The Airbnb gold rush is on
Whole buildings, like this one in Chinatown, are being converted into hotels
Photographs by Ken Richardson
AIRBNB, LIKE THE draw of ride-hailing apps to car owners, started with the premise that your home can make you a little extra money by renting out rooms to travelers looking to save a few dollars. Empty-nesters, they said, could rent out junior’s bedroom now that he’s moved out and put a couple extra bucks into the retirement account or help pay down the mortgage. Young professionals who want to travel could find a cheap place in another country and rent out their home to a similar globetrotter through the app in a win-win situation.
SIDEBAR: EVERYONE KNOWS ANTHONY IN THE NORTH END — JUST NOT THIS ONE
That quaint notion, though, has gone awry as big investors have muscled their way into the market, buying up individual units and even entire buildings in all of Boston’s neighborhoods and using Airbnb as a booking agent to create ersatz hotels in the middle of residential streets. The rentals each bring in hundreds of dollars a night to the “hosts,” while taking long-term housing off the rolls and in some cases pushing existing tenants out into an ever-tightening market for affordable housing.
City officials agree the growing shift is putting pressure on the housing stock, though they estimate the number of units lost so far at about 1,500 to 2,000. Airbnb insists only about 300 units listed on its website have been removed from the housing stock, but an examination of the listings suggest the company is grossly underestimating the number.
All of this real estate churn is occurring right under the noses of city and state officials who have been slow to respond even though Airbnb has practically begged lawmakers to regulate the industry and start collecting taxes on the rentals. It’s another case where technology—as well as the entrepreneurs who seek to make a buck off of it—is moving much faster than lawmakers on Beacon Hill and policymakers at Boston City Hall.
Larry Post, a retired financial services executive, is one of those entrepreneurs. He owns 80 apartments and condominiums in Boston, many in the Back Bay, where he lives, and some in the North End and on the waterfront. About 20 of the units are listed on Airbnb, including at least three he purchased in the last year specifically to rent out on the site. He says he has never kicked out a tenant to pave the way for a short-term rental on Airbnb.
“Most of these Airbnbs, I own the whole building,” says Post, whose son and five other people run the short-term rental part of his business.
Post says his short-term rental business is not affecting the city’s supply of housing. He insists the units he is renting on Airbnb could not be easily leased to tenants because of their location at ground level or in basements. He also disputes the argument that Boston is struggling with a shrinking housing market, citing data from the real estate industry indicating there is a 16 percent vacancy rate in the Back Bay rental market and claiming the city overall mirrors that trend. With hotel occupancy at its peak, says Post, he and others are accommodating those who want to come to Boston and spend their money.
“These bring huge incremental revenue to the city,” he says of his short-term rentals. “Call a realtor in the Back Bay and North End. If there was zero supply on MLS [Multiple Listings Service], then rents would go higher. Rents are actually coming down.”
Several studies earlier this year indicate rents in Boston are dropping ever so slightly, though the city remains in the top five most expensive rental markets in the country. While MLS did show in mid-November about 16 percent of Back Bay’s 1,100 units available for rent, a 2017 third-quarter report by the Department of Housing and Urban Development labeled the Boston rental market “tight,” pegging the citywide vacancy rate at 2.7 percent, down slightly from the same period in 2016 when it was 2.9 percent.
The Airbnb website currently has about 5,000 listings in Boston, at an average price of $173 a night. Critics say the rentals are making neighborhoods a mecca for luggage-wheeling visitors who bring little more than a sense of impermanence to once-tight knit communities.
“These guys more and more are functioning like a hotel without being permitted as one,” says Giordano. “On the other hand, the city isn’t getting any revenue out of them like they do in other hotels.”
The four-story apartment building with the friendly city park and playground next to it in Boston’s Chinatown neighborhood is indistinguishable from most of the others along narrow Tyler Street save for one thing—it is essentially a hotel.
