A Florida trial between Aimco, one of the nation’s largest apartment property owners, and San Francisco-based tech giant Airbnb, scheduled to start Monday, could determine the viability of a large chunk of the online community marketplace’s business.
Apartment home provider Aimco filed a lawsuit against Airbnb in Florida’s 11th Judicial Circuit Court in Miami, in an effort to stop the tech company from listing the company’s apartment properties on the Airbnb website. Aimco’s apartment leases specifically prohibit renters to sub-lease their apartments. In the lawsuit, Aimco said that it has asked Airbnb to stop listing its apartments on Airbnb.com, but that the short-term rental company has refused.
First Court-Bound Lawsuit Involving Property Owner and Airbnb
This is the first court case involving a property owner and Airbnb that will go to trial and be decided by a jury. If Aimco wins the case, it could embolden other large multi-family property owners to block their buildings from being subleased on Airbnb.com, which could remove a big chunk of potential business for Airbnb.
As much as 60 percent of short-term rental listings in so-called supply constrained markets on Airbnb.com are in multi-family apartment and condominium buildings, many of which prohibit short-term subleasing, according to a transcript from a October 25, 2018 court hearing that was part of the Florida lawsuit. Airbnb’s revenue, profits and opportunities for growth depend on multifamily buildings in cities that typically prohibit and restrict short-term rentals. A ruling in favor of Aimco and its private property rights argument may have a substantial impact on Airbnb’s business, potentially reducing the company’s revenue by 50 percent or more.
Consider that, according to the study called “Hosts with Multiple Units — A Key Driver of Airbnb Growth” and commissioned by The American Hotel and Lodging Association (AHLA), Airbnb relies on rental units for the lion’s share of its revenue. From the 13-city study:
- In the U.S., hosts renting out two or more entire-home units generated nearly $2 billion in revenue in 2016. In the 13 markets highlighted, revenue reached $700 million.
- 81 percent of Airbnb’s U.S. Revenue, or $4.6 billion, comes from whole-unit rentals (those rentals where the owner is not present during the time of the rental), rising from 78 percent in the prior year.
- Each of the 13 cities studied saw an increase in the total number of listings by multi-unit hosts. In Nashville, Seattle, Oahu, and New Orleans, the growth of the number of units managed by multi-unit operators more than doubled — and Nashville saw an increase of more than 160%.
- The markets with the highest share of total revenue derived from multi-unit hosts are Miami (57.9 percent), Oahu (53.5 percent), and New Orleans (42.3 percent).
Aimco’s case also argues that private property owners have the right to determine the how their properties are used, and that long-term renters of those properties want to live in a community and don’t want transient hotel-like apartment buildings in their residential communities.
Airbnb claims that the Communications Decency Act shields online service providers from liability for content posted by users of websites such as Airbnb.com. The company also says it’s service provides extra income for middle-class families.
Some studies by researchers have challenged this view.
A 2015 report by researchers in Los Angeles found that commercial Airbnb rentals were costing Los Angeles renters $464 million a year in lost housing units removed from the long-term rental market. The study found that commercial leasing agents controlled roughly two-thirds of Los Angeles Airbnb listings – not middle class families – and that those operators generated 84 percent of total revenues that year, about $64 million.
Airbnb Is Focus Of Regulations In Chicago, Boston, New York, and San Francisco
Several cities have tried to crack down on Airbnb and other short-term rental companies by regulating vacation rentals or by instituting outright bans.
San Francisco, where Airbnb is based, has been regulating short-term apartment rentals under rules that took effect this past January. Airbnb and HomeAway, a rival short-term rental company, sued San Francisco in 2016 to block the new law. But a federal judge tossed out the companies’ claims and ordered them to work with the city. New York City, Chicago, Boston and other cities also have established rules regulating Airbnb and other short-term rentals, to protect long-term renters.
Voters in South Lake Tahoe, California, approved a November ballot measure that prohibits home rentals of less than 30 days outside the city’s tourist core. Supporters of the measure said short-term renters disturbed the peace in residential neighborhoods with loud, late-night parties, and that they made it difficult for locals to find places to live.
It’s not just property owners who are fighting short-term rentals. The AHLA opposes multi-dwelling short-term rentals and businesses that use rental properties exclusively for short stays. The group has said it does not oppose home sharing.
On it’s “issues” page, The AHLA writes…
“Across the country, there is a growing concern that some short-term rental companies, such as Airbnb, HomeAway and Flipkey, are enabling the proliferation of “illegal hotels,” where commercial operators list multiple units in the same metropolitan area or list units for extended periods of time without adhering to commonsense regulations or tax obligations. Indeed, in many major urban areas and vacation destinations, these commercial operators or investors are buying rental properties with no intention of living there, but solely for the purpose of renting them out to short-term visitors, just like a hotel..This unregulated commercial activity often compromises consumer safety, undermines job growth, increases housing costs while limiting affordable housing options, and endangers the character and security of residential neighborhoods.”
Hotels must adhere to strict safety standards, such as having working sprinkler systems and access for people with disabilities, as well as have provide emergency exit directions, emergency lighting and fire doors.
Airbnb rentals are not required to meet any of these safety standards.
The Miami trial is expected to last two weeks.
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