Platform Failures: How Short-Term Rental Platforms like Airbnb fail to cooperate with cities and the need for strong regulations to protect housing

Short-term rental platforms like Airbnb are failing cities by not only driving up rent but also hurting affordable housing across the world, says a new study released by The Left in the European Parliament.

Written by Murray Cox, the community activist behind the Inside Airbnb data project, and Kenneth Haar from Corporate Europe Observatory, ‘Platform Failures – How Short-Term Rental Platforms like Airbnb fail to cooperate with cities and the need for strong regulations to protect housing’ looks in detail at Airbnb’s existing deals with cities across Europe and America.

With case studies on Barcelona, Berlin, Amsterdam, Paris, Prague, Vienna, New York and San Francisco, the report reveals how Airbnb has driven up rents, caused damage to urban communities, and wrecked affordable social housing programmes.

With mere self regulation currently in place for these platforms, the authors calls on EU Commission Vice-President Margrethe Vestager – who is in charge of the Digital portfolio – to support cities throughout Europe in dealing with this disruption.

They emphasise that only by delivering strong rules can such companies be forced to cooperate properly with city councils in the upcoming EU Digital Services Act.

Key Findings

The impact on housing from short-term rentals is real and proven:

• Amsterdam: 1 in 9 units rented on Airbnb in some neighborhoods
• Barcelona: Rents increase by 7% and property prices 19% from presence of Airbnb (even after controlling for gentrification)
• New York City: 15,000 apartments removed from housing, all renters paid US$616m in 2016 due to Airbnb
• Paris: 15,000-25,000 apartments removed from housing
• Prague: 15,000 apartments lost

Market Failures: Housing Market + Tourism Market ≠ Home Sharing

Combining the Housing and Tourism Markets results in massive commercial use, with very little home sharing:

• Amsterdam: 87% of revenue estimated to be commercial (full-time short-term rentals and property portfolios)
• Barcelona: Commercial use on Airbnb estimated to be 75% of listings
• Prague: More than half of apartments listed on Airbnb are by hosts with more than one

Platform Failures: Failed Cooperation, Failed Self Regulation

Platforms refuse to cooperate with cities and profit from illegal listings:

• Amsterdam: Airbnb withdrew ability to enforce 60 day cap after city tightened regulations
• Barcelona: Airbnb provides data but 60-70% addresses are missing or incorrect
• Berlin: 80% of Airbnb listings are still illegal; Platforms refuse to provide data
• Paris: 60% of Airbnb listings are illegal.
• New York City: 85% of Airbnb active listings are illegal
• Vienna: Airbnb refuses to remove listings in Social Housing

Platforms want to appear to be cooperating and to be regulated: to appease their investors; reduce the likelihood of further regulation; including preserving shielding laws in the EU.

The many ways platforms have failed cities:

• Hiding identities of hosts and locations of illegal listings • Systematically fail to verify host identities and locations
• Refuse to follow local laws like displaying registration numbers or removing illegal listings
• Threatening legal action over new regulations and filing abusive lawsuits
• Refusing to provide data for enforcement
• Failing to disclose activity for taxes collected
• Using taxes to avoid housing regulations
• Offering negotiation to avoid regulations (spoiler, most negotiations fail)
• Withdrawing negotiated agreements in retaliation
• Self regulation tools: trivial to bypass (yearly caps and “one host one home”)
• Proposing ineffective regulations to delay and block better regulations

Recommended Regulations

Cities continue the work to strengthen their regulations, and these three components have proven essential:

1. Mandatory Registration System
2. Platform Accountability
3. Platform Data Disclosure

The forthcoming Digital Services Act (DSA)

In the European Union, ancient laws such as the e-Commerce Directive have led to legal uncertainty and confusion, including many court cases, over the right for cities to regulate short-term rental platforms.

The e-Commerce Directive will be updated, in the form of the Digital Services Act that is to be proposed by the European Commission shortly after the release of this report on December 15.

What is needed from a Digital Services Act to equip cities with the tools needed to deal with the impact on affordable housing from short-term rental platforms?

To achieve the maximum room to manoeuvre, the best option is for short-term rental platforms to be excluded from the Digital Services Act — much like Uber following decisions by the European Court of Justice in December 2017.

If short-term rental platforms are to be included in the Digital Services Act, there are six elements which are needed for cities:

1. Access to non-aggregate data
2. Obligation to provide valid data
3. Acceptance of authorisation schemes for both hosts and platforms
4. Full cooperation on illegal listings
5. Full liability where platforms operate
6. No obstruction from the Commission

COVID-19: Are short-term rentals immune?

While tragic for city residents, short-term rentals have proven immune to COVID-19. The pandemic has reduced short-term rental activity but hasn’t returned lost housing units back to long-term rentals.

Continued regulation and enforcement is needed to incentivise the return of short-term rentals to long-term residents during and post COVID-19.

The Report

The full report can be downloaded here.