The building at 106 Tyler Street was once home to a dozen families, mostly immigrants with limited English skills, according to Karen Chen, executive director of the Chinese Progressive Association, a neighborhood advocacy group. The tenants either moved out or were forced out over the last year, she says, to make way for Airbnb renters. The owner of the building is listed as Tyler Realty LLC of Weston, according to Suffolk County Registry of Deeds records. On the Airbnb site, a woman named Haiying Ji is identified as the host of the units in the building. Ji did not return a call for comment.
Chen ticked off six buildings in about a three-block radius around Tufts Medical Center and near the Theater District that she says her group has identified as fully converted to Airbnb listings. She says her association is not able to block the conversions so it has focused on winning more time before the tenants have to move out to make way for short-term renters.
“We noticed it probably about a year-and-a-half, two years ago,” says Chen. “The problem was not as severe then, but now we have seen whole buildings being purchased and turned into Airbnb.”
According to the Airbnb site, there were 12 units available for short-term rental in the Tyler Street building just before Christmas, with prices ranging from $91 a night for a one-bedroom to $216 a night for a three-bedroom, two-bath unit that sleeps up to 10 people.
The full price, factoring in cleaning fees, is higher. For the one-bedroom, the building owner then adds on an $80 cleaning fee and Airbnb charges a $23 service fee for a total of $194 for one person for one night. For the three-bedroom, the cost is $239 for four people for one night, plus a $140 cleaning fee and the Airbnb service fee of $50 for a total of $429. That’s still lower than most hotel rooms in the city, but not the super-bargain the list price would indicate.
Interviews with residents, advocates, state and city officials, and even Airbnb representatives indicate the conversions are not limited to Chinatown. They are happening in the North End, Bay Village, and the Fenway. Triple-deckers in Dorchester, Roxbury, and Mattapan are increasingly being rented short-term out to visitors rather than long-term to families. Students are getting squeezed out of Allston, Brighton, and Mission Hill.
Airbnb’s footprint is growing quickly in the North End. One of the telltale signs of a short-term rental is the sprouting of keypads in doorways and lock boxes attached to entrances, fence grates, and posts where owners store keys for renters to gain access. Walk down any street off Hanover, Commercial, or Salem streets in the neighborhood and you’ll run out of fingers and toes counting the devices.
Another indicator is the number of people dragging luggage along the streets while looking at their phones for directions. Another is the seven-day a week presence of trash bags at the curb in a neighborhood that has pick-ups twice a week.
“The systemic issue is that it’s removing rental properties from stable residents,” says Mary McGee, president of the North End Waterfront Residents Association. “It is just bringing more transients into the neighborhood. They don’t put their garbage out on garbage day. They put their garbage out whenever they leave. They are coming and going at all hours.”
There’s nothing to prevent owners or buyers from converting their property into Hotel Airbnb because of the lack of regulations but even officials with the technology company want to change that. Will Burns, director of policy for Airbnb, says the company has been working with state and city officials to cap the number of commercial listings and reduce the number of buildings being changed wholesale into short-term rentals.
“We want to work with the city to help them regulate that, how many short-term rentals you can have in the city,” says Burns, a Chicago native whose mother is an Airbnb “superhost.” “There should be limits. I’m saying it’s not right for someone to convert an entire apartment building.”
THE HOSTS WITH THE MOST
Larry Post travels a lot so he appreciates all that a first-class hotel offers. “I have never, ever stayed in an Airbnb,” says the 65-year-old Back Bay resident. “I am not an Airbnb person. It brings in the opposite kind of person than me.”
But Post was successful in financial services because he also knows a good investment venture when he sees one. Post says his Airbnb rentals have directly created jobs for his son, who runs the short-term rental part of the business, and five other people. He says the people who stay in his units, in turn, spend a lot of money in the city.
Though Airbnb officials insist the small homeowner or apartment dweller with a room available is their average purveyor, a breakdown of the site’s data shows more than 62 percent of the available listings in Boston are entire units or homes. Private rooms make up about 37 percent of the listings while shared rooms account for a little more than 1 percent.
