5
Early to bed, early to rise, and work like hell and organize.
—CHRIS LEHANE
SOMETIME IN THE SPRING OF 2010, Chesky got a call from a host in New York City. “He said, ‘There’s this thing going on in New York, they’re trying to push this law through, and you’ve got to be really concerned about it,’” Chesky remembers. “I’m, like, ‘Tell me more about it.’” He says he had no knowledge of the law the host was referring to—and once again, no experience in the subject at hand, in this case municipal government and city politics. Someone suggested Chesky get representation and hire a lobbyist to try to get in front of New York lawmakers. “I didn’t even know what a lobbyist was,” he says. He says the more he learned, the stranger he thought it sounded. “You can’t talk to these people, so you’ve got to hire people to talk to these people?” he says. “I thought, first of all, that’s kind of insane. I’ll hire these people to talk to these people because they won’t talk to me? OK.” The company hired Bolton–St. Johns, a prominent lobbying firm in New York. But there wasn’t much time: the law in question was potentially going to be passed in just a few months. “We had to have a crash course,” Chesky says.
That crash course would turn into a years-long learning curve regarding the ins and outs of local politics and the powerful forces behind them, not just in New York City but in scores of municipalities around the globe. And it would become the biggest speed bump in Airbnb’s young life. As it turns out, the very activity behind Airbnb, renting out one’s home on a short-term basis, violates existing laws in many places. The laws are hyperlocal and vary not just state by state or city by city but town by town. And the regulatory patchwork is complex: hosts can run afoul of local laws governing short-term rentals, tax collection, building-code standards, zoning bylaws, and more.
In many markets, Airbnb has worked with regulators to amend these rules to allow it to operate legally. It has forged key agreements over the years with cities like London, Paris, Amsterdam, Chicago, Portland, Denver, Philadelphia, San Jose, Shanghai, and many more to liberalize laws, to create new ones, or to collect taxes. The company is actively engaged in talks with many more municipalities to do the same.
But some places just won’t let it go. In a small number of high-profile markets in particular—New York City, San Francisco, Berlin, and Barcelona, among others—regulators and lawmakers have dug in their heels with particular tenaciousness. And as Airbnb has grown bigger over the years, the intensity of the opposition has escalated. (Those same laws govern HomeAway, VRBO, and other short-term-rental platforms, and those companies are involved in some of these same legal fights, too, but none of these companies became as big as fast or were in as many urban places as Airbnb.)
Almost nowhere has the fight been as heated as in New York City, the company’s biggest U.S. market, with an estimated $450 million in annual revenue brought in by its hosts. The 2010 law marked the beginning of a protracted saga that took many twists and turns over the years as the company fought for regulatory clearance—and stirred the ire of lawmakers and the entrenched hotel and real estate industries by continuing to operate anyway. In late 2016, the company suffered a major blow when Governor Andrew Cuomo signed a law that made it illegal for individuals to advertise apartments being rented for fewer than thirty days if the resident was not present—the majority of Airbnb’s business in New York. Airbnb immediately filed lawsuits against the city and the state, which it subsequently settled, but the battle has had a major impact on one of the company’s highest-profile markets.
The company’s experience in New York is also a case study for the kinds of collisions that can happen when new ideas and technologies come out of nowhere to threaten the status quo and incumbent industries—and how the political realities on the ground aren’t always as smooth as the ascending line on these companies’ unfettered growth charts. It highlights how deeply emotional issues around housing can get. The struggle over Airbnb in New York and elsewhere has also pitted Democrat against Democrat, has brought together strange bedfellows, and has made it hard sometimes to discern just who is the David and who is the Goliath.
New York City suffers one of the most severe shortages of rental housing in the country, with vacancy rates of around 3.4 percent. It is the most lucrative hotel market in the United States. It is one of few places in the country where the labor movement remains robust. And when it comes to rough-and-tumble city and state politics, nothing beats New York City. So, as is the case with many things in the Big Apple, the fight for Airbnb is bigger, tougher, and more colorful than anywhere else.
The law that Chesky received the call about in early 2010 concerned a new amendment to the so-called Multiple Dwelling Law, which would make it illegal to rent out New York City apartments in buildings with three or more units for fewer than thirty days if the permanent resident was not present. The practice already violated most co-op and condo bylaws, but this bill would have made it state law. Sponsored by Democratic state senator Liz Krueger, it was primarily directed at landlords who were operating illegal hotels by converting housing that was intended for long-term rentals into units rented to tourists by the night.
The practice of offering short-term rentals was decades old, but just as it had done with so much else, the Internet had made it vastly easier to get the word out quickly and cheaply. With even the smallest, dingiest studio able to command triple-digit nightly rates and high occupancy levels, landlords, building owners, and some clever entrepreneurs had been turning to websites to more efficiently market their units—whether Craigslist, HomeAway, local operators like IStay New York, or the little-known universe of native-language, country-specific tourism-marketing websites that pipe out New York City lodging deals to the rest of the world. Airbnb was not meant to be the target—in 2010, few lawmakers in the city and state had heard of the quirky start-up from California. So, despite Airbnb’s rallying its community of several hundred New York City hosts to write letters to Governor Andrew Cuomo, the bill passed.
As Airbnb gained momentum, though, things started to change. All the conditions that allowed for the company to spread so quickly were particularly ripe in New York: the Great Recession, sky-high rental prices, and large swells of both renters and millennials, the two groups most predisposed to use Airbnb. From 2010 to 2011, as the company sped toward one million bookings, New York, its first market, also became one of its biggest. By 2012, however, the company began to feel the first signs that it might not be so welcome. “We started hearing some rumors that there was going to be a crackdown on our hosts,” recalls Belinda Johnson, the company’s chief business-affairs and legal officer who at the time had recently joined Airbnb as general counsel.
In September of that year, according to the New York Times, a thirty-year-old web designer named Nigel Warren used Airbnb to rent out his room in the East Village apartment he shared with a roommate while he went to Colorado for a few days. With the roommate’s OK, Warren listed it for one hundred dollars per night and quickly had a booking from a woman from Russia. When Warren returned from his trip, he learned that the city’s Office of Special Enforcement, a multiagency task force that investigates quality-of-life complaints, had paid a visit to the building and slapped his landlord with three violations and fines totaling $40,000. The case took a few turns over technicalities, but several months later a judge ruled that Warren was violating the law and fined his landlord $2,400. Airbnb intervened and appealed on Warren’s behalf, arguing that since he was renting a room in his home and not the full apartment, it was within the law, and in September 2013 the city’s Environmental Control Board overturned the decision.
Airbnb celebrated the news—the company’s then policy head, David Hantman, called it a “huge victory”—and while the ruling clarified that the law allowed apartment-dwellers to rent out a room while the resident was present, it was not necessarily emblematic. More than half of the people who rent out their spaces on Airbnb in New York City use it to rent their entire apartments. The Warren verdict, dealing with a shared-apartment situation, had little to do with those hosts, but a growing coalition of anti-Airbnb forces wanted everything to do with them. The company’s fight in New York was just getting started.
