Like many things involving politics and regulation, things are never quite as simple as they seem. The City of Richmond’s proposed regulation of short term rentals such as Airbnb and VRBO is being described as an attempt to supposedly make short term rentals officially permissible. However, the proposed regulation would hamstring what Airbnb’s business model has become. Let me explain.

Airbnb Started as Home Sharing, But No More

Airbnb started out as a concept by which homeowners shared their primary residences part time with guests as an alternative to hotels. However, that is not what Airbnb is today. Roughly half of the rental volume on a dollar basis for Airbnb (and growing) comes from the commercial rental of homes that are not typically the owners’ primary residence. According to a hotel union lobby funded study which was highlighted by Politico, “half of all Airbnb rentals in New York City are conducted by 10 percent of hosts, who earned a full 48 percent of all the revenue earned in the city last year.” These commercially dedicated Airbnb hosts with multiple homes are often decorated and fitted out exclusively to be an Airbnb. These are not typically houses lived in by the owner. The City of Richmond’s proposed regulation would ban these dedicated/commercial Airbnbs, and therefore half of all rental activity for Airbnb and its largest growing segment.

If you think about it, the evolution of Airbnb makes sense. Guests of Airbnb want nice, dedicated homes that are professionally managed by a person or team who make the experience what everyone expects out of a hotel. These guests are not ok with a house that is filled with the kitschy decorations from your Aunt Susan, or personal belongings strewn about the house. Airbnb guests are looking for a near perfect hotel-like experience where they can take Instagram shots to share with friends. Similarly, homeowners really don’t want the risk of strangers (Airbnb guests) rummaging through their personal belongings if they had the choice.

Given the dynamics, Airbnb rentals from dedicated short term rentals dominate current airbnb activity. This is the direction the short term rental market is headed if government regulation didn’t intervene and skew what would otherwise happen naturally.

So Why Ban Dedicated/Commercial Airbnbs?

That’s a good question. I suspect the hotel lobby is pressuring the Richmond government just as it has in other cities across the country. There could also be folks looking to prevent Airbnbs from increasing rents in Richmond since furnished Airbnbs naturally command higher rental prices than an unfurnished apartment or house rented via an annual lease. The theory by the anti-gentrification crowd is that a house used as an Airbnb could otherwise be used as housing for permanent residents. There is probably some truth to that.

But on the flip side of the coin, the City of Richmond is becoming a nascent tourist destination. We have great restaurants, breweries, museums, and an incredible art scene especially for a city of Richmond’s size. Plus, there is that awesome James River running right through the middle of our gorgeous city that we are now showing off to the world thanks to the T-Pot Bridge. These tourists are increasingly looking for an authentic experience in a Richmond neighborhood via Airbnb, rather than a stay at a hotel. These Airbnb guests also bring large sums of dollars to the Richmond economy which is then taxed with meals tax, sales tax, etc, that go toward building schools, paving potholes, and the like.

Richmond Needs To Make a Choice

So we are faced with a decision. Do we want Richmond to continue to be part of the Airbnb tourism trend that is taking over the world and invite guests into our City with similar experiences that they can have in other Airbnb friendly cities? Or are we going to essentially ban what Airbnb has become and force travelers into hotels and part time home rentals that they clearly would not otherwise choose if a dedicated Airbnb was available?

The latter admittedly will have some anti-gentrification benefits. But it also smacks of the anti-change type of thinking Richmond was once known for. More recently, the city seemed to be trying to signal a more open minded and creative mentality with the adoption of the tourist friendly RVA moniker. I guess we haven’t totally made up our minds yet whether we are still Richmond or RVA when issues like Airbnb arise.

It begs the question though, why not just tax Airbnbs (including commercial/dedicated Airbnbs) similar to a hotel in order to level the playing field, let the market mature, and make some money for the city along the way? Whatever ends up happening, the outcome will have profound impacts on shaping Richmond’s tourism and hospitality industries. Richmond needs to be very careful to not snuff out an already existing industry and source of revenue for the city. This is not a decision to be made lightly.

*Data in Graphic from Airbnb