Airbnb and Cape Town’s rising rents: an interview with Chris Lehane

The company’s strategy boss says regulation is welcome. But why hasn’t government done so?

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Photo of City of Cape Town
GroudUp asked Airbnb’s Chris Lehane to answer for the perception that the company is driving up rents in Cape Town. Photo: Brent Meersman

Access to housing is under pressure in Cape Town. There is a shortage of at least 100,000 housing units, according to recent statistics. There is a perception that Airbnb is making the situation even worse for middle- and working-class residents to find affordable places to rent.

But Chris Lehane, head of Airbnb global strategy, says it is up to the city’s authorities to propose regulations to limit the online business’s negative impacts.

The online hospitality platform has seen massive growth since its beginnings in 2008 and has been criticised for reducing available rentals to residents in cities such as New Orleans, Amsterdam, Berlin and Los Angeles.

With 17,600 listings representing 17.6% of total Airbnb listings on the continent, Cape Town is also beginning to feel the pinch of what has been called the Airbnb effect – the view that there may be thousands of houses, rooms and apartments no longer available for rent to residents, as owners choose to rather make money through short-term lets on Airbnb than risk defaulting tenants.

Certainly, property prices in Cape Town, where over 40% of all South African Airbnb listings are situated, have grown phenomenally over the past five years, particularly in the city bowl, Atlantic seaboard, and southern suburbs where Airbnb listings are concentrated.

According to the FNB Property Barometer, a property on the Atlantic seaboard costs 143% more than it did five years ago, with city bowl property prices having risen by 114%. Prices in Cape Town’s near eastern suburbs of Woodstock and Salt River have increased by 93%, the southern suburbs by 85% and the southern peninsula by 73% over the last five years. Yet over the same period, property prices nationally have essentially remained flat. The result is that Cape Town has the lowest rate of first time house buyers in the country, at less than 7%, compared to the national average of 21%.

However, as much as residents might rage at the high price of property and rentals in areas such as Claremont, Observatory or Tamboerskloof and believe there would be greater supply (and thus lower prices) if landlords weren’t signing leases with residents rather than listing their properties on Airbnb, Lehane argues the San Francisco-based company cannot be held responsible for the city’s housing shortage.

As a former political consultant in the White House and spindoctor for US President Bill Clinton during the Monica Lewinsky scandal, Lehane knows how to deflect criticism.

Lehane was in Cape Town last week, where he met with mayor Patricia de Lille. They brokered an agreement to foster greater penetration of Airbnb into township homes, with a commitment to invest $1m (approx R13m) in community-led tourism projects in Africa over the next three years.

Lehane said Airbnb welcomed tailormade regulations that would limit any negative impact. He said regulations for Airbnb hosts had already been put in place in over 400 cities, and Cape Town merely had to say what regulations it required to suit the city’s specific needs.

“I totally believe in regulation,” said Lehane. “We think there should be new laws for new things. There absolutely needs to be laws that help protect and promote society’s greater interests.”

With Airbnb situated in over 65,000 cities around the world, there was no way the company could tell cities what regulation was required to prevent negative impacts on the city’s housing situation, and it would be arrogant to attempt to do so, he said.

But Lehane said Airbnb had proactively approached authorities in the 300 most popular cities. “We knock on the door and say we want to help you. Tell us what you’re looking to solve and we’ll work with you to solve it.”

One of the things Airbnb did, he said, was make its data available in order for cities to determine exactly what impacts the company was having. The company also encouraged the imposition of taxes on Airbnb transactions, such as those often imposed on the established hospitality industry.

What was required was for the city, or the country, to provide Airbnb the authority to collect a tax at the point of transaction on Airbnb’s platform between host and guest, and then remit it on a monthly basis. He said some cities chose to use the income to build social housing.

Other regulations such as a “one host one home” policy had been put in place, as well as caps on how many nights a host could rent out accommodation, so that they were not able to make more money off short-term letting than long-term leases.

There were already over 400 such regulatory agreements in place with cities around the world, and Airbnb “wants to do one here in Cape Town, or in South Africa”.

He said he’d seen a pattern emerge over the last 18 months, in which cities were generally “really comfortable” with people using the home they live in to earn extra income through Airbnb, either renting out a spare room or renting the entire home out while on vacation.

This helped people pay their rent or their bond or simply brought more money into the local economy, and “by and large there is a desire to encourage that”.

What was generally more problematic, was commercial activity where homeowners chose short-term letting via Airbnb over making their properties available for long term accommodation. In some countries, such as Japan where an ageing population meant there was now an oversupply of houses, there was a desire to increase commercial activity. But in other cities with a severe housing shortage, such as San Francisco, it was a matter of “really wanting to limit people to using only their own homes”.

Lehane said he believed the ability to earn extra income through Airbnb should not be limited to homeowners. Anyone renting a property should be able to list a spare room or even the entire house or apartment if they were going away for awhile.

“It’s an important principle for us: whether you own or not, you should be able to use the home you live in, which is typically your greatest expense, as an economic generator.”

This is partly the motivation behind the collaboration agreement signed with De Lille on 18 October, in which Airbnb pledged to provide township residents with support to list homeshares, as well as provide “Airbnb experiences” where tourists pay to participate in activities that see them interacting directly with the community or neighbourhood. These could range from jogging along Khayelitsha streets with a local runner, spending a day working in a community garden, or tasting local foods.

Hosts offering Airbnb experiences, however, may be in contravention of the Tourism Act if they are not registered as tour guides or not adhering to various requirements.

People letting out apartments on Airbnb for short-term rent are also in violation of municipal by-laws mayco member Brett Herron told GroundUp recently. And while De Lille stated the Airbnb agreement is part of the City’s commitment to creating an “enabling environment for inclusive economic growth and job creation”, her office has not answered questions posed by GroundUp as to how this squares with City and national legislation.

Nor has De Lille’s office answered questions, sent on Thursday, on whether the City was looking to develop regulatory measures with Airbnb to ensure housing availability was not negatively affected, and whether a tax on home-sharing was being considered.

This article was produced for GroundUp and the Daily Maverick by West Cape News.

TOPICS:  Housing

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