Over time, an anti-Airbnb alliance started to form made up of elected officials, affordable-housing activists, and representatives of the hotel union and the hotel industry, whose arguments against Airbnb then were the same that they are today: Airbnb traffic can inhibit quality of life for neighbors, who didn’t sign up for having transient tourists parading through their buildings. It creates safety issues both by providing access to residential buildings to strangers and by failing to comply with traditional hotel-safety regulations. Perhaps most critically, they said the proliferation of units dedicated solely to renting out on Airbnb—so-called illegal hotels—removes housing from a market that is already in a serious affordable-housing crisis, driving prices up further for everyone.
A much bigger blow came in the fall of 2013, when New York State attorney general Eric Schneiderman served Airbnb with a subpoena, saying he was going after illegal hotels and seeking records of transactions for some fifteen thousand Airbnb hosts in New York City. Airbnb took the rare move of fighting the subpoena, filing a motion to block the request, alleging it was too broad and too invasive of its customers’ privacy. The following May, a judge agreed. But Schneiderman’s office came back with a pared-down version asking for information only on Airbnb’s biggest players. A week later, Airbnb and the attorney general’s office announced they’d reached what they called a “settlement”: Airbnb would supply anonymized data on nearly five hundred thousand transactions from 2010 to mid-2014.
When the attorney general’s report came out, it said that 72 percent of Airbnb’s “private” listings in New York were in violation of state law. And it said that while 94 percent of hosts had just 1 or 2 listings, the other 6 percent were so-called commercial hosts—those who had 3 or more listings regularly through Airbnb—and they accounted for more than a third of bookings and revenue. It said that one hundred hosts had 10 or more listings. The top dozen hosts had anywhere from 9 to 272 listings and made more than $1 million per year each. The biggest user, at 272 listings, had revenue of $6.8 million.
It wasn’t so much the illegal activity that was new—after all, given the 2010 law, any Airbnb listing for a full apartment was illegal (unless it was in a house with fewer than three units), and both then and now, thousands of hosts and guests either don’t know about the law or willfully ignore it. What was new was that this report—marking the first time a party outside Airbnb had any access to the company’s data—revealed the scope of the multiproperty activity on the site. It dovetailed with previous reports that suggested a small percentage of hosts was responsible for a disproportionate share of the company’s New York business. Airbnb called the data incomplete and outdated. It said that New York’s current rules lacked clarity, and it wanted to work together with the city on creating new regulations to stop bad actors while putting in place “clear, fair rules for home sharing.”
The System Gamers
This question of multiunit hosts or “commercial listings” has plagued Airbnb in New York and elsewhere. The company’s ideals promote a world where home sharing lets regular people open up their homes to strangers, whether the host is in the residence or out of town, providing a unique and special way to travel. But whether Airbnb likes it or not, it also presents a cold, hard arbitrage to be played—the difference between what a housing unit can pull in each year in nightly rents can be double what it can generate as a longer-term rental. And many people, from property managers to corporate real estate giants to mom-and-pop entrepreneurs, have over the years jumped in to play it. The company has said over and over it doesn’t want this behavior and has rooted out professional operators. But it does not share raw data about this, leaving its opponents to fill in the gaps with their own estimates. “The revenue generated by Airbnb rentals is one of those great unsolved mysteries, like the Loch Ness monster or chupacabra,” wrote the authors of a 2015 report by Airdna, one of several independent data providers that “scrape” Airbnb’s website in order to generate data-and-analytics reports.
No one disputes that the early days of Airbnb in New York City drew a proliferation of bad actors. One of the largest early such players was Robert Chan, a party promoter who went by the name Toshi and operated some two hundred illegal short-term apartment rentals, on Airbnb and other sites, out of fifty residential buildings in Manhattan and Brooklyn; he’d lease multiple units, paying above-market rent to landlords, and rent them out for nightly stays.
The city of New York ultimately sued Chan and won a $1 million settlement in November 2013, but other operators continued to use the platform. In the fall of 2014, Gothamist posted a video of a two-bedroom apartment in the Murray Hill section of Manhattan stuffed with twenty-two mattresses. A pair of renters of a three-bedroom, top-floor apartment in a row house in Elmhurst, Queens, installed Sheetrock to subdivide each bedroom into three smaller bedrooms, which they listed on Airbnb for thirty-five dollars a night. Stories abounded, in New York and elsewhere, of commercial landlords evicting tenants who were seeking the higher yield of a nightly rental.
In 2014, the company began implementing what would become the linchpin of its strategy to push back against its opponents: mobilizing its hosts. Immediately after Schneiderman had issued his subpoena, Douglas Atkin, the company’s global head of community, worked with a New York City host to start a petition calling for the New York legislature to change what it called the “slumlord law,” which it said failed to distinguish between commercial operators and everyday New Yorkers seeking to rent out their primary home some of the time. The company hired veteran Democratic political strategist Bill Hyers, a partner at Hilltop Public Solutions and the campaign manager behind Bill de Blasio’s mayoral victory, who conceived and ran a multimillion-dollar grassroots campaign laser-focused on a single message: that Airbnb helped middle-class New Yorkers. The hallmark of the campaign was a television ad called “Meet Carol,” which featured an African American widowed mother who’d lived in her lower-Manhattan apartment for thirty-four years and who had turned to Airbnb after she’d lost her job. In cinematic slow motion, Carol shakes out a fresh sheet over a bed while the sun streams in through the window and flips hotcakes over the griddle for her smiling guests at the breakfast table. “I have on my profile, ‘Taking over the world, one pancake at a time,’” she says at the end of the ad.
The middle-class message would become Airbnb’s rallying cry in its global regulatory battle for years to come: Airbnb helps everyday people make ends meet. The company argues that it lets longtime residents use what is typically one of their greatest expenses—their home—to make additional income that helps pay the bills. Airbnb says it is a boost to tourism in cities—in particular, spreading tourism dollars to neighborhoods that typically don’t see them, since Airbnb properties are typically outside the traditional hotel zones. It says that it helps locals and small businesses in neighborhoods that traditionally wouldn’t see any of this spending.
Airbnb has released many reports to support this argument over the years. According to a report issued in 2015, Airbnb hosts had earned more than $3.2 billion in the U.S. over the previous seven years. In a separate report focused on New York City, Airbnb reported that its business brought in $1.15 billion in economic activity in 2014—$301 million of which went to hosts and $844 million to New York City businesses. Much of the latter funds went to neighborhoods that don’t typically see tourism dollars. Of the 767,000 tourists Airbnb says it brought to New York in 2014, 40,000 of them stayed in the Bedford-Stuyvesant section in Brooklyn, where they spent $30 million. In Harlem, they spent $43 million; in Astoria, $10.6 million; in the South Bronx, $900,000. (Airbnb hired HR&A Advisors to do the study.)
Yet none of this appeased Airbnb’s opponents, who just accused it of exacerbating gentrification in areas where it had already begun. By the summer of 2014, as the attorney general’s investigation was under way and shortly after the company had raised another megaround of funding at a $10 billion valuation, the conversation around Airbnb started getting heated and alarmist. “One person said, ‘I don’t want al-Qaeda in my building, therefore I don’t want Airbnb in my neighborhood,’” Chesky later told me. “Like, it was getting irrational. It wasn’t based in reality, and I was, like, ‘This is getting dangerous and unhealthy.’ And so we went to New York.”
