Confessions of an AirBnB Kingpin
Since February of this year (2015) we’ve rented first one then two of the available rooms in our house on AirBnB. In four months we’ve had over 120 bookings, earning us some kind of AirBnB rookie of the year award. However, this has not led to fabulous riches, just a more mobile lifestyle.
The way local politicians are going after AirBnB, you’d think it was a bonanza black market with people making money beyond your wildest dreams. Supervisors in San Francisco and legislators in Sacramento won’t let “kingpins” like us get away with it! Not only are we not paying enough in taxes, we’re depriving local residents of much needed housing – or so the argument goes. They’ve proposed capping Airbnb rentals at 60-120 days per year, outlawing the practice altogether, and of course taxing the crap out of it.
|Cap the Number of Days an Airbnb Rental can be Rented Out at 120 per year.
This initiative would cap the number of days an Airbnb rental unit can be rented out per year at 120. This is partly to recoup some of the permanent housing stock that has been converted into short term rentals, as well as reduce any other impacts that may be resulting from these types of rentals, (parking, neighborhood character, etc.).
I had a bit of a reality check today as I sat down to calculate just how much we were making off of our AirBnB enterprise. We’re netting close to $2,900 a month (in a beach town, during the summer, 2 blocks from the beach – a.k.a. high-season), but after the cost of rent on those rooms ($1650), utilities ($120), house cleaning ($120), soap and coffee ($100), and compensating a UCSC student to wash and change the sheets every day ($400), we’re only netting about $510 a month. Moreover, we spent $4,500 just furnishing the rooms, so we won’t break even till the end of the year. Whatever’s left over then will of course be taxed.
Believe me, many are the day I wake up and wonder, “why even bother?” The only answer is mobility. It’s given me the ability to travel and partially offset the cost of my stay in other cities like San Francisco, Los Angeles, Washington DC, and New York. Rather than paying for the full cost of my monthly rent AND hotels in those cities, I can get a slightly cheaper Airbnb there and earn some of the money back by sharing my own room. This lets me be anywhere, work from anywhere as a truly global citizen. More than an awe inspiring revenue stream, Airbnb is a modern lifestyle choice.
Granted, there are some people that have set up much larger operations than we have. This article, “The 10 AirBnB Superhosts that Rule New York City” points out that 1/3 of all Airbnbs in New York are managed by just 10 host accounts. But if my own experience is any indication, these people are doing real, hard work running a distributed hotel using a streamlined booking app. What they’re not doing is making drug money type margins.
Politicians would have us believe that Airbnb “kingpins” like myself are gobbling up the local housing stock and radically exacerbating the housing crises in California. The reality is, there’s clearly a shortage of short-term/overnight rentals as well, that’s why guests book on Airbnb. It’s the politicians who have caused these crises by failing to do their jobs: namely negotiating a political compromise with city residents to build more hotels and more high-density housing in existing coastal neighborhoods that are seeing astronomical demand. These are hard conversations to have, but it’s the job they were elected to do.
In Santa Cruz CA, a beach town with one of the highest housing cost to income ratios in the country, City Council has proposed making it illegal to rent out your back house to vacationers. Yet many residents point out that they can’t afford to live there without the additional rental income. Should the government really dictate who you can or cannot rent to?
|Prohibit the use of Accessory Dwelling Units as Vacation Rentals
The Santa Cruz City Council is considering a ban on all Accessory Dwelling Units (ADUs), sometimes referred to as “granny” or “in-law” units, being used as short term vacation rentals. Instead, these units would have to be used as more permanent rental housing. This initiative is in response to increasingly high and competitive rents within the city. However, some claim it is an unwarranted attack on private property rights, and that many homeowners are dependent on the revenue they generate through short term vacation rentals.
California needs to grow, and our cities do not belong to the current residents alone. They are collective infrastructure investments whose utility we must maximize to support a sustainable humankind. Should any consideration be given to the current occupants? Of course, but not to the detriment of the future.
Yet, as always, it’s easier to raid the pockets of these new Airbnb “zillionaires” and promise to use the funds to build below market rate housing, rather than tackle the issue head on. The reality is, there are no zillionaires, mostly just regular people trying to make ends meet by working hard so their extra rooms are fit for a guest. Even the rookie all-stars among us are just making enough to get by.
There is only one way to end the California housing crises – Build More Housing Stupid. Not subsidized, below market rate housing. Just good old fashioned, demand satisfying, market rate housing that can naturally bring costs down by increasing the supply.
Politicians, please, talk to your constituents about a vision of growth for the future and make it easier to develop new market rate housing.