VC money. Once that goes away, we'll see how competitive they are.

Uber is profitable in the USA.

So I see no reason why its won't stay competitive.

Apple is profitable but it certainly not competitive on pricing. Monopolies also tend to be profitable, competitiveness isn't even a concern there.

????

So are Uber's prices too low, because it is being subsidized by VC money, or are the prices too high, because it is a monopoly?

You can't have it both ways.

My argument is that their prices are just fine where they are now, and that there is no upcoming price hike, because the prices, in the USA, are profitable NOW.

In my market, Uber undercuts the established taxi businesses.

People clearly have a higher valuation for a taxi ride than what Uber is charging because they've been paying the higher price and are still paying it when they choose another business other than Uber to ride with. Once Uber has driven out the other options, thus the need for competitive pricing, why wouldn't they capture that lost value?

What I am saying is, Is that if Uber is profitable right now in the US, then this isn't "undercutting".

This is the fair, free market price. That's how normal competition works.

If they were significantly not profitable, then you can use the price dumping argument.

But since they ARE profitable, then this is the price that the free market will go towards.

I can have both because there is no relationship between profitability and competitive prices. Profitability doesn't imply competitive prices and competitive prices don't imply profitability.

That Uber happens to be profitable and offer competitive prices doesn't imply anything for their prices in the future.

Are there any good sources for Uber's unit costs versus prices? I would be surprised if all rides in all markets are subsidized by VC money. I would expect most of the VC money is being spent on expansion (more cities and more drivers) and that Uber service is actually profitable in mature markets. There are several articles claiming that Uber is profitable in the US.

This is the only in-depth treatment I have found. It's damning: http://aswathdamodaran.blogspot.com/2014/06/a-disruptive-cab...

That is from two and a half years ago.

I actually preferred uber when it first launched and it was kind of expensive and you got nicer cars and more professional drivers.

Uber black still provides that option.

Right. When I started using Uber, back when it was just "Uber" and w/o the various levels, it was cost-wise on par with local cabs but I always used it. The ability to get a decent experience, when I wanted it and with the online capabilities was a huge win over taxis.

You can still use Uber black for that.

I don't think this is necessarily true. Much of the VC dollars Uber has are currently being used to enter new markets. It's primarily used as growth dollars, as it should be.

They lost $1.2 billion this year and spent $1 billion on trying to capture the India market alone. In several other markets they were taking a similar strategy.

My suspicion is that as a rider in a primary market, you are paying a "sustainable" (for the rider) rate. Maybe not so much for the driver. But that's a different topic.

So are you saying we should get rid of any regulation where "customers love a service" that doesn't follow the regulation?

So we should allow a contract killer for hire on-line marketplace because drug cartels would really love to book their preferred hit man from an iPhone app?

Slippery-slope fallacy. Revising regulation to strike a balance between no regulation and existing regulations to allow services like AirBnB and Uber does not have a causative link to creating a contract-for-hire market for killers...

I am pushing back against the slippery slope that all regulation is bad, or rather, that AirBnB should be allowed to ignore regulation. I am trying to demonstrate, that in principal, at least one regulation would be obviously appropriate. If we agree on that, then we can get into the process of evaluating which regulations are efficient, acceptable and balance the competing interests of maximizing utility, and promoting social good.

I think few would take the position that all regulations are bad, or that Silicon Valley companies should be able to ignore regulations. However, regulations need to change with the times and the technology, and this is one case where they haven't caught up. The regulations are serving to protect special interests, defeating the natural efficiency of the free market. They also serve some use, in terms of safety standards, mandating accessibility for people with disabilities, etc. Clearly they need to be revised and improved, but I don't have a lot of confidence in the political environment in the US that they will bring sanity to the situation anytime soon.

No, I think it's reasonable to look at who is benefited and harmed by a regulation. The morality of contract killing is probably not very controversial. The vast majority of people would oppose it even if no laws or government existed.