While Chesky’s reaction when the 2010 bill first appeared was to just fight back—early on, top Silicon Valley minds had advised the company to lie low and stay off the radar or even to be antagonistic—Airbnb’s Belinda Johnson brought a decidedly more conciliatory approach when she started, in 2011. She encouraged Chesky to start meeting with his opponents instead. “Belinda taught me that no matter how much somebody hates you, it’s almost always better to meet them,” he says. He embarked on a “massive charm tour,” traveling to New York and meeting with stakeholders: regulators, hoteliers, members of the real estate community, journalists—even Mayor Bill de Blasio (“We had a really great conversation,” Chesky says). Meeting face-to-face didn’t change their stance in most cases—that would soon become an understatement—but it got them to hear his side.
But the opposition movement continued to gain steam. In late 2014, the city’s powerful hotel union, elected officials opposed to Airbnb, and a consortium of affordable-housing advocates and the hotel industry joined forces to form Share Better, a sort of anti-Airbnb political-action committee whose first move was what it said was a $3 million campaign against Airbnb.
The He-Said, She-Said of Home Sharing
Airbnb’s response has always been that it doesn’t want corporate profiteers, and that over the years it has worked to eliminate them. It stepped up those efforts in the fall of 2015 when it introduced a new “community compact,” a pledge to work more closely with city officials and, in particular, to help curb any impact of its business on affordable housing. It released a report filled with data on its operations in New York City, and said it was moving to a “one host, one home” policy there. “We strongly oppose large-scale speculators who turn dozens of apartments into illegal hotel rooms,” the report read. “Illegal hotels are not in the interests of our guests, our hosts, our company, or the cities where Airbnb hosts share their space.” The most recent report on Airbnb’s New York operations showed that 95 percent of its hosts in the city had only one listing, and the median nights booked per listing is forty-one per year.
The issue with critics, however, has been not the percentage of hosts but the volume of the business that comes from commercial interests, whether individual hosts controlling multiple units or even one unit that is dedicated solely to rental on Airbnb. Different studies over the years have shown commercial listings to represent as much as 30 percent of inventory and, depending on the definition, up to 40 percent of revenue or more in some markets. In the summer of 2016, Share Better put out a study of Airbnb’s New York activity that identified 8,058 listings it called “impact listings,” offered by hosts who had more than one unit rented out for at least three months per year, or a single unit rented for at least six months per year. It said those units reduced the availability of rental housing by 10 percent.
Airbnb has always maintained that the data offered by outside parties is inaccurate. Its most recent data in New York at this writing showed that multiple-listing activity represented 15 percent of its active entire-home inventory in the city and 13 percent of overall host revenue, down from 20 percent of revenue a few months earlier. Its critics say that data doesn’t tell the full story; they want the company to release anonymized data showing the location and rental behavior of its individual hosts, which the company refuses to do, to protect its customers’ privacy.
Chesky says that a lot of nuances about Airbnb’s workings are lost in the headlines. “We really do care deeply about this issue, and we are trying to solve it,” he says. He insists that large real estate groups are not what the company wants. “We don’t have much differentiation if it’s a corporate rental,” he says. “It feels like a hotel. There’s less belonging.”
Purging commercial operators, the company says, is not so simple. Some of the multilisting activity is activity that is legal: units that are rented for more than thirty days, or listings of homes with fewer than three units—say, brownstones in Brooklyn or row houses in Queens—that are exempt from the Multiple Dwelling Law. The company also has a growing number—three hundred thousand spaces globally at last count—of boutique hotels and bed-and-breakfasts that list on its platform. Some hosts, Chesky says, list the same apartment in multiple ways, which can make a single listing look like two. And he points out that even if the company bans a particular host, that host could create another account under a separate name. “We don’t know everyone,” Chesky says. “We don’t interview every single person and ask them why they’re doing what they’re doing.”
This is the biggest issue with members of the hospitality industry: the so-called illegal hotels that they feel are proliferating on the platform. Hotel executives believe that despite what it says, Airbnb has many more such listings than it is letting on, and they believe the company has the power to identify them and police them. “They say, ‘We can’t get rid of them.’ That’s absurd,” says Vijay Dandapani, president of Apple Core Hotels, a chain of five hotels in midtown Manhattan, and chairman of the Hotel Association of New York City. “Around the world there is a sense they don’t play by the rules and they’re less than transparent.”
Many who make it their business to scrutinize the makeup of Airbnb’s listings agree that most of the large-scale professional operators in New York and in other cities have left the site. A lot of them have moved on to Airbnb’s competitors. If anything, in New York City and other markets, they appear to have given way to more amateur microentrepreneurs—small-scale, everyday Joes who either amass enough profit to buy or rent a few places for themselves, which they list on the site, or pool together with friends or coinvestors to do so. These are people like Pol McCann in Sydney, who has two listings, is renovating a third, and hopes to retire in a few years to become an Airbnb host full-time; or people like Jonathan Morgan, the previously mentioned host who runs six listings out of three homes in Savannah. Scott Shatford, the founder of Airdna, started his company after developing a business running seven listings in Santa Monica, California. He says he was making $400,000 a year at his peak—money he used to bootstrap his Airdna business.
But these entrepreneurs often go to great lengths to cloak themselves, creating multiple single accounts under different names and curating their listings to generate the individual look and feel that Airbnb wants and that its customers have come to expect. “Everybody wants to play by this very personal experience,” says Shatford. (He and others say that, despite what Airbnb’s critics say, it’s very hard to prevent people from gaming the system. “Anybody who’s intelligent at all can get around anything they could put up around managing multiple properties,” he says.) But regulators are still waiting to pounce: in 2016, after Santa Monica passed some of the toughest laws regulating Airbnb in the country and Shatford gave an interview about his business, he was charged with five misdemeanor counts. He struck a plea deal with the city, paid $4,500 in fines, and has since relocated to Denver, where he now focuses exclusively on Airdna.
“I think this entire controversy around corporate rentals is only trying to get at a single question,” Chesky says when I ask him about it over breakfast ordered in at an Airbnb listing, a modest row house he’s staying in in Washington, D.C.’s Georgetown. “Which is, are there units dedicated to Airbnb activity in a city where they have a shortage of housing? I think any other thing about how commercial it is, how many homes they have, is totally beside the point.” From a policy perspective, he says, in markets where there is not a housing issue, Airbnb is not against multiple listings. In some places—he uses Lake Tahoe as an example—a municipality may actually want property-management companies to manage listings on Airbnb (and in 2015 the company piloted property-manager partnerships in some vacation-rental markets). It’s another way to reach potential vacationers and bring them to the destination. “As a policy,” Chesky clarifies, “you can’t possibly be against that.” In cities where there is a real housing issue, however, like New York, he says the policy should very clearly be one listing per host.
