Airbnb and Corruption

Joseph Schumpeter includes this sentence without further discussion or supporting data in a recent column:

Uber and Airbnb are bringing dramatic improvements to two large industries that have been more or less stuck for decades.

The argument is that the sentence should be self-evident. The existence of these “disruptive” business models must be an improvement because they exist. That makes no sense. What are those improvements? How are they measured? The author doesn’t say – he just makes the claim – but readers are expected to take his word for it. LeVar Burton pitched the benefits of reading books and even he didn’t ask people to take his word for it. Why should we trust someone with no argument?

New Orléans recently relented in the face of Airbnb (they’d already rolled over for Uber and Lyft). Given that the mayor’s mom rents out a huge house for $750/night, it’s not surprising. This is in the face of a lack of industry beyond tourism, crime, rising rent prices and low to no wage growth.

Of the more than 4,000 places to stay in New Orléans on offer on Airbnb, nearly 75 percent are “whole 01nov2016-imagehouse” rentals — meaning, the owner doesn’t live there and you can reserve the entire home for a weekend, under New Orléans’ proposed new regulations.

Now, if you’re allowing people to book your whole house for a two-night stay, obviously that house can’t be rented to long-term residents. By using Airbnb to take short-term rental properties off the market, those that let to residents are able to dramatically increase rents (supply and demand), which drives people like me — taxpayers who brought high-tech jobs with them — out of town.

For instance, Nadia, who owns three Airbnb houses in New Orléans, describes herself this way on the site:

I live Full time in Michigan, but come to New Orleans every couple of months and love it here. It has been a second home to me for about about 5 years now. I want to make sure when visiting New Orleans, I provide you the best experience as a tourist to make you feel as warm and comfortable as I do as a tourist there while I’m visiting [sic]

She’s turned the only two houses on Annunciation Street from Felicity to the other side of Second Line Soundstages into Airbnbs. And she doesn’t even live in New Orleans. (The units are also rather skanky and located in the projects but they look nice from the outside.)

Worse: Western cities — London, New York, Vancouver, Austin, Portland, San Francisco and elsewhere — have been the target of corrupt Chinese, Russians and Mexicans looking to launder money in real estate deals.

I don’t understand why cities have such a hard time regulating Airbnb and Uber and the like. Airbnb has it in its name – regulate them as bed and breakfasts. Uber is, obviously, a taxi service. It’s very simple. Money is what’s clouding the obvious. The use of a smartphone app or website to schedule your room or ride doesn’t fundamentally alter the services they offer.

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