Is Airbnb a community or a market? It's a question with big implications.
Communities tend toward a common morality, or at least toward shared norms. Markets bend only toward efficiency.
In communities, social sanctions are often all it takes to control bad behavior. In markets, you discourage unwanted behavior by setting a price on it in the form of taxes or fines.
In approaching the problem of illegal hotels on its platform, Airbnb has preferred to treat it as a community issue, one best managed through self-regulation. On Wednesday, the company issued something it called the Airbnb Community Compact, portraying it as a landmark event in the company's evolving relationship with cities. These are the tenets of the compact:
1. We are committed to treating every city personally and helping ensure our community pays its fair share of hotel and tourist taxes.
2. We are committed to being transparent with our data and information and we will help cities understand the home sharing activity in their community while simultaneously honoring our commitment to protect our hosts' and guests' privacy.
3. In cities where there is a shortage of long-term housing, we are committed to working with our community to prevent short-term rentals from impacting the availability of long term housing by ensuring hosts agree to a policy of listing only permanent homes on a short-term basis.
Airbnb says its service is better for everyone when guests stay in properties where someone actually lives rather than an illegal hotel operated by an anonymous landlord. Even if the resident is absent during the guest's stay, it makes for a higher level of interaction and personalization of experience. To that end, it's committed to encouraging hosts to operate on that model, and will share anonymized data with cities to prove it's following through.
But "ensuring hosts agree to a policy" is not the same thing as "ensuring hosts abide by a policy." Is the company prepared to do anything about hosts who agree not to operate illegal hotels but do so anyway -- use data science to sniff them out and suspend their accounts, for instance? An Airbnb spokesman declined to go into specifics. "Our experience is that our community is very good about making decisions in the best interest of their communities," he said, in an email.
But illegal hotels aren't a community failure -- they're a market failure. As a new report by Bloomberg shows, they're springing up in cities where property owners realize they can make several times as much money offering homes for short-term stays as they can leasing them out to longer-term residents. Thus, the most inventory-constrained real-estate cities, such as San Francisco, Los Angeles and New York, are also the most profitable, leading to ever more inventory being pulled off the residential real estate market and reserved for tourists and business travelers.
Airbnb may see itself as a community, but the hosts behind the illegal hotel phenomenon don't see it that way. They don't care about the best interest of the community. They're participating in a market. Imagine if Uber tried to get its drivers to work in the middle of the night or on holidays by appealing to their sense of social responsibility instead of by offering them a chance to earn more money. It would be a joke.
Yet that's basically how Airbnb is proposing to address the illegal hotels phenomenon it has enabled. If the company is serious about making life in cities better, not worse, it will start backing up its words with action. You can't solve the problems of a market with the tools of a community.