From a brand perspective, though, he says it’s a different story. “Our core community are ordinary hosts, people renting and sharing the homes they live in. We think that’s very special.” He points out our surroundings during this interview, with books and trinkets lining the shelves. If this were a dedicated rental, he says, we wouldn’t be seeing the human touches around us. “You have a proximity,” he says. “There’s care. There’s a sense of belonging. Not ‘service,’ but belonging. That’s the core of the company.”
Got that? Airbnb isn’t opposed to multiple-unit hosts in cities that are not housing-constrained—but only if the hosts are delivering what Airbnb considers to be a good experience, which it defines as a real human offering the right kind of “hostiness.” “We don’t want property managers who are going into this for the money,” Chesky says. The goal, he says, is what Airbnb’s hospitality chief Chip Conley calls “capital ‘H’ hospitality, and lowercase ‘business.’” So, Airbnb argues that in a non-housing-constrained city, microentrepreneurs like McCann in Sydney or Morgan in Savannah should be allowed. (Regulators in Savannah disagree and have slapped Morgan with more than fifteen citations totaling fines of $50,000, which he says he has not paid; in Sydney, McCann had been feeling pressure from a potential tightening of rules there, too; if the government were to place any cap on the number of days a unit can be rented per year, his business would not be viable. But by the time of this writing, a government report had recommended allowing short-term rentals for an unlimited number of days per year in New South Wales; the issue was headed to parliament.)
New Yorkers with Issues
Many of the points the anti-Airbnb camp makes are understandable. Granting transient guests access to residential buildings means that people who haven’t been vetted have keys to the buildings’ public spaces and could not lock the doors properly or could create other hazards. Residential apartments don’t have the same safety precautions as hotels, like sprinkler systems and clear evacuation plans (though New York City building code requires residential buildings, too, to adhere to fire-safety standards). Perhaps most valid for everyday New Yorkers is the quality-of-life issue. People in New York live in small spaces stacked on top of one another, already sharing walls, floors, ceilings, and public spaces.
There are few things New Yorkers treasure more than their personal space and their routines, and having tourists knocking on the door trying to get in or throwing the garbage in the wrong place or tossing cigarette butts on the roof deck infringes upon both. Plenty of New Yorkers I know seem to have some kind of Airbnb-adjacent story involving transient tourists. One longtime resident of a West Village building says she knew her next-door neighbor started listing his studio on Airbnb when she started hearing noises through the walls and noticed different people coming in and out of the place each week. One such party, a family of four, kept the building’s luggage cart in the hallway for the duration of their stay; she realized why when she spotted the kids outside the building, gleefully riding the gleaming gold cart up and down Eighth Avenue. Not too far from where I live, there’s a listing that’s popular with Scandinavian tourists, and neighbors have grown accustomed to seeing clusters of very tall, very blond young men gathered outside the building, smoking and talking late into the night.
Yet even with these nuisances, the argument isn’t as straightforward as Airbnb’s opposition makes it sound (for one thing, nine out of ten women in New York might tell you they’d welcome any influx of tall men, transient or not). Plenty of New Yorkers know what it’s like to deal with a permanent neighbor who’s a nuisance year-round.
Over the years, the opposition has focused its argument on the issue of affordable housing: that Airbnb removes units from the market, driving up prices for everyone else. Airbnb indeed has a tremendous number of listings in New York City—more than forty-four thousand at last count. But with more than three million housing units in total, they represent less than 1.5 percent of the total. A much larger number, two hundred thousand units, are vacant for other reasons. There are many forces—zoning laws, the high cost of construction, strict land-use regulations, an influx of wealthy foreign buyers, and a population at an all-time high thanks to a resurgence in big cities—all of which contribute far more directly to the city’s lack of housing and sky-high prices than Airbnb does. “We recognize it [Airbnb] might not be causing the issue, but that doesn’t mean you shouldn’t care and should take thousands of apartments off the market,” says Murray Cox, an affordable-housing activist and founder of data provider Inside Airbnb, another outside provider of Airbnb data.
The bigger Airbnb got, the more the conflict in New York escalated. Aside from the law, short-term rentals are forbidden by most landlords, and some began adding riders in their leases prohibiting tenants from using Airbnb, implementing stricter protocols for having guests, and adding cameras and hiring private investigators to catch tenants in the act. Related Companies, the largest owner of luxury residential rentals in New York, with more than seven thousand units, was said to have developed a PowerPoint presentation to teach its property managers how to sniff out tenants who were renting their units out on Airbnb. And in the fall of 2015, Mayor de Blasio pledged $10 million over three years for additional staffing and upgraded technology to better enforce those in violation of the city’s short-term-rental law.
There are few things more acrimonious than a political fight in New York City, especially one that combines labor, big business, and the hypersensitive, deeply emotional issue of affordable housing, and as the stakes got higher, so did the level of vitriol. When actor and Airbnb investor Ashton Kutcher wrote a letter defending the company, New York State assemblywoman and longtime Airbnb critic Linda Rosenthal told the Wall Street Journal that the letter “won’t make a scintilla of difference” and added that “he’s trying to punk me.” Helen Rosenthal, a city council member representing the Upper West Side (like Linda Rosenthal a Democrat; the two are not related), told The Real Deal, “The most important message for me to get out there is that we are going to make life as difficult as possible for Airbnb, who continues to just ignore state law.”
In early 2016, Share Better released an ad that mocked the company’s “Belong anywhere” motto, titled “Airbnb: Problems Everywhere.” (“Thanks anyway, Airbnb, but you’re not helping anyone but Airbnb,” went the snarky voice-over.) Around the same time, two city council members sent a letter to Airbnb’s top thirty investors, notifying them of the illegal nature of Airbnb’s operations in New York and warning them it could affect the value of their investment. “For our part, if we were invested in a company that knowingly engaged in so much illegal activity, we would think twice about keeping our money in that company,” the authors wrote.
Airbnb dismissed the letter as “theatrics.” It amassed more political firepower: It hired a who’s who of top New York City lobbying, political-strategy, and communications firms. It hired as its head of policy in New York Josh Meltzer, who’d previously worked for Attorney General Schneiderman. For help approaching the labor unions, it brought on board Andy Stern, former head of the powerful Service Employees International Union. It spent more on advertising. It sponsored marathons. (Perhaps predictably, on the eve of the newly named Airbnb Brooklyn Half Marathon, protesters showed up wearing T-shirts that said “#RunFromAirbnb.”)
But it had powerful, well-funded forces lining up against it (REBNY, the real estate lobby, soon joined the fight), and in mid-2016, at the very end of the state’s legislative session, a bill that Assemblywoman Linda Rosenthal had introduced earlier in the year calling for a statewide ban on advertising for short-term rentals started gaining steam. Deliberately written as an “advertising” regulation to get around the legal defense that a website couldn’t be held liable for the content its users posted, the bill prohibited apartment-dwellers from simply listing the rental of their unoccupied units for fewer than thirty days and shifted the punishment from the landlord or building owner to the tenant or apartment dweller, who under the bill could be fined $1,000 for a first offense and $7,500 for a third. Despite a PR push from tech-industry heavyweights, including Airbnb investors Paul Graham, Reid Hoffman, and Kutcher, who slammed the bill for preventing innovation and hurting middle-class New Yorkers (“People are going to lose their homes because of this ignorant bill!” the actor tweeted), the bill passed on the last day of the legislative session, dealing a sudden and unexpected blow to Airbnb.
