AirBnB: The Economics of Poorphobia
It’s safe to say that most of us hoped that if COVID-19 was going to destroy our social lives, and kill a bunch of people, it could at least have the decency to shut down short-term Airbnb rentals. But no. Thanks to its near-monopoly on the short-term rental market, Airbnb is recovering from COVID-19 much faster than other businesses. Their stock has shot up 146% since the company went public at the beginning of December.
It’s hard to believe, but before Airbnb became the gentrification juggernaut that it is today, it was just meant to be a quick moneymaker for three guys struggling to make rent.
In October 2007, Airbnb founders Brian Chesky and Joe Gebbia found out that their rent would be increased by 25%. Without steady employment, Chesky and Gebbia had to think of a way to make some fast cash. So they bought an air mattress and rented out the spare room in their apartment on weekends for extra money. Like the underdogs of a feel-good rags-to-riches story, they earned enough money for next month’s rent, evading homelessness and making lifelong friends along the way.
A heartwarming origin story, but we know Airbnb didn’t stop there. While Chesky and Gebbia’s original vision involved homeowners renting out spare rooms for extra cash, the reality is that Airbnb has completely distorted the short term rental market, artificially deflating vacancy rates and decimating affordable housing.
The concept of Airbnb in itself is morally neutral and could have been useful in communities without hotels or for people renting out an extra room in their home to help pay their mortgage. However, a significant portion of Airbnb hosts own at least ten properties, and 81 percent of Airbnb’s revenue comes from whole-unit rentals where the owner is not present during the guest’s stay. Significant portions of residentially-coded buildings are being used as short-term rentals, and under the conditions set by capitalism, neither Airbnb nor their hosts are really doing anything society perceives as wrong. In fact, the fear of landing in the poor house is so pervasive that, if I’m being honest, I understand why people would buy up properties to use as passive income. Their greed is motivated by the fear that they’ll slide into poverty after one wrong move. This logic gives Airbnb hosts the ability to dismiss their monopolization of the housing market as a shrewd step in self-preservation. Similarly, Airbnb can ignore hosts’ abuse of their app in favour of making profits because, under capitalism, they are morally bound to their investors who can pull their money out of the company at a moment’s notice.
As depressing as it sounds, the fate of Airbnb was pretty much sealed by the nature of our market economy. Western capitalism is a pyramid scheme in that, no matter someone’s wealth, they always feel beholden to a higher economic power and vulnerable to poverty, making it necessary to exploit the people below them. Capitalism motivates us to exploit each other, so that even the most well-meaning apps will eventually contribute to that exploitation. The only way out is to avoid market-based strategies altogether, and to dismantle the system that rewards exploitative behaviour and prioritizes profit over people.
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