Airbnb Pits Neighbor Against Neighbor in Tourist-Friendly New Orleans

An anti-Airbnb sign at a house near the French Quarter and Marigny Triangle, popular areas for vacation rentals.
William Widmer of The New York Times

Talk to the locals in certain New Orleans neighborhoods — from the historic and genteel Garden District uptown to the dense and increasingly trendy Bywater downriver — and you can be pretty sure that one topic will come up eventually: Airbnb.

Jenny Johnson loads a car after staying at a rental property owned and operated by Christian Galvin in the Garden District of New Orleans.
William Widmer of The New York Times

With crime, potholes and the Saints, the home-sharing economy has become one of the city’s default topics, bickered about in countless informal conversations, through snarky signs (“Won’t You B&B My Neighbor?”) and increasingly in public forums where city officials, and the citizenry, argue over what to do about it.

Amber King and Ella, her daughter, at another Garden District vacation rental property owned by Mr. Galvin.
William Widmer of The New York Times

Everybody has an opinion. Some are distraught at revelers leaving “floors covered with vomit” in residential buildings and “short-term strangers” squeezing out long-term residents. But just as passionate are people who say renting rooms on Airbnb has brought them enough cash to rehabilitate properties or cover the mortgage after a layoff or after Hurricane Katrina. All of those arguments were made in September at a planning commission hearing on the subject — a meeting that lasted more than two hours despite a time limit on comments.

Shotgun houses, narrow dwellings with rooms arranged one behind another and a door at each end, in the Bywater neighborhood, a popular vacation rental destination in New Orleans.
William Widmer of The New York Times

That hearing began a process that is supposed to resolve how to handle short-term rentals in New Orleans. Blurring the lines between residential and commercial land use, home-sharing platforms have created a unique and thorny regulatory problem — a “hybrid” that “doesn’t really fit into the typical boxes,” as Robert D. Rivers, the executive director of the New Orleans planning commission, puts it. The technology design that has disrupted the hospitality industry has also disrupted civic life and public policy making.

Mr. Galvin, who owns and operates several rental properties on Airbnb, where positive ratings from guests have earned him the title “superhost.”
Willaim Widmer of The New York Times

Similar efforts to regulate home sharing are underway in Philadelphia; Portland, Ore.; Austin, Tex.; and other municipalities where short-term rental sites like Airbnb (said to be worth $24 billion) and HomeAway (which was bought by Expedia last year for about $4 billion) have spurred disagreement. But the issue is amplified in New Orleans, where tourism (which contributed anestimated $6.8 billion to the local economy in 2014) butts against the pride residents take in the authenticity of their neighborhoods.

Trash piled outside a residence near the French Quarter that neighbors say is a full-time Airbnb rental.
William Widmer of The New York Times

Like some other cities, New Orleans has laws that make a lot of short-term rentals illegal. In most circumstances, renting property for less than 30 days is prohibited without a special permit that few individuals have obtained, and it is punishable by fine or possibly jail time. But city officials acknowledge that New Orleans simply does not have the resources to enforce this rule — given the 2,400 to 4,000 short-term rental listings on various services. Whether short-term rentals will be permitted in some form is not in question; the numbers have already settled that. It is up to the city to adjust accordingly, and figure out how they will be allowed.

Representatives of the larger home-sharing companies have met with New Orleans officials, but they are seldom heard from in more public forums. Officials of Airbnb and VRBO (Vacation Rentals by Owner, a HomeAway brand that is popular in New Orleans) point out that they operate in so many places they cannot possibly get into the specifics of local policy; they are merely private businesses offering services to consumers. So it is up to New Orleans and other cities to devise their own regulations, and up to users to follow them. The upshot is a curious mix of ubiquity and absence: a public debate that seems to involve everyone except the parties who started it.

For the time being, the platforms operate in “a regulatory Wild West,” wrote Jeffrey Goodman, a New Orleans design consultant and self-described “planning nerd,” in the February issue of the American Planning Association magazine Planning. And while cities scramble to adjust, Mr. Goodman wrote, these companies “make money without proper oversight and without proper accountability.”

The surprise is that, despite the bickering and contention, the various constituencies in New Orleans have a lot of common ground. Even the most ardent proponents of short-term rentals agree that the practice should be regulated: There ought to be mechanisms to collect taxes, restrict the density of short-term rentals in certain areas, and deal with absentee owners who offer property for rent and allow rowdy guests to become neighborhood nuisances.