Airbnb maintained that the bill was introduced unfairly, the result of what it said was an eleventh-hour backroom deal brokered by special interests that ignored the voices of thousands of New Yorkers. It launched a million-dollar advertising campaign, removed more than two thousand listings on its platform in New York that it said appeared to be hosts with multiple units, and introduced a proposal to create both a technical tool on its site and a registration process to ban hosts from listing more than one home. But four months after the bill was passed, on a Friday in late October 2016, Governor Cuomo signed it into law. “This is an issue that was given careful, deliberate consideration, but ultimately these activities are already expressly prohibited by law,” his spokesperson said in a statement. Linda Rosenthal, the bill’s sponsor, weighed in: “I’m gratified that [Governor Cuomo] stood up for the cause of affordable housing and protecting tenants,” she told the New York Times after the bill was signed.
Airbnb promptly responded: within a few hours of the signature, the company filed a lawsuit against the city of New York and the state attorney general, claiming the law violated the company’s rights to free speech, due process, and protection granted to it under the Communications Decency Act. Airbnb circulated a memo titled “Hotels Celebrate Chance to Price Gouge” after a hotel-industry chief executive said in an earnings call that the legislation would positively impact the company’s pricing power. (The Hotel Association of New York City’s Vijay Dandapani takes issue with this line of attack, saying compression pricing is simple supply-and-demand economics at work, similar to the way airlines price their product.)
A few days later, Airbnb staged a rally outside Cuomo’s New York City offices. Some two dozen hosts showed up with signs that said “Each cent pays my rent” and “Freelancers for Airbnb.” (One plucky Cher fan held up a sign that read “Cher your home.”) They chanted cries of “Airbnb, you and me!” and “Airbnb for NYC!” But they were drowned out by a counterprotest by a group of affordable-housing activists, tenants, union members, and Assemblywoman Rosenthal, who led the charge as the group marched up to the Airbnb protesters and yelled louder and much more forcefully, “Airbnb, BAD for NYC!” and “Homes are not hotels!” A few days later, at another rally, City Council member Jumaane Williams told the New York Daily News, “I’ve never been so happy to see an organization lose.”
For the company’s community in New York, the news created confusion. Guests who had already booked trips to New York began asking their hosts if they should cancel. Evelyn Badia, the host in Brooklyn with her own consulting business, adjusted her listing so it read, “Legal Comfortable, Spacious 2bdrm apt in House.” At the rally, a bystander asked me if Airbnb buys buildings and converts them into rentals.
I spoke with Chris Lehane, the company’s global head of public policy, shortly after the rally. “The deck was completely stacked against our hosts,” he said. “Bad politics drive bad policy. When the special interests get to write a law and pass it without any public process where hosts have no voice in that, you’re going to end up in one of these situations.” He says the company will continue to push for a legislative solution for regulations that restrict commercial activity on its platform and allow regular people to rent out their spaces occasionally, a policy proposal that, he says, “by any objective analysis is good for the state.” (As this book was going to press, the company settled its suits with both New York State and New York City—in the latter case, with both sides agreeing—in theory—to work together on targeted enforcement of bad actors.)
Neal Kwatra, CEO of the political consulting firm Metropolitan Public Strategies and the chief strategist of Share Better, says, “There’s a law on the books since 2010 that has prohibited a huge part of Airbnb’s business model, yet they had a very strategic approach here.” He says the company “had a very clear understanding that, actual regulation notwithstanding, enforcement of the law wouldn’t happen at the kind of scale that would disrupt their business. And I think what we have is a coalition of different constituents principally focused on the impact on affordable housing where Airbnb has driven up rents by removing thousands of units of long-term housing supply.”
Assemblywoman Linda Rosenthal says she is “thrilled [the bill] was signed into law, but I think that Airbnb is being dragged kicking and screaming to run its business in accordance with the law and I think they’re going to try to get out of it any way they can.” She takes issue with what she calls the company’s “different business model, which is to go into an area, overwhelm it and then you dictate the policy rather than the government telling you what to do.” She says if the company cared about its users, it would have made the law clear on the home page of its website. (On its “Responsible Hosting in the U.S.” page, the company encourages its customers to abide by all local laws.)
Airbnb and those familiar with its strategy say it attempted many times over the years to offer to compromise but that lawmakers were not interested in a conversation. “They [Airbnb] were willing to do pretty much any deal,” says Hilltop’s Bill Hyers, who is not currently working with the company, but he says that various parties were “aggressively not willing to even talk. There was nobody to deal with at the end of the day because of that.”
Lehane said the New York situation would likely play itself out over time in a series of battles in a “longer-term war” and that for the next few years the twists and turns of the conflict would be the “mood music in the background.” He says the company will continue to push for a compromise that involves getting the underlying 2010 law changed.
Organize, Mobilize, Legitimize
Lehane is friendly and affable when I meet him for the first time at Airbnb’s headquarters, months before the law would pass in New York. He seems nothing like the pugnacious war wager he’s said to be. Lehane is a political heavyweight: a Harvard-trained lawyer, he’s been in Democratic politics since the 1980s. After working on Bill Clinton’s 1992 campaign, he was recruited into the special counsel’s office of the White House, an elite team that ran damage control for investigations into the Clinton administration (he produced the 332-page report that coined the phrase “vast right-wing conspiracy”). He then served as press secretary for Al Gore’s 2000 campaign before decamping for the private sector. Known for his bare-knuckled tactics, pithy one-liners, and skilled opposition-research work, Lehane was famously nicknamed a “master of disaster.” In between working for clients like Microsoft, Goldman Sachs, Lance Armstrong, and labor unions, as well as nonprofits like the billionaire Tom Steyer’s climate-change-advocacy efforts, he wrote and produced a satirical film about a political strategist called Knife Fight. In 2014, Airbnb brought in Lehane as a consultant to help with the company’s battle with San Francisco, and he soon joined full-time.
Lehane is slender but cuts a big presence around Airbnb headquarters, where he is almost universally known as “Lehane.” Ground zero for his operations is a three-story stand-alone building in an alley behind Airbnb’s headquarters, formerly called the Annex, which Lehane rechristened the ADU, shorthand for Accessory Dwelling Unit, a wonky housing term for what’s often known as a granny flat or an in-law unit. Such units lend themselves particularly well to home sharing (and they are fittingly, somewhat thorny to regulate). At Airbnb, the ADU houses the entire mobilization team, policy communications and operations, and other departments, including social impact and strategic research—some two hundred staffers all told, many of whom come out of Democratic politics. Lehane modeled the setup after Mayor Bloomberg’s design of City Hall in New York, with a bull pen in the middle and different teams clustered around it but near one another so they can interact. “If you ever walked into a global political campaign, it would feel exactly the same,” he says.