I agree, my point is that it is a balance. My example is far to the extreme. And I concede that AirBnB has a reasonable argument that the regulations should apply to them since there are real, and important factual differences in the way they operate.

That being said, as you point out, we should look at the benefit and harm of a policy, if existing business are harmed that is a relevant factor. I think it is reasonable, that has a general and universal rule, companies should operate under the same set of rules. The difficulty is that AirBnB, may not fit into existing categories of an industry and regulatory framework. So how do we determine which set of rules to apply, or whether any should? How do we determine what a company is doing that is subject to regulation?

Perhaps a good starting point is to look and the product/service and customer segment. Thus, where two companies are providing an interchangeable good/service, to the same customer segment, they seem to be direct competitors and as such, I think it is reasonable to apply the same rules or we are allowing one party to benefit from regulatory arbitrage.

What part of "we should find common ground" means "get rid of any regulation"? You prove my point perfectly by ignoring all context and making it us vs them, rather than weighing the value of both sides.

The goal should be to update regulations to reflect modern reality, not destroy the massive value created by these new services (and an array of future services) by applying rigid century old hotel/taxi regulations and pigeon-holing them onto tech companies. Or punishing workers with labour and social welfare laws from a past time when everyone was in an employee/employer relationship rather than contractors.

Grey markets are almost always a reaction to inefficient, out of date, or unintended side effects of state intervention. India's economy crashing after removing the currency is a perfect example of this, it exposed a massive grey market which existed due to their famously heavy handed government policies [1] [2]. Or when anatomy research was exploding in popularity in the 1890's and access to cadavers was limited by government policy to the bodies of prisoners and orphans, leading to a massive black market of grave diggers and murders, which only stopped when the policy was updated, despite broad enforcement effort [3].

Sometimes grey markets are good for society while slow moving regulatory and judicial systems catch up to modern economic reality. Sometimes they're disastrous (see: drug war). But you can't put the rabbit back in the basket, so the sooner common ground is found the better.

[1] https://www.youtube.com/watch?v=hVwIZzGHxwc

[2] http://www.bbc.com/news/world-asia-india-35610332

[3] https://en.wikipedia.org/wiki/Burke_and_Hare_murders#Anatomy...

I don't take issue with finding common ground, or revising regulation. I will even acknowledge that regulations are slower to change than private actors are at innovating. Which is a problem.

I agree with you that grey markets can show an inherent problem with a regulatory regime and should be viewed as providing useful information. That being said, people will always break the law, that doesn't, by itself mean there should be no law, the question is what is the right balance given the competing objectives.

But I think your examples are excellent. Regulation can definitely go to far, have unintended consequences, and create real social harm. The problem is that what is ok changes over time; right now we are comfortable with using cadavers for research, but society was not at the time due to certain beliefs in place. Perhaps we will have a similar change with stem cell research in the future such that some of the current restrictions will seem similarly antiquated. But to say that both were inherently irrational is not a fair reading of facts or history. My point is that its good to debate what regulation is beneficial and revisit the debate regularly.

There will always be a tension here, regulation to protect social interests, and freedom to allow individual commerce, and that is ok, society should always reevaluate its structure as should any organization. I am merely reacting against the impulse to eliminate ALL regulations or say that business models that ignore relevant regulations are valid and superior.

For the record, I am actually a big fan of AirBnB, and use it regularly. I support their mission, I just think we have to be honest about the sources of their success, a part of which is a unique, better product, but a part of which is due to regulatory arbitrage. If we are not honest, we cant learn from what they have done and replicate it in other sectors. If my company takes the same approach in health care, I would go to jail, so why should we encourage this mind set for others reading hacker news?

> And customers love those services.

Until they die in a fire in a building that doesn't follow fire code; or are seriously injured in a possibly uninsured Uber[1] car.

[1] Uber provides insurance to US drivers. I don't think they provide it anywhere else.