Airbnb officials – who claim there are only 300 Boston units on its site that are fully removed from the city’s housing stock—define any unit rented out for more than 117 days a year as a commercial venture. According to a review of data, however, more than 2,500 of the 4,870 Boston listings in December were available more than 117 days a year, with more than half of those available for 300 days or more.
According to data on the website InsideAirbnb.com, acknowledged by many to be an accurate repository of information on the app, nearly 56 percent of Boston listings on the site come from people or companies with multiple listings, indicating they are renting either several rooms in their house or other units they own.
The number of Post’s Airbnb listings, all made under his son’s name and picture, puts him in the top 20 in Boston, but only number 17 on the list. The top lister in Boston goes by the name of “Kara” and has at least 181 units available on Airbnb. Attempts to contact Kara and others in the top 10 were futile as communication is limited to the Airbnb site and the app appears to automatically remove phone numbers when they are included in an inquiry, and responses appear to be automated with no further way to contact the hosts.
Many of the commercial Airbnb listings double as corporate short-stay units, which are regulated under a city ordinance overseeing what is termed “executive suites.” The units are restricted as to where they can be located and how long—or short—someone can stay in them. But listing them on Airbnb allows the corporate owners to bypass those regulations as well as fill them up for extra money while they’re not being leased conventionally.
Until a reservation is made on its site, Airbnb will not give the exact location of a unit, instead identifying the region it’s in with a shaded circle roughly a quarter-mile in diameter. Company officials say this is for security reasons, but shielding the exact location of units frustrates neighborhood residents and officials concerned about the proliferation of Airbnb units.
“We’re trying to create a transparent process,” says state Rep. Aaron Michlewitz of the North End. “Right now, you have no concrete evidence your neighbor has an Airbnb. There’s privacy issues that we’re trying to balance but it’s important to create a transparent process. We want people to know who’s renting these out.”
It’s a business for him, Post says, no less deserving or onerous than any of the other businesses in a neighborhood and one that is not illegal—or evil—despite what opponents say.
“If I go back to short-term furnished rentals, six people lose their jobs,” says Post. “I don’t think it does anything to the character of the neighborhood. I think we have a huge benefit for the city. The [neighborhood] meetings I’ve been on, you’d think you’re opening up a nuclear waste site next door.”
But Michlewitz says there is a discernible change in his old neighborhood and others when long-term tenants are shut out of the market.
“I think it does change the fabric of the neighborhood in that you have a full-time resident who wants to be invested in the community if they live there long-term,” says Michlewitz, who has been trying to pass regulations on the short-term rental industry for three years. “If you had a neighborhood full completely of short term rentals, I don’t think that’s a neighborhood, that’s a tourist industry.”
CHECKING IN ON REGULATIONS
As with the emergence of Uber and the transportation network industry, city and state officials appear to have been caught off guard by the proliferation of short-term rentals. “The technology moves at a quicker pace than the legislative process,” says Michlewitz. “We’re trying to keep up with that. It’s like having to put the cat back in the bag with Uber. We’re trying to accomplish the same goals with this piece as well,” he says of Airbnb.
Both the city and state have been inexplicably slow in responding to the unfettered growth of the industry. In fact, the city put a freeze on any ordinances and inspections that would hinder the short-term rental market despite some officials’ concerns over the impact of removing units from the long-term housing inventory.
In June of 2014, as short-term rentals began to sprout up around the city, William “Buddy” Christopher, commissioner of Boston Inspectional Services, issued a memo instructing his workers to give short-term rentals a pass on applicable city ordinances.
“The city is currently examining how these services fit within our existing zoning and permitting definitions and whether new or amended regulations are warranted to address these specific arrangements,” Christopher wrote. “During this interim period so long as there are no other code violations observed and the premise remains owner-occupied, it is the initial recommendation that inspectors stay the issuance or enforcement of violations based solely on the failure of a homeowner using these services to change the dwelling’s occupancy to include bed and breakfast use.”