It falls on Lehane to oversee Airbnb’s strategy to push back and get the laws to turn in the company’s favor. “It’s a wild thing,” he says, sitting down for one of our chats in Airbnb’s offices. “It’s like you’re building a car, building the road, building rules, people are throwing rocks at you—it’s great!” But he freely admits he is also a consumer of what many by now have referred to as the Airbnb Kool-Aid. He believes the company has the potential to be a driving force for the middle class and says the reason home sharing has caught on with the consumer the way it has is that a series of larger socioeconomic trends have converged. It reinforces social contracts that have become frayed. It enables everyday people to be economically empowered. It brings people together. “At the end of the day, the reason why Airbnb is succeeding at the level that it is is not because of some magic potion or fairy dust that’s been put on some algorithm,” he told the U.S. Conference of Mayors in 2016. “It is because we’ve built a platform that allows people to interact with people and have a transformative experience.”
Lehane maintains that most cities in the world are opening to partnering, and he is quick to point out the many places Airbnb has worked with local lawmakers to update or amend existing laws to make its activities legal—most recently on the day we speak, in Chicago, which passed a measure legalizing short-term rentals with no caps on the number of days, and allowing for the collection of a 4 percent tax on every rental, which will fund services for the homeless. (“Alternate housing fans touring the Windy City, rejoice,” read an article about the rules.) As the New York battle raged, lawmakers passed friendly legislation right across the Hudson River in Newark and Jersey City, New Jersey, and in the same week Cuomo signed the New York bill, regulators forged agreements in New Orleans and Shanghai. (Lehane says that people like to “overindex” New York, but he and others point out that the platform is now so large that no one place is material to the overall company. This appears to be true: Airdna data estimates that total revenue from Airbnb hosts in New York City represents 10 percent of the U.S. total and 3 percent of the company’s global host revenue.) Of the top one hundred markets the company has identified as important, Lehane tells me, seventy-five to eighty are “either done or moving in a good direction,” ten are “sort of static,” and the remaining ten “are always in some type of a conflict,” with four at the core: New York, San Francisco, Berlin, and Barcelona.
But in those high-conflict places it’s been hard, and the common denominator, Lehane says, is the unique politics that exist. In Barcelona, the government is sensitive to the influx of tourism in its Gothic Quarter. In San Francisco, the issue is a shortage of housing layered on top of a power struggle between the city’s progressive roots and its more moderate—and moneyed—technology industry. In Berlin, which banned all entire-home short-term rentals without a permit and instituted fines of up to $115,000 for violators, there are long-standing issues around housing that go back to the reunification of Germany, now exacerbated by a refugee crisis. And New York, of course, is the epicenter of what Lehane calls the “hotel-industrial complex.”
Mastering unique politics is Lehane’s specialty, and he knew that the key to winning Airbnb’s regulatory battles would lie in mobilizing its hosts. He says that Airbnb has something that no other private-sector entity he knows of has: hundreds of thousands of engaged hosts and guests who can be an “army of change.” His solution: implement a grassroots mobilizing effort, much like the company did in New York when the attorney general first struck, but one that would be the equivalent in size and scale to a presidential campaign—and would be launched all over the world.
To his way of thinking, Airbnb has two unique elements that make this possible. One is scale: in the United States alone, the company’s user base is larger than some of the country’s largest special-interest groups, such as the Sierra Club, the American Federation of Teachers, and the Human Rights Campaign. Many in the Airbnb community are casual users; Lehane divides them into “base voters,” the hosts, who are the more engaged but much smaller group, numbering just a few million; and “occasional voters,” the guests. But the company’s polling has shown that even the casual guest can be easily mobilized, and in certain markets as much as 5 to 15 percent of the general electorate uses Airbnb in some fashion. “If there’s one thing politicians can do, it’s math,” he says. “And that’s pretty compelling math.”
The second unique thing about Airbnb is its economic model. Its “base voters” don’t just believe in the cause; they make money from it. Airbnb hosts keep all the revenue that comes in the door but the 3 percent the company charges for its host fee. “These people are making ninety-seven cents on the dollar,” Lehane says. “You put all these things together, and that’s why I think we can be really politically disruptive.”
Some of this groundwork had already been laid when Lehane began his work. Douglas Atkin’s effort to build a petition movement during the New York attorney general’s investigation was part of a broader effort in 2013 and 2014 to engage the Airbnb community in three cities where it faced opposition: New York, San Francisco, and Barcelona. Called Firestarter, it was a sophisticated mobilization approach that drew on tactics from the Obama presidential campaigns—specifically, the “snowflake” model of community-driven campaigning, a sort of crowd-sourced, bottom-up campaign model that empowers volunteers to organize and train each other. By ratcheting the asks of community members up a “commitment curve,” starting with showing up at a meeting or sending a tweet all the way up to writing op-eds, the tactic is designed to extract as much passion as possible out of everyday people. “You can run a bunch of TV ads, and that will have some type of impact,” Lehane says. “But getting a couple of hundred calls when you’re a city councilperson is an awful lot. And that happens.”
Lehane was basically charged with bringing his political advocacy muscle to the Firestarter model, expanding it, and rolling it out to one hundred key cities worldwide. The backbone of his efforts are home-sharing clubs, groups of hosts ranging from ten to fifteen people to a few hundred whom Lehane sees almost as modern-day guilds. Airbnb seeds them and provides infrastructure and support, but the clubs create their own bylaws, set their own goals, and, the hope goes, will become their own political citizenship entity. “These clubs have to be led by you, built by you, made up of you,” he told an audience of five thousand hosts as he introduced the idea at the 2015 Airbnb Open in Paris. “We will help provide the advocacy tools, but it’s going to be your voice that carries the day.”
Lehane’s “beta test” for this approach was the mobilization effort in San Francisco in 2015 to defeat Proposition F, a ballot initiative that would have put constraints on short-term rentals and, along with New York, the company’s highest-profile regulatory battle. The city and Airbnb had already come to agreement to legalize short-term rentals, passing what became known as the “Airbnb law” in the fall of 2014, with Airbnb agreeing to cap the number of days per year hosts could rent their entire homes and requiring hosts to register with the city. But opposition mounted in the wake of the bill, and Proposition F proposed to reduce the cap, required the reporting of quarterly data, and gave neighbors and housing groups the ability to file legal complaints. With an $8 million budget for the campaign, Lehane deployed a team of veteran field organizers and hundreds of volunteers to mobilize the community’s user base. In the end, 138,000 community members knocked on 285,000 doors and contacted 67,000 voters to defeat the proposition. (Its $8 million budget also went toward advertising, including television, with a series of snarky billboards that were perceived as snide and insulting: “Dear Public Library System, we hope you use some of the $12 million in hotel taxes to keep the library open later. Love, Airbnb.” After the ads sparked a backlash, the company took them down and apologized.)
The victory was significant—but it would be short-lived. In June of 2016, the Board of Supervisors passed new legislation requiring that short-term-rental platforms vet their own listings to make sure their hosts are registered—or pay fines of $1,000 per unregistered listing per day. A few weeks later, Airbnb filed a lawsuit against the city of San Francisco that, at the time of this writing, was, just as in New York, still moving through the courts.
