The week of Airbnb’s IPO, I wrote this. Like Tesla, I like the company. I like the idea. I give it huge credit for innovation. I give it less than 0 credit for the valuation the idiots in New York have ascribed to it. I simply will never understand the pitch to clients as to how a company like Airbnb is a good long term hold. Tell me “Everyone is an idiot and they will buy this up to x $/share at which point we will punch out and laugh at all the bag holders”, I can be convinced. Sadly. No money manager is that honest.
I do not blame the company. Their IPO was at $68 per share. They knew that’s what it might could maybe should be worth as a stretch. Having just finalized a capital raise at an $18 billion valuation, raising $3.5 billion of real cash was a big win for any company that burns money like it’s an 88 year old marrying a playboy bunny. But opening up 114% and giving the company a $100 billion valuation seemed like a major stretch to anyone with a brain. Sadly, when New York runs your money, they only care about your fees and their bonus.
In the first 9 months of 2021, Airbnb has lost $406 mm. In fairness, that’s better than the $697 mm they lost in the first 9 months of 2020, but my real issue is that they only have $10 billion in assets but sport a total market cap of $90 billion. Even more striking is digging into that $10 billion of assets. $5.5 billion is cash from capital raise and only $270 mm is hard P,P&E. So, like assets. Which means they need my house and the other 7 mm listed on the platform to have any revenue.
Me? I’m a huge fan of the ability to move money out of the Ponzi stock market that leads to $100 billion valuations for a company with no actual assets and into hard assets like houses that they don’t own. My house in Arizona (inquire within) is 5 bedrooms, 3 bathrooms, with a pool and sport court on an acre lot. Thanks to the Federal reserve, it’s up 55% in value since I bought it 2.5 years ago, and thanks to Airbnb it makes $800 a night and grossed over $100,000 in 2021. By any metric, that cap rate is phenomenal in a 0% interest rate environment.
But… the storm clouds are brewing. In September 2020, a Democrat (self described as told me on the phone at 3 am when the police called me. They were there because he had a 150 person Snapchat party at my house (his rental) and he couldn’t possibly get a citation because his career would be in trouble … and … well.. he was black and the police don’t like black people, don’t you know. I politely said “I’m a middle age white dude. You know what, at 3 am, the police don’t like me either, so go out there and get your F@&king ticket). I thought it was the end of it. Nope.
In November of 2020, I got a court summons that threatened me with 6 months in jail and a $10,000 fine. I ended up in court, pled it down to a civil charge instead of a misdemeanor to avoid jail time, and read every one of the 900 pages on the Paradise Valley town code. You want to understand the legal system? I recommend having a case you are involved in. Heightens the stakes and scares the hell out of you.
Flash forward to December 2021. My loving neighbors discovered that our community- 34 lots really - was governed by a single document from 1970 when the property was first subdivided. With the help of a lawyer 20 of them found, they dredged up a C,C&R (restrictions) document that they felt had some wiggle room and an opportunity to amend. Like John Mulaney’s monologue about the US constitution, it may be stretching the logic of the original document. Nonetheless, the neighbors sent nasty grams to the the 14 of 34 owners that weren’t involved in a discussion that said they were changing the rules, 52 years later, and short term rentals were no longer allowed.
Fortunately, I’m very comfortable with lawyering, have lots of amateur training as a result of my big mouth, and I was able to get access to the Lexis system to research all the Arizona case law that supports the illegality of their position and I invited them to politely, lovingly, fornicate with themselves.
But, the pressure is unrelenting on Airbnb in communities across the world. Last night, Paradise Valley separate and apart from my neighbors held a town meeting where they were to approve the restrictions on short term rentals that include such things as: must have a phone in your house, must meet all renters in person to check them in, and must confirm they aren’t sex offenders. Their helpful PowerPoint is here. The mayor and all the council people had made up tbeir minds long before the meeting. But, a glutton for punishment, I signed up to be a speaker, and my comment notes are below.
But the point is not whether I win or lose. I lost before I logged into their zoom meeting. More broadly, society has become a hostile and angry place, and despite words to the contrary from “Black Lives Matter!” narcissists, when they are in the majority, they feel entitled to crush those in the minority, as long as there is political cover.