More than three-and-a-half years later, that memo still stands as the city’s governing policy and it doesn’t appear officials are enforcing the “owner-occupied” standard of allowable use, opening the door to commercial ventures with multiple listings.
Christopher English, policy analyst and special projects manager for Boston Mayor Marty Walsh, says the administration expects to have regulations issued early this year, in late January or early February. He acknowledges the city’s delay in drafting regulations has created a growing problem and concedes that without regulations, whole building conversion cannot be stopped.
“We have been taking a bit of time in our approach at the risk of allowing this proliferation of short-term rentals across the city,” he says. “We need to put something on paper to really be able to target that. If it’s purchased, there are still private property rights people have so until we put something into place, we do face some challenges there.”
Among the expected city regulations will be a three-tier registration approach. The lowest tier, with the least oversight, will be those homeowners who were the foundation of Airbnb, the ones with a room in the back of the house or the basement, followed by tighter restrictions on people who rent out their entire apartment or house while they vacate it. That level will have some restrictions as to how many days out of the year it can be offered for short-term rental. The most clamps will be placed on units rented out commercially, with restrictions likely being placed on how many that one entity or individual can offer as well as restrictions on how many units in a building can be used for short-term rental before it is classified a hotel.
Few people want the short-term regulations to go hard at those who have a spare bed or room to offer to transients, a longtime fixture in the Boston housing scene.
“We have a dearth of rooming houses now,” says Ford Cavallari, chairman of the Alliance of Downtown Civic Organizations, the umbrella group for many of the neighborhood organizations. “There used to be rooming houses all over the place and for a variety of reasons the whole market is sort of dried up. We think it has a totally different dynamic to it. It has different people renting. It really does help people make the rent. In fact, our associations are unified in believing that in renting out your room, there’s no problem there, you don’t even have to touch that.”
English says the rules the city eventually issues will take into consideration the economic boost that Airbnb provides.
“The number of units we see is a testament that people want to come and visit Boston and want to stay,” says English. “We’re cognizant of that. Anybody that’s coming to stay in the city is likely to spend money here. It’s generating economic benefit to the city and the region.”
Officials at the state level are also eyeing the economic benefit more than the perceived social ills in shaping policy and regulations. Michlewitz has filed several versions of his bill over the last three years, though they’ve never gotten out of the Legislature’s Joint Committee on Financial Services, despite the fact he is the House chair.
Michlewitz’s current measure mandates safety and health inspections before allowing a short-term rental. In addition, the bill would levy a tax of 4 percent to 8 percent depending on whether it’s an owner-occupied unit, leased by a professional management company, or operated by a commercial venture. The rest of the measure leaves regulations largely to communities, allowing them also to adopt a local option tax of 6 percent, with Boston allowed to set a 6.5 percent tax. The bill requires communities to use half the revenue they collect from commercial hosts toward low- and moderate-income housing programs.
One of the things the delay in drafting regulations has done is convince people like Michlewitz and Walsh that there’s a place for Airbnb in the city’s landscape.
“There’s a lot more nuances, more than meets the eye,” says Michlewitz. “I was of the initial impression Airbnb is awful, let’s get rid of it, it’s destroying my neighborhoods. There are some positives, it’s not all negatives.”Neighborhood advocates say that may be the case, but allowing the listings to grow without reasonable oversight is harming densely populated neighborhoods as well as putting the visiting public at risk.
“They just left this non-enforcement policy in place and that’s why Boston is in the shape that we’re in,” says Cavallari, who noted the Coconut Grove fire 75th anniversary in December spotlighted the issues of allowing unchecked commercial operations. “What we’re saying is, if it’s a public accommodation, we’ve got to take seriously the safety of public accommodations. There should be inspections at the same frequency levels as hotels. Otherwise, we’re going to have one of those accidents and that’s the last thing we should allow to happen. If we know we can prevent that, we should be doing just that.”