Scaling “Hostiness”
Airbnb faces a conundrum: it wants to grow its business, in New York City and everywhere. But it wants to do it in an appropriately homespun way. “The more human interaction, the closer to our mission,” Chesky says. But therein lies a challenge: How do you grow the kind of human, hand-held hostiness Airbnb wants? How do you take a one-home, one-host model of cozy hospitality and still scale it? Like most things, the company’s founders consider this a design challenge.
One workaround for this is setting up partnerships with landlords. Airbnb is an urban phenomenon, and in many places, regardless of local laws, apartment-dwellers are prevented from hosting on Airbnb because their landlords don’t allow it. Many don’t want short-term rentals in their buildings because it violates their policy or because it goes against local regulations, and it’s often the landlords, not tenants, who get fined. Sometimes these are small-time operators in one-off walk-up buildings. But many people who rent apartments in cities do so from one of a small handful of megalandlords: massive real estate companies like Avalon Bay Communities, Camden Property Trust, and Equity Residential Properties. These companies and others control hundreds of thousands of apartment units all over the country, and they rent to a disproportionate number of young millennials. They typically enlist large-scale property-management groups for the day-to-day management of their buildings, but it’s the landlords who make the rules and bake them into their standard leases. Cracking open this group and getting them to change their rules to allow home sharing would let Airbnb notch significant gains—and, ideally, the kind of gains it wants, letting Joe and Jane apartment-dwellers rent out their homes either when they’re away or while they’re there.
For the past few years, Airbnb has been working on forging alliances with these rental conglomerates. In 2016, Fortune’s Kia Kokalitcheva reported on the launch of a new initiative called the Airbnb Friendly Building Program, in which owners and developers of big multifamily buildings can sign up for a partnership with Airbnb. Under the arrangement, the buildings grant their tenants permission to rent space in their units on Airbnb; in return, the developer retains the ability to set certain rules around the practice, like setting hours for check-in and length of stay—and gets a share of the revenue. The booking still takes place on Airbnb, but the company says it will share data with the landlords on the kinds of transactions the tenants are engaging in and in which units. The idea plays to the landlords’ interests: their primary goal is to fill their buildings and to secure long-term leases that generate the kind of stable, predictable revenue streams their investors like to see. The case that Chesky and Airbnb are making to them is that their core customers, millennial renters, want to live only in homes that are shareable. They have known Airbnb all their adult lives, and, just as they do about many things, they feel a little entitled to that revenue stream. If you embrace Airbnb and make it legal for tenants to share their homes—or so the pitch to landlords goes—you will have an easier time filling up your buildings, you will have a higher occupancy rate, and, since your tenants may have an additional revenue stream coming in, you will be more likely to collect your rent on time, which will boost the appeal to investors. As of this writing, landlords controlling some 2,000 units had signed on, a fraction of the potential market, but the company hopes to land some of real estate’s biggest fish.
In the future, the company hopes to take such partnerships further. Real estate companies also develop new apartment complexes with hundreds of thousands of units, and Airbnb is also in talks with them about designing new apartment layouts expressly for home sharing: apartments with, say, an extra bathroom, or with a layout that’s more conducive to having guests, where the second bedroom is in close proximity to its own bathroom and on the opposite side of the living area from the master bedroom.
After he tells me these plans, I point out to Chesky that of course this can’t happen yet in New York City, where the most popular form of using Airbnb—renting one’s apartment when you’re out of town—is illegal. Chesky says landlords are all over the country and not just in New York. “But this idea assumes . . . ,” I begin, and he nods and completes my sentence: “a clear-sky horizon.”
Early to Bed, Early to Rise . . .
Chesky is optimistic he will get that clear sky. He believes that Airbnb has taken lessons from its battles in New York City, where its opponents have criticized it for having a tin ear for local politics. “What we learned is not to wait for a problem,” Chesky told the audience at Fortune’s Brainstorm Tech conference in the summer of 2016. “If you want to work with a city, you should get to know a city. If you get there first [and] you come with the best of intentions, you could end up with a partnership. If a city comes to you, you could have many, many years of potential conflict.”
Some markets have continued to crack down. In the spring of 2015, despite a protest by one hundred members of the Airbnb community, the city of Santa Monica instituted what was at the time the harshest short-term-rental laws in the United States, with rentals of an entire home for fewer than thirty days banned outright. Only hosts who remain on the premises would be allowed to rent out space in their homes, and only then if they obtained a business license from the city, adhered to city fire and building codes, and remitted a 14 percent hotel tax. (These were the new regulations that got Airbnb host and Airdna founder Scott Shatford in trouble.)
Airbnb has become a big issue in Reykjavik, Iceland, a much smaller market, but one where tourism has surged and hotel capacity has not kept up. Airbnb listings have filled the gap, and the small city now has double the number of Airbnb units per capita than cities like San Francisco and Rome. Researchers have estimated that at least 5 percent of the city’s housing stock was being rented out on Airbnb, worsening an already tight housing supply. The city put in place strict regulations—hosts need to register and pay a fee, and they are limited to ninety days of renting per year before being required to pay a business tax. As of this writing, the issue of short-term rentals was heating up in Toronto and Vancouver, and London’s new mayor, Sadiq Khan, expressed interest in revisiting the city’s short-term-rental laws over concerns about affordable housing and quality-of-life issues for neighbors.
In the meantime, those who use Airbnb have become accustomed to tolerating the lack of clarity in certain markets. Many travelers who book on Airbnb are told by their hosts to tell neighbors they encounter in the hallway that they’re a friend or relative visiting. One friend was told on a trip to Los Angeles to look for a key that would be hidden in a stack of bicycles and to say she was a friend visiting to anyone who asked. Even before the short-term-rental bill was passed in New York, landlords might have noticed a growing number of tenants with luggage-toting friends who came in and out frequently to “take care of the cats.”
Even those who are renting out rooms in their homes legally are being doubly good about following all rules. “Until this is cleared up, I want to be as close to the line as possible,” says Chris Gatto, a New York City host. He rents out a spare room, so his hosting operation is allowable in New York, but he makes sure to give each guest a ten-minute walkthrough of his apartment, pointing out the fire extinguisher and exits, and has installed clear signs throughout the place. Sheila Riordan, the enthusiastic Airbnb traveler from chapter 3, won’t stay in any listing where the legality is up in the air. “I don’t want to be anywhere where someone might question why I’m there,” she says. Companies that have built their business on the back of the home-sharing boom have resigned themselves to the fact that it may be a few more years before things are settled. “It’s an externality we just have to kind of live with,” says Clayton Brown, CEO of the key-exchange start-up Keycafe. (Meanwhile, a new subset of the Airbnb cottage industry has emerged: companies that help governments and landlords unearth rule-breaking short-term renters.)
At the Open in Paris in 2015, the mobilization efforts were center stage. “You know, being a host, I think a lot of times we’re misunderstood,” Chesky told the crowd. “Not only are we sometimes misunderstood but I think sometimes we are even attacked.” That will soon change, he promised them. “Because they are going to see not just our house but who we are in our hearts.” Lehane urged them to take action. “We’re going to have more fights and more battles in the days and months and years to come,” he told them. “But when this community is empowered to be a movement, it cannot be beat.” As they moved forward together, he told them, “Our mantra will be ‘Early to bed, early to rise, and work like hell and organize.’”
