Rent Your Place on Airbnb? The Landlord Wants a Cut
Rent Your Place on Airbnb? The Landlord Wants a Cut
Revenue-sharing model would allow apartment dwellers to
market rooms through lodging website
By LAURA KUSISTO Updated Dec. 16, 2015 11:24 a.m. ET
Three of the nation’s largest landlords have held
discussions with Airbnb Inc. about allowing apartment dwellers to market rooms
through the company’s global network in exchange for a slice of the revenue.
Equity Residential, AvalonBay Communities Inc. and Camden
Property Trust have had discussions with Airbnb in recent weeks about joining
forces, executives at each of the companies said. They all said they are
interested in pursuing a revenue-sharing model with Airbnb but would need to
work out details.
The moves hold the potential to expand Airbnb’s access to
rental units across the country and further formalize a business that has grown
from a matchmaking service for couch-surfers into a real threat to established
hotels.
Airbnb’s service has long run afoul of many apartment
companies’ contracts. A truce could allow a bigger portion of America’s housing
stock to be used as hotel rooms, potentially adding thousands of new listings
to Airbnb’s books by allowing tenants to openly use the site rather than
handing over their keys on the sly.
Equity Residential is the largest publicly traded U.S.
apartment operator, with about 108,000 units, according to the company, while
AvalonBay is the second largest with 83,000 units and Camden owns about 59,000
units, according to the companies.
“A lot of our hosts are renters,” said Christopher Nulty,
an Airbnb spokesman. “Any solution we would be able to identify would be a win-win-win
for everyone involved.” Earlier this year, Airbnb tapped a former San Francisco
real-estate executive for a position dedicated to forging partnerships with
apartment operators.
Home dwellers who use Airbnb’s website to list rooms or
entire homes for rent pay Airbnb a percentage of the nightly rate. But most
apartment leases have restrictions that forbid tenants to sublet or to do so
without permission. That has made many of the apartment dwellers who advertise
their units on Airbnb’s website subject to possible eviction, a hurdle to
Airbnb’s growth thus far.
Nevertheless, Airbnb, founded in 2008, now lists about
322,500 accommodations in the U.S., up 80% from a year earlier, according to
the company. It generated $340 million of revenue in the third quarter, on
bookings of $2.2 billion, according to an investor presentation earlier this
year reviewed by The Wall Street Journal.
Airbnb’s valuation has ballooned as home dwellers and
travelers have embraced the service. As of last month the San Francisco-based
company was valued at $25.5 billion, almost matching Equity Residential’s $28
billion market capitalization.
“You just can’t turn your head or keep your head in the
sand over what’s going on,” said David Santee, Equity Residential’s chief
operating officer. A potential deal is “just a way to figure out how can
everybody coexist, bring transparency and figure out a way that everybody can
win.”
Kristy Simonette, chief information officer at Camden,
said the company is in early talks with Airbnb about a partnership. “While it’s
a little scary, we do think there’s a play there,” she said.
Tim Naughton, chief executive of AvalonBay, said in a
conference call in late October that the company is deciding “whether we want
to embrace it.”
Airbnb has struggled to win support from some local
political officials, tenants groups and rental property owners, however.
Critics warn that apartments could essentially be converted into hotel rooms,
depleting the rental stock in cities with housing crunches, such as New York,
San Francisco and New Orleans.
Such a deal could place Airbnb under additional scrutiny
from lawmakers by seeking to legitimize the use of apartments as hotel rooms.
Lawmakers in some cities are seeking to crack down on the practice, arguing
that it takes units off the market for local residents and that apartment
buildings don’t adhere to the same fire and safety codes as hotels.
“I’m sort of appalled that Airbnb thinks the next answer
to their problem of not running a legal business is to try to convince some
number of landlords … that they can get in on the deal,” said New York State
Senator Liz Krueger, a Democrat and vocal opponent of Airbnb.
Executives at the three apartment companies said they
plan to examine local laws carefully to ensure they don’t run afoul of them.
Mr. Santee, of Equity Residential, said they wouldn’t let units be converted
into full-time hotel rooms.
Airbnb officials have said in the past that the vast
majority of its users are renting out their apartments only occasionally on the
site, helping them afford rapidly rising rents in those cities. “Our recent
conversations with landlords have been guided by the principle of primary
residence home sharing only,” Mr. Nulty said.
Some landlords are hostile to Airbnb because tenants are
able to make money off their units with no direct financial benefit to the
landlord. Others are concerned that having people staying in their buildings
who haven’t undergone the same background checks puts existing tenants at risk
of having to deal with noisy partyers or unsavory characters.
Airbnb officials said residents have an incentive to
screen candidates looking to stay in their homes. The website also allows hosts
to rate guests, providing a check on unruly users.
In San Francisco’s recent battle over Airbnb, the San
Francisco Apartment Association, a landlord group, joined forces with tenant
groups to support Proposition F, an unsuccessful ballot measure that limited
the number of nights a year a unit could be rented out to 75.
Landlords and tenants “are normally at one another’s
throats,” said Dale Carlson, co-founder of ShareBetter San Francisco, which
helped lead the fight for the ballot measure. Instead, he said, the groups
wrote the anti-Airbnb measure together. “The apartment association catered
lunch and it wasn’t poisoned,” he said.
Major landlords, such as Related Cos., have moved to
evict New York tenants who rent out their units, citing local laws that
prohibit renting out a multifamily unit for less than 30 days if the resident
isn’t present.
Airbnb got its start appealing to travelers seeking a
less corporate, more informal local experience than traditional hotels. But as
the company grows, it has been seeking ways to formalize its business, such as
by offering to pay hotel taxes in some municipalities and venturing into the professional
vacation rental business by developing software that would help link property
managers to the site.
But landlords could stand to benefit from a hookup with
Airbnb. They could impose a fee to tenants for allowing them to rent out their
units, apartment executives and analysts said.
Landlords also could find it easier to pass along rent
increases. If tenants can get $300 a night renting their room from time to
time, it is easier for landlords to keep pushing steep rent increases, the
apartment executives and analysts said.
“For those that are pushing the threshold of
affordability, maybe they can do an Airbnb or two a month,” said Wes Golladay,
an analyst at RBC Capital Markets. “Maybe it’s affordable and they can stay.”
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