The regulations that Uber is skirting are based on the problems caused by taxi drivers otherwise being anonymous. Since Uber can connect drivers to rides and handles payment the problems that plagued pre-regulation taxis aren't a concern in this case. We shouldn't reflexively assume that all regulation is bad, but we shouldn't reflexively assume that all regulation is good either. As with Chesterton's fence, always look at why something was created before saying whether it should continue or stop.

Injuries by uninsured drivers in places where valid insurance isn't required to drive isn't really a thing you can lay on Uber. It applies to every car on the road in those countries.

> Injuries by uninsured drivers in places where valid insurance isn't required to drive isn't really a thing you can lay on Uber. It applies to every car on the road in those countries.

Uber has been cited multiple times in Germany because it did not enforce the required insurance for its drivers, instead letting them drive with a private insurance.

> taxi drivers otherwise being anonymous.

Everywhere I take taxis the drivers have to display their name and id. Or did you mean something else by 'anonymous'?

They display those because of the medallion system, the system of regulations that Uber is ignoring.

Injuries by drivers whose personal insurance doesn't cover their commercial activity is something I think you can lay on Uber.

Medallion systems limit the amount of traffic caused by taxis, so it isn't just limited to problems caused by drivers being anonymous.

> And customers love those services.

All else being equal, customers love paying less for the same thing. But they don't necessarily like the implications at scale. E.g. would New Yorkers vote to raise property or income taxes to make up for the $1.8 billion that would be lost from hospitality taxes?

Even that's not as simple, though: if hotels all failed, they would be replaced by something else (maybe AirBnBs, maybe other things, probably a mix) that would generate economic activity and tax revenues.

Certainly adding up to less than what's lost in hospitality taxes, but it does counteract the loss to an extent.

It doesn't counteract the loss, because the hotel already generated economic activity and tax revenue and then hospital taxes on top of that.

Taxing the hospitality industry is a way for a municipality to shift the tax burden from residents to visitors.

Because we live in a first world country. Taxes pay for that. That include hotel and taxi taxes.

AKA regulatory arbitrage--profit from not obeying the same laws as your competitors.

.... So, ONLY a third? That leaves two thirds left, thats not due to that. That is still a big difference.

Hotels have to comply with other regulatory mandates like health insurance for the workers, worker's comp, pension/retirement plans, in some cities - unions, etc.

You may also be forgetting the other amenities that hotels may provide: the additional cost of common area facilities (exercise rooms, breakfast areas, pool, etc) the hotel provides for the guest. Room service, turndown service, and daily cleaning also play a huge role.

There's also a huge amount of space that's used for things like lobbies, front desks, back of the house offices for the accounting/managerial/etc staff that keep not only your one room operating, but provides the flexibility to rent 100, 200, 300, 400 rooms.

Then of course, you have the construction + regulation that goes into a hotel. Guestroom entry doors must meet a specific fire-rated standard (greater than those normally found in residential homes). In the United States and in Europe, each guestroom is designed to maximize the protection of the occupant from environmental threats. Fire alarms and sprinklers are regularly tested, every entry door has a lock whose key is tightly controlled. HVAC systems are constantly maintained so that dust and mold don't build up inside.

And so on, and so forth.

There is a hotel chain in the UK that will refund you if you do not have a good night's sleep. They pay out on this promise too, I can assure you.

Hotels also have a lot of empty rooms that cost money to maintain whether they are occupied or not.

Hotels employ staff, not all of whom are fully productive 100% of the time.

Before a hotel takes my money I actually know where it is. The hotel is governed by local legislation so I have redress if something goes wrong.

I may have some redress with Airbnb but I wouldn't like to bet on it.

"Airbnb did not comment directly on the FT’s calculations, saying that tax was proportionate to the level of activity provided, not the platform on which accommodation is listed. It suggested it was misleading to compare someone occasionally sharing a spare room with a 200-room hotel with high occupancy rates."

Is AirBnB still pushing the "spare room" thing?

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