The trick is that the most efficient way of achieving those ends might require the services to change how they operate. A technological fix that would permit only licensed owners to list their properties online, for example, could satisfy many complaints. But the services have been unwilling to pursue those possibilities. So New Orleans will have to find another answer.

‘A Rogue Hotel’

Rob White lives in the French Quarter. Thick with 18th-century structures, the dense grid is the oldest neighborhood in New Orleans and its biggest tourist magnet. New hotels or bed-and-breakfasts have been tightly restricted or banned for many years, to preserve some degree of the residential character that is part of the attraction. Regulations for short-term rentals are even tighter here (nothing under 60 days, in theory), but the online services have provided an easy workaround to that rule, in Mr. White’s view. He says it seems that he is the only full-time resident on his block. “You know who comes in and out of there?” he said at a community meeting about a condominium building nearby. “People with their luggage.” The tourists roll in on Thursday or Friday and roll out a few days later. “It’s a rogue hotel,” he complained.

Mr. White is a member of the Short-Term Rental Committee, not an official city entity, but a vocal coalition of preservationists, neighborhood activists, owners of traditional bed-and-breakfasts and residents of various historic New Orleans neighborhoods. Its criticism of short-term rentals predates the rise of home-sharing services, but it has become steadily louder since Airbnb’s arrival in the city in 2009, and it has included bitter complaints about the city’s failure to enforce the relevant code, which dates from the 1950s.

Deputy Mayor Ryan Berni concedes that enforcement of the short-term rental law has been “lax and difficult.” Listings on home-sharing platforms do not reveal specific names and addresses, and identifying and building cases against violators would involve considerable time and money, city officials say. In fairness, New Orleans, like most cities, has more urgent priorities — including an understaffed police force and road and infrastructure problems that would cost billions to fix. “We just didn’t feel like we had the tools to do it,” Mr. Berni said.

Stopping scofflaws would be easier if the services identified those using their tools to break the law, an argument made by critics of short-term rentals. Representatives of Airbnb and VRBO counter that turning over such information would violate their users’ privacy. A VRBO spokesman says that its users essentially pay to advertise a property, and the platform is not directly involved in resulting transactions. Mr. Rivers, of the planning commission, and a former lawyer for the city, says it is not even clear that the city has the legal standing to demand such information, and that ultimately it needs a solution involving its own data.

In recent months, Airbnb has released limited information about use of its site. For instance, it says that 92 percent of New Orleans’s hosts booked property for fewer than 180 days in the previous year, a statistic that suggests users are regular people occasionally supplementing their income. But this data release left out other important numbers — such as listings per host, which might have illuminated the multiple-property power users who may account for significant booking volume.

Mr. Goodman, the New Orleans consultant, has followed the wrangling over short-term rentals in New Orleans for a couple of years, meeting with a number of city officials — and, briefly, working as a contractor for Airbnb. He has gradually become more frustrated with the dearth of official information. In New York City, similar frustration led the state attorney general to apply legal pressure to obtain more detailed data on Airbnb hosts as part of an effort to crack down on illegal home sharing. Mr. Goodman notes that Airbnbpromotes itself as an enabler of human connection and community, but leaves compliance with local laws to the users and regulators.

Airbnb declined to comment in detail about specifics of the debate in New Orleans. But Max Pomeranc, an Airbnb public policy manager whose focus includes New Orleans, responded to criticism about compliance with local laws by saying that its service is available in 34,000 municipalities around the world, making deep local involvement everywhere impractical. Mr. Pomeranc also noted that anyone signing up to be a host in New Orleans encounters a “Responsible Hosting” page encouraging compliance with local laws and various links to official city sources.

For a study intended to guide local policy makers, the New Orleans City Planning Commission ultimately relied in part on data from Inside Airbnb and the New Orleans Short Term Rental Report — third parties that have “scraped” Airbnb’s site to approximate the geographic distribution, use rate and other more detailed data. Inside Airbnb asserts, for instance, that more than 44.7 percent of New Orleans listings involve hosts promoting more than one listing; some offer 10 or more. It also concluded that 210 out of 2,646 listings are in the French Quarter. The sharing services invariably criticize such sources as unreliable. But they have yet to release parallel data of their own.

