It’s been a problem on Airbnb since the business first launched in 2008. Tenants renting rooms, or entire apartments, without the consent of their landlord. Not only is this a violation of a standard lease agreement, it also creates uninsured risks for landlords whose insurance policies typically do not cover the business activities of tenants.
Tenants were some of the first hosts to discover the financial gains to be made on Airbnb. In the early days of Airbnb, New York hosts, mostly renters, were the early adopters of the booking platform. With New York’s sky-high rental rates, Airbnb provided many tenants with a way to offset their monthly living expenses by periodically renting rooms to travelers.
However, a few enterprising individuals saw the profit-making potential of renting numerous apartments and re-renting them as short-term rentals on Airbnb. These entrepreneurs would rent several properties, furnish them, and re-rent them earning 2 to 3 times the monthly rental costs.
Obviously, landlords weren’t too happy to discover that tenants were profiting from their properties nor were they happy about tenants using their properties for means other than the intended residential use stipulated by the lease agreement.
What most landlords also failed to realize is that in the case of a damage to the building or a lawsuit filed by a guest, neither the tenant’s renters insurance policy nor the landlord’s insurance would cover the loss. Neither of these policies was designed to cover business-related activities.
New York banned the re-renting of apartments for short-term stays in October 2016 but the practice continues in many areas across the country. In most cases, the tenant is hosting on Airbnb without the consent of the landlord and is in violation of the lease terms. By hosting paying guests, the tenant is also creating an uninsured liability for the landlord.
After taking a bit of a beating in New York, Airbnb has undertaken new measures to find common ground with city councils. The company has signed agreements with many municipalities to allow property owners to continue to earn money hosting guests while Airbnb helps cities profit by collecting and remitting occupancy taxes.
Airbnb has launched another initiative aimed at creating friends out of another former enemy – landlords. The new program called the “Airbnb Friendly Buildings Program” aims to entice owners of multi-unit apartment blocks to permit hosting by tenants. In return, the landlords benefit through receiving a percentage of the Airbnb revenue earned by their tenants.
Airbnb is aiming for the so-called “win-win” situation or, in this case, “win-win-win”. Current tenant hosts can continue earning money on Airbnb (and offsetting some of their monthly rental costs), landlords earn more than the market rate for long-term rentals, and Airbnb stands to gain by preserving its base of hosts and possibly attracting new tenant hosts.
How the city municipalities view this program is another matter. in cities such as New York, the Friendly Buildings Program won’t change anything. The city considers the practice illegal end of story. In most other cities, Airbnb will have to comply with local zoning laws when selecting eligible buildings.
Multi-unit dwellings in zones that allow for short-term stays of 30 days or less, and have existing Airbnb hosts, are likely candidates. It will be interesting to see just how many of the building owners Airbnb can entice into the program. It’s also unknown at this time just how Airbnb plans to work with landlords to provide adequate insurance coverage.
Airbnb actually initiated the Friendly Buildings Program in 2015 but it hasn’t received much attention until now. That changed when they released news of their first collaboration with a property developer to build an Airbnb-themed apartment building. The concept called “Niido Powered by Airbnb” will be a 324 unit apartment building in Kissimmee, Florida where tenants will automatically be allowed to re-rent their units for up 180 days per year. According to Airbnb, this will be the first of many “powered by Airbnb” developments.
Neptune Condominiums in Toronto, Canada recently became the first non-US multi-unit apartment building to join the Friendly Buildings Program. However, in this case, there is no landlord as the units are individually owned. The building’s condo board decided to join the program to increase the transparency of hosting activities within the building and collecting fees to cover the additional wear and tear to common areas.