A Numbers Game
In the long term, though, most experts and observers think that the odds are on Airbnb’s side and that it will ultimately be given leeway to operate, even if it means under tighter regulations in some markets, for one reason alone: consumers want it. You don’t get the kind of growth Airbnb has seen without striking some kind of deep chord in the consuming public. In that sense, it’s not so much the hosts as the one hundred forty million–plus guests, those who book and stay, who may have the ultimate sway on the regulators. “I think in terms of . . . are more people going to be doing this tomorrow than today? Yes. And more the day after that,” says Lehane. “The public is already there, and the politicians follow where the public is pretty quickly.” Carl Shepherd, the cofounder of HomeAway, thinks regulators who choose not to get on board have their heads in the sand. “It’s like they’re saying, ‘I’m not going to participate in the world in 2015,’” he told the Los Angeles Times. “You can either deny this exists, or figure out how to make it safe.”
You can measure consumer zeal for Airbnb in a number of ways, but they all show the same thing: it is a freight train. A Quinnipiac poll found that New Yorkers who supported Airbnb outnumbered those who wanted it banned by 56 percent to 36 percent. (Over the course of my reporting, I observed a particularly telling phenomenon of New Yorkers who complained about transient neighbors in their own building but made use of Airbnb when they themselves traveled.)
In New York, outside the hotel industry, the broader business community supports Airbnb, albeit measuredly. “We certainly don’t countenance the abuses, and we’re not endorsing Airbnb on all terms,” Kathy Wylde, president of the Partnership for New York City, the nonprofit made up of the CEOs of the city’s largest businesses and private-sector employers, told The Real Deal. “But we think there is room to be able to work out an arrangement where everybody wins.”
So yes, by planting a flag in markets even when laws specifically prohibited it, the company showed a certain amount of naiveté, moxie, or total disregard for authority, depending on which side of the argument you fall. But there is a reason so many millions of consumers have embraced Airbnb. It wasn’t just three guys out to break all the rules. It was a culmination of forces that were more powerful than that: an epic recession that left people with a much greater incentive to travel cheaply or to seize upon the opportunity to turn their homes into something monetizable; a general sense of fatigue with a hospitality industry that had become overpriced and overcommodified; a wave of new millennial values and attitudes that made the idea of a form of travel that was quirkier, more eclectic, more original, and more authentic not just acceptable but a way of life; and declining trust in government, especially among the middle class, and the search for individual, self-sufficient means of economic empowerment. Understanding those forces might help regulators understand why Airbnb caught on the way it did—and why its users are so ready to pick up a sword and fight for the cause. “Tell city leaders we’re going to win,” says Jonathan Morgan, the host in Savannah who faces $50,000 in fines. “Tell them, ‘I’m going to fight this till I die, and I’m younger than you.’”
Plenty of other industries have gone through regulatory issues on their way to becoming accepted: when eBay was gaining ground, it faced fierce resistance from traditional retailers; one of its opponents tried to pass a law requiring that users have an auctioneer’s license to sell on the platform. Payment start-ups from PayPal to Square to Stripe had to prove their legitimacy to regulators who were horrified at the idea of exchanging money online. “Success almost always results in legitimacy,” says Airbnb board member Jeff Jordan. (Of course, not all popular technologies win out—the peer-to-peer music-sharing service Napster was shut down over copyright-infringement issues, though streaming music would later become standard and the industry figured out a way to charge for it.) None of Airbnb’s investors seem too concerned. “I think ultimately we will get to a place where the world is as it should be, and at worst there will be some lower growth in, paradoxically, two American cities [New York and San Francisco] that should be the home of bold tech plays but which are two of the most problematic cities in the world,” says Reid Hoffman.
Chesky loves peppering his discourses with quotes from history’s great thinkers, often paraphrasing one from George Bernard Shaw: “The reasonable man adapts himself to the environment. The unreasonable man adapts the environment to him. Therefore, all progress depends on the unreasonable man.” It’s a much-cited reference in Silicon Valley, where legions of start-up founders pride themselves on being unreasonable enough to get gobs of funding and then get the laws changed in their favor.
For this reason, Chesky is not surprised that Airbnb has generated so much pushback. “When we started this business, I knew that if it would become successful, it would be somewhat controversial,” he tells me in a moment of reflection in the President’s Room at Airbnb’s headquarters, a wood-paneled replica of a 1917 executive quarters in the company’s offices in 2015. He said that even back in the days of that holiday break in 2007, when, unemployed and discouraged, he started casually talking up the idea of AirBed & Breakfast to people when he was home in Niskayuna, they had a visceral reaction to his new idea: they either loved it or they hated it. “Either it was ‘Great, I can’t wait to do it’ or ‘I would never want that in my neighborhood.’” And when he first heard about the 2010 law in New York City, and when the regulators at the time assured him that the law wasn’t about Airbnb and wouldn’t affect his company’s users, he had a sneaking suspicion that it might not always be fine. “It doesn’t seem ‘fine,’ because it’s the law,” he remembers thinking.
Even George Bernard Shaw might have said that was a reasonable assumption to make.
Chesky is confident that there will be a solution and that “my hair will still be brown when that happens.” He thinks eventually a law will pass that will allow people to rent their primary homes and prohibit dedicated rentals and second homes from being rented in New York. He also believes Airbnb will collect and remit taxes to New York. “I think this is going to happen, but I do think there’s going to be quite a bit of jockeying over the next couple of years to land there.”
If nothing else, this whole saga has caused Chesky to plan a little differently for the future. Back in 2007, it seemed impossible that Airbnb would ever be in ten thousand homes, let alone three million. Now that he has seen the enemy with his own eyes, as he plans out the next phase of the company, its ambitious push into on-the-ground experiences, he has taken care to do so assuming that same kind of growth and all its attendant pushback. “I’ve been designing this assuming all of that,” he says, after giving me a preview of the company’s new expansion plans. “What will it do to neighborhoods? Are we going to enrich the communities or take away the communities? This is not going to be without its critics. That’s the first thing I’ve learned.”
Others have a different approach: they shrug it off. They say that all of this, while a giant headache, was entirely predictable. “It’s one hundred percent inevitable,” says Michael Seibel, the Airbnb cofounders’ very first adviser and the person who, more than anyone else beyond the founders, may be responsible for Airbnb’s becoming what it is today. “Whenever you disrupt a massive industry and you try to make room for yourself inside of that industry, the various interests are going to push back,” he says. “They didn’t build a billion-dollar hotel industry by not knowing how to push back. The more incumbent you are, the more you can use politics to do that.” At the end of the day, Seibel says, echoing so many others, it’s the consumer who votes and the consumer who usually wins.
Another one of Chesky’s favorite quotes is from Victor Hugo. “You cannot kill an idea whose time has come,” he paraphrased for the audience at the 2014 Airbnb Open. But Seibel boils it down even more succinctly. “At the end of the day, do people like using Airbnb? Do millions and millions and millions of people want Airbnb? Yes,” he says. “Everything else is a solvable problem. It’s solvable with the application of smart people, time, and money.”
“What you can’t solve for,” he says, “is if you built something nobody wants.”