So even though short term rentals raise house values by 5.4% (because they expand the buyer universe) and even though my renters bring $125,000 a year of dollars to the local economy to support coffee shops and restaurants and golf courses that make the city and their residents beneficiaries, all hail the new order of majority oppression. Do I pay more taxes here than EV drivers pay? Yes. And those taxes support roads and schools and even the police that come to my house at 3 am. But no matter. Caron has been wronged and Caron is coming for you.
I’m a hockey and golf dad who lives in Colorado. Long term, I want to be in Arizona, in this community, and from a resource allocation. standpoint, it makes no sense NOT to rent this house to other families like me, who have kids and want to enjoy the birds and sun. So I do. And “they” don’t like it. I concede, the night of the party, I was horrified. Which brings us to the original point, Airbnb support was absolutely no help. I called 3 times. No response. I had to tweet at them to even get a response, and they were extremely unhelpful, though comfortingly they didn’t enjoy the public attention of being tweeted at. I was the one that had to deal with the police and evict the tenant, which was an experience in and of it self.
If Airbnb wishes to survive the battle with communities across the world and retain the 7 mm houses on their platform, they are going to have to do more than threaten to sue the town of PV for trying to change their codes to support the 90% of owners that don’t rent their houses on the platform.
Bottom line, we created a lot of Karen’s in 2020 and they feel empowered. And when they have a credible complaint, it’s going to be hard to put a mask on them and send them away in their car driving by themselves, yelling at the kids.
Talking points. Unedited.
I woke up this morning in my house in PV, had a coffee and listened to birds and looked at the sun and loved it. It is my happy place. My favorite place. But I don’t live here full time. So I offset my costs by renting it.
There is a negativity bias. The houses are worth 5.4% more. That’s almost 100,000 per house based on the median house. Our renters are injecting more than 2500 a weekend into the economy. That supports your local coffee shop. Your local store. Your favorite restaurant or golf course.
As a threshold issue, party houses and short term rentals are very different. We don’t need to be regulating short term rentals - we need to be regulating the component that is breaking laws. 99% of my renters are single families and friends, golf buddies who just want to have a wonderful weekend in our favorite state. This is about the calls from Karen’s. You want them to be reduced. So do I. In more than 2 years of renting our place weekly, there was one party where I got a call from the police at 3 am. I hated it. The neighbors hated it. None of us want that. But the propositions brought to the committee today don’t lessen the calls. I know from experience - I have to register my number and back up with PV (I didn’t and I was fined and ended up on court). You have my phone number. Neighbors have the police phone number. The system works. The legislature has been very specific about what you can address - only health and safety. SB1350 is clear you can’t do this, or rather you are really stretching the intent.
I loved the part about transparency in finance. STRs generate significant tax revenue for the town. And to the speaker that said background checks are available for $22, I say “neat.” I don’t have enough information with privacy laws to run a background check. You can ask them, and they attest and be subject to rule lbs of law of perjury. But that’s it.
As you said in your preamble - we already have tools to address it his. SaB1350 prohibits restrictions from the town - as Sedona discovered / that is only for public health and safety. There is no correlations to a public health threat.
This is arbitrary and capricious with respect to public safety and welfare and these restrictions will not address this. They are not rationally related. That’s why airbnb will sue you and you are bringing a war to our community.
So the intent is - as the order suggests - to prevent parties. Concur. Do I need a local phone? No. My renters would never answer one. Anyone who books on Airbnb or the same has a phone. It’s an app. If you are booking a place online and don’t have a phone / you are trying to get off the grid and that’s your perfect renter.
CDC cleaning recommendations? Come on. They recommend you don’t eat cookie dough. This isn’t about cleaning or health- it’s about government toll control and how much does everyone like wearing masks? Exactly. 15 minutes the thing dies.
And finally - to the in-person check in and available within an hour. COVID has shown us / this committee meeting not in person has shown us- in person is not required. A phone is.
What you want to do is reduce calls and parties. I agree. Raise fines in owners that don’t properly vet their clients. But also. For those calling in- if their phone call doesn’t lead to a citation, they should be fined the exact same amount.
The policies as proposed don’t solve the problem. Punishing party houses AND Karen’s for over reporting is.