Airbnb surprised investors with its best quarter yet, at least as far as net income was concerned. In the company’s earnings call last week, CEO Brian Chesky pointed to a strong travel season, a successful effort to get new listings on the platform, and a push into new international markets as reasons for the strong numbers.
But not included in the conversation were some of the regulations that had been passed limiting short-term rentals in certain areas. The most well-known is a crackdown that came from NYC regulators this year that all but banned short-term rentals by requiring permits to be obtained and for hosts to be on the property during the rental period. Now, it is being reported that short-term listings in Manhattan have dropped more than 80 percent. There are plenty of other cities that have either banned or restricted short-term rentals in certain areas.
These laws have reduced the supply of rentals on Airbnb as well as put the company in a tough position of policing and reporting. Italy won a ruling against Airbnb, forcing them to pay a 21 percent hotel tax in 2017. After that ruling, a spokesperson from the company said that they would abide by it but wouldn’t be responsible for the collection, “Airbnb does not have a tax representative to enforce the withholding of income tax in Italy, and the ruling makes clear that any requirement to appoint one is contrary to EU law.” This did not turn out to be the case. This week, a judge in Italy ordered the seizure of $830 million for unpaid taxes. A landlord in NYC is also suing Airbnb for allowing his property to be rented on the platform despite being put on a “do-not-register list.”
The risk of further regulation also increases with rental prices. As cities get more pushback to unaffordable housing, they become more inclined to limit or prohibit short-term rentals. Those in favor of this tactic cite a study done this summer on the effects of rents in Irvine, California, after a strict ban was put in place. The researchers concluded that “contract rental prices in the long-term rental market decrease by 3.0 percent within approximately 2 years after the enforcement of STR ordinance.”
Airbnb wants to be much more than just a short-term rental platform, Chesky has said over and over in interviews. But for the time being, Airbnb is still known as a place for vacation rentals; they still get the large majority of their profit from short-term stays. So, while they might eventually be able to outgrow the increasingly popular short-term rental regulations, it still poses a threat to their business model.
Exclusionary List: Meridian Capital, a New York mortgage broker known for doing large volumes of smaller loans, is being investigated for possible fraud by the lending agency Freddie Mac. A broker has been placed on leave, but during the investigation, Freddie is suspending its lending operations with Meridian. The larger concern for Meridian is being put on Freddie’s infamous “blacklist” of individuals and companies that are not eligible to work with the agency.
Signature deals: Bids are due this week for the loan portfolio of the now-defunct Signature Bank. The portfolio could be worth as much as $33 billion, but it will likely only get a fraction of that. Many of the buildings are already worth less now than they were when the loans were originated. How much of a discount the loans sell for will, in a way, set the market expectation for what we could expect to see when it comes to property value.
Hot mess: In a letter to clients, a Morgan Stanley analyst said hotdesking was one of “the most structurally damaging headwinds facing the office market.” Loss of demand due to companies moving to hotdesking might sound bad, but given the alternative of companies not taking office space at all, landlords might be okay with this new boogieman.