Market Mad House

In individuals, insanity is rare; but in groups, parties, nations and epochs, it is the rule. Friedrich Nietzsche

Market Insanity

The Financial Crisis Facing Airbnb Hosts

The Guardian’s Inequality Project featured a great op-ed on the effects of Airbnb and the housing crisis in Los Angeles. In the post Ruth Fowler admits why she has become a reluctant Airbnb host.

Short-term rental is the only that way that Fowler can pay her rent and keep herself and her son off the street. Fowler rents her spare room to a variety of guests for 10 days a month. Disturbingly some of the guests are Angelinos who cannot find a full-time place to rent.

Her dilemma shows us why so many Airbnb hosts end up turning to factoring solutions like Payfully simply to make ends meet. Payfully advances cash against unpaid Airbnb bookings. One has to wonder how many hosts are using Airbnb simply to cover the rent or the mortgage these days.

The number has to be fairly high because the average rent for a one bedroom apartment in LA (historically a cheap city to live in) is now $2,000 a month, Fowler pointed out. Meanwhile the average income in Lalaland is around $28,000 a year.

Is Airbnb Driving Gentrification and Harming African Americans?

There is some disturbing evidence that Airbnb drives gentrification of working-class neighborhoods and pushes out African Americans. Inside Airbnb, a website set up by Murray Cox and Tom Slee posts some fascinating numbers that support this argument.

Some damning data against Airbnb includes:

  • Airbnb Hosts in New York are five times more likely to be white than black.


  • White Airbnb hosts in black neighborhoods in New York earned $159.70 million from Airbnb. Meanwhile, African American hosts only earned $48.3 million; less than a third of the revenue the whites made.


  • In Stuyvesant Heights Brooklyn 74.9% of the Airbnb hosts were white, but 89.7% of the area’s residents were black.

  • Cox and Slee calculated that economic benefits form Airbnb are four times more likely to go to white people.


  • They also calculated that African Americans are 12 times more likely to lose their homes or see rents raised because of Airbnb.


If this data is accurate, it does not indicate that Airbnb is a racist conspiracy. Instead it is affected by the historic results of racism. IE; white people are more likely to get access to bank loans and other sources of capital that give them the resources to take advantage of Airbnb.

It looks as if Airbnb is having some nasty effects on African Americans. A development that is sure to lead to some ugly political ramifications.

Is Airbnb a Scapegoat for the Housing Crisis?

Fowler asks an important question that shows why Airbnb is the perfect scapegoat for the housing crisis. She wrote: At the back of my mind is the question: if Airbnb didn’t exist, would my rent even be this high?”

That’s a question a lot of politicians are sure to start asking around election time. Airbnb makes a great scapegoat for the housing crisis, because it keeps people from asking about other causes of high housing costs such as restrictive zoning regimes, rent control laws, anti-slumlord legislation, and the mortgage tax deduction.

A particularly vile combination is anti-slumlord legislation and rent-control. First a local government passes rent control; which means that slumlords are the only landlords that can operate profitably. Then it passes “anti-slumlord” legislation and prosecutes those who take advantage of the new rent regime.

The end result is that nobody can make money from affordable housing so there is none. Something that that the politicians and bureaucrats never appreciate; is that as bad as slum housing is, it is still far superior to sleeping under the bridge.

Bashing Airbnb does not threaten anybody’s property values; or potentially raise taxes like real solutions would. Nor does it threaten a tax-deduction that tens of millions of Americans profit from. There’s also no need to talk about unpopular fixes like public housing construction or rent vouchers for the poor.

Therefore Airbnb is more of a symptom of the housing crisis rather than the cause of it. Unfortunately it’s also a readymade scapegoat for “progressive politicians” that want to keep stuffing their pockets with real estate developers’ money.

Although one question remains here, would Airbnb exist if there was no housing crisis? We have no way to know, but something has to be done about the housing crisis before it makes our cities unlivable for everybody.