photo courtesy Open Grid Scheduler / Grid Engine on Flickr
Airbnb has long encouraged individual homeowners and renters to think of their space as a hotel, but a recent partnership with a Miami-based developer has begun to take the concept to a new level.
Last December, Airbnb announced a partnership with Newguard Development Group to launch a chain of residential complexes branded as “Niido Powered by Airbnb.” Niido buildings are designed to blend features of an apartment building and a hotel, and will facilitate home sharing to benefit guests, tenants and landlords. Niido tenants can rent out the apartments for up to 180 days per year; landlords receive a cut of the revenue; and guests have access to hotel-like amenities such as a concierge and cleaning services.
A little more than half a year on, Niido has taken over two existing apartment complexes
– one in Kissimmee, Florida and the other in Nashville, Tennessee. Airbnb has said it plans to invest up to $200 million in buying additional properties in Florida cities including Miami, Fort Lauderdale and Tampa.
This idea really isn’t very different from the “condo hotels” that are commonly used in beach and ski resorts. At those developments, which have been around for decades, someone buys a condo for personal use, but the developer or a management company (often affiliated) makes the unit available for short-term rentals by vacationers when the owner is not present. Many units provide lockable storage for some of the owner’s more valuable or personal items. Sometimes, though not always, the owner is contractually obliged to make the unit available for rent a certain minimum number of days per year. Typically the management firm gets a percentage of the rental, with the rest going to the unit owner.
While many condo hotels ran into trouble during the Great Recession, they have started to bounce back, especially in popular resort destinations. It used to be the case that visitors made reservations for these properties directly with the management company or through a real estate office. Now, many condo rentals are handled through Airbnb, VRBO or both; my family stayed at a Utah ski condo that we found through Airbnb last year.
Making these arrangements more professional should eventually turn down the temperature on many of the controversies that Airbnb has sparked. The company is reminiscent of Uber in its sometimes complicated relationship with the communities where it operates, but it has been much less confrontational in practice.
Bringing short-term rentals out of the gray market will encourage compliance with tax and safety laws, such as ensuring units have smoke detectors and other fire suppression devices. This is no small thing to many municipalities, which charge exorbitant hotel taxes to fund tourism development while reducing the burden on local residents (in other words, voters).
It also means greater housing affordability, contrary to those in cities like San Francisco and Los Angeles who claim Airbnb drives up prices for local residents. What these detractors really mean is it drives up rates for renters, who must compete with short-term travelers for a limited housing supply (usually limited by local regulation). But Airbnb makes more efficient space of the property that owners pay for, which encourages more developers to build more housing, some of which will inevitably find its way to the rental market.
Airbnb’s leaders have also made clear that they plan to focus Niido development in cities and neighborhoods where the cost of housing is already unusually high, in hopes of attracting tenants who would find a way to offset that cost appealing. Tenants will owe 25 percent of their profits to Niido, as well as city hotel taxes, cleaning expenses and the standard commission to Airbnb. This means their profits will be less than in a non-Niido building; however, like Airbnb’s Friendly Buildings program, Niido buildings are meant to be a way forward that does not involve hosts skirting state or city ordinances, or trying to keep unsympathetic landlords in the dark. In other words, it’s a more sustainable, better-regulated model.
That said, it is unfair for a renter who has leased in a conventional apartment building to find herself suddenly living in a condo hotel run by Airbnb. Residents in both the Nashville and Kissimmee buildings described feeling “blindsided” by the changes they will face. While tenants are not required to rent out their space, they cannot opt out of certain changes to their building. These include smartphone-based locks, lobbies and common spaces designed for guests and residents to share, and the requirement that tenants carry ID cards. Residents in Nashville, a city that has become an increasingly popular destination for bachelor and bachelorette parties, expressed worry over a Niido ad that claimed “At Niido, it’s spring break all year.” Tenants in both cities worried that their home will suddenly be full of loud, careless guests with no concern for the building.
Newguard, and any other developers that strike similar deals with Airbnb in the future, should recognize that their model represents a material change in the terms of an existing lease. It would make sense if the companies making these conversions compensated existing tenants in some way. Maybe offer them a couple of months of free rent, followed by an option for tenants to break the lease and move without penalty, or even to bill the developer for moving costs. A free rent period would let people try out the new arrangement, and many of them may discover that it isn’t as bad as they imagine.
Of course, living in a condo hotel means losing a sense of community in a building. For many people, that’s a real loss; for others, who might be the sort who can live next door to someone for years without saying more than hello, the change may make no difference. And Niido does seem to recognize