The License Debate

People have been taking in lodgers in New Orleans “for 300 years,” Christian Galvin points out. Mr. Galvin rents out a house in leafy uptown New Orleans year-round. In fact, he is a “superhost” on Airbnb, meaning he has many positive ratings from guests, and he is a member of the board of Alliance for Neighborhood Progress, a local group that promotes short-term rentals.

Even the alliance, a relatively sophisticated operation that is financed by dues and has its own lawyers, favors regulation. Mr. Galvin said the group expected that developing rules to legalize short-term rentals would take seven or eight months. “Just tax it, and let’s go about our day,” he said. “Why is it dragging on?”

The answer to that might be apparent in the 118-page draft study the planning commission released on Jan. 19. The document painstakingly breaks down the varieties of short-term rentals and suggests solutions like restrictions by neighborhood density (preservationists favor a total ban in the French Quarter) or other factors (restricting year-round, non-owner-occupied rentals, of the sort that Mr. Galvin operates, in residential areas). It will take months to sort out the details. The latest twist is the consideration of a state bill to require short-term rental services to collect the same taxes as hotels and motels. But if the third-party data on short-term rentals is remotely accurate, and something like the planning commission’s preliminary recommendations became enforceable laws, listings and bookings for these sharing platforms would probably decline.

Despite the polarization around the issue, many, including lawyers for the Alliance for Neighborhood Progress, have endorsed a simple-sounding idea: require short-term rentals to obtain some sort of official license or permit number (for a fee) and enter it in a field on the web. Enter your license number, or you are not permitted to list. Mr. Goodman, the planning activist, agreed that the platform databases were “the choke point in the system,” and tweaking them to function only with a municipal license would amount to a genuine partnership with cities. “It requires the city to keep a good database, and these listing companies to honor that database,” he said.

For the home-sharing services, however, this appears to be a nonstarter. According to Mr. Rivers, Airbnb and VRBO told his staff that it would be too onerous to adjust their software to accommodate every regulatory arrangement for thousands of municipalities around the world. Spokesmen for Airbnb and VRBO confirm that rewriting their platforms in this way is not practical.

The planning commission seems to have accepted that argument, and its study recommends instead that license information, with the address of an advertised property, should be included in the “narrative” section of a listing. To critics, that means people without licenses could still rent, and it would still be up to the city to ferret out those who do not follow the rules. In the few cities that have enacted analogous policies, compliance has been estimated at less than 15 percent.

Mr. Berni, the deputy mayor, while emphasizing that the planning commission report is merely a starting point, says this recommended strategy has potential. Compliant users paying for licenses could generate revenue to begin funding enforcement. Going after a “bad operator” is a complaint-driven process, he says, and a listing that lacks a license number could give the city cleaner legal leverage.

Perhaps that will work. Even Mr. Goodman expresses optimism. He notes thatAirbnb in particular seems to be moving toward accepting that it is not just a responsibility-free enabler — adding more robust insurance options and, increasingly, tax-collection tools. So maybe all the local contention will lead to a productive resolution after all. “I just want to have New Orleans win on this,” Mr. Goodman says.

Written by Rob Walker of The New York Times

(Source: The New York Times)

7 Things You Need to Know About the Crisis in Greece

Copyright Trine Juel/Flickr
Copyright Trine Juel/Flickr

With Greece nearly certain to default on a 1.6-billion-euro bond payment due June 30, the long-feared prospect of Hellenic financial chaos is just about here.

The nation’s banks closed this weekend, and the government imposed controls of the movement of capital in and out of the country. A Greek referendum is set for Sunday, in which voters will decide whether to accept more austerity or face the prospect of being booted from Europe’s currency union.

1. How bad is the problem? 

Greece owes foreign creditors about 280 billion euros, including $242.8 billion to public or quasi-public entities, such as the International Monetary Fund, the European Commission and European Central Bank. It doesn’t have the cash to make the interest payment due this week, and the failure to make a deal to restructure and refinance the obligation raises the prospect of an imminent default. The two sides are talking about an 18-billion-euro package to refinance some of that debt.

Greece’s private creditors took a write-down of about 75 percent on debt owed to them in 2012, but the public entities have resisted a similar move.

2. Why have talks broken down? 

The so-called Troika of the IMF, ECB and EC are looking for a combination of spending cuts (the most politically sensitive of which are to pensions that function as the Greek equivalent of Social Security) and tax increases. Greece’s top tax rate of 42 percent already applies to annual incomes as low as 42,000 euros. In addition, the nation has a value-added tax of as high as 23 percent, and Social Security taxes are also much higher than in the U.S. The country is already having huge problems collecting taxes it is owed. Greek Prime Minister Alexis Tsipras, pointing to the nation’s 25.6 percent unemployment rate, argues that Greece can’t handle more austerity.

3. What did the government do this weekend?

Greece’s anti-austerity Syriza party called for an election, hoping voters would back its push to get creditors to back down. It also imposed so-called capital controls to halt the flight of money out of the country and closed banks for a week.

While most domestic transactions are little affected, there is a daily cash-withdrawal limit of 60 euros, and international transactions are subject to approval. Greek banks had been reporting a sharp decrease in deposit balances since at least April, cutting into the banks’ ability to meet their own international obligations. Europe has also been helping Greek banks with a program called Emergency Liquidity Assistance, but Goldman Sachs economist Huw Pill said Sunday that the assistance could end early this week as the rest of Europe tries to cap its total exposure to Greece.

“Although the Greek government has repeatedly stressed that this is not a referendum on Greece’s euro membership, we believe that in practice it is,” IHS Global Insight economist Diego Iscaro wrote Monday. “In the event of a ‘no’ win, Greece’s euro zone membership will be seriously jeopardized. The creditors are unlikely to change their position markedly, and it would be impossible for the Greek government to accept the current proposal after being defeated by popular vote.”

4. How will the mess affect the markets in Europe and the U.S.?

European markets traded sharply lower on Monday, and the Dow Jones Industrial Average opened nearly 1 percent lower in New York. But the effect may be short-lived: S&P Capital IQ published a 70-year historical analysis of past market shocks that found events like this produce an average decline of 2.4 percent on the next trading day, which has been recovered in an average of 14 trading days.

“Greece represents less than 2 percent of the EU’s GDP,” S&P strategist Sam Stovall wrote. “By itself, its default or exit won’t upend the EU. … Yet if this drachma drama triggers a market decline in excess of 10 percent, not seen since October 2011, it may be a blessing in disguise. As history has shown, prior market shocks have usually proven to be better opportunities to buy than bail, primarily because the events did not dramatically alter the course of global economic growth.”

5. What happens if Greece leaves the euro or is forced to leave the euro?

Estimates of how little Greek drachmas may be worth are all over the place, from 340 to the U.S. dollar to as little as 1,000 drachmas to the dollar. Even before Greece is (or isn’t) forced to leave the currency union, there is talk of the government meeting its obligations in so-called “parallel currency,” whose value is highly uncertain.

6. Has the IMF’s austerity program worked so far?

No. Austerity has been the rule in Greece since the first debt-restructuring program was approved in 2010. But Greece’s unemployment rate has nearly tripled since, and annual gross domestic product has dropped 100 billion euros, or almost 30 percent. Greece’s slashed spending and tax hikes brought the nation’s “primary deficit,” or deficit before debt-service payments, into surplus territory in 2010. But the program was the equivalent of slamming on the economy’s brakes: Output dropped so rapidly that the primary deficit is now again 2 percent of Greek gross domestic product even with tough controls on spending. That’s not much different than the U.S., but the U.S deficit as a percentage of output is declining because the U.S. economy Is growing.

7. What does this mean for Greek tourism?

Uncertainty overshadows Greek tourism. And the stakes of not interrupting tourism are high indeed: Tourism accounts for 18 percent of the nation’s economy and employs a quarter of its workers, according to the Association of Greek Tourism Enterprises. Greece attracts as many as 17 million annual visitors, twice the nation’s population, and is virtually the only industry still growing in a nation where an estimated 59 businesses are closing each day.

But already, tourists are reporting difficulty getting cash, because automated teller machines are running out, and the threat of capital controls had some merchants unwilling to accept credit cards. Over time, leaving the euro and devaluing the drachma would lead to a period where Greek vacations should be very cheap for Western tourists.

How long that would last, and the impact it would have on hotels and other merchants, is hard to forecast. But resort owners are resisting creditor proposals to end or curtail their tax breaks for resorts on more remote islands and to raise the value-added tax on lodging.

Written by Tim Mullaney of CNBC

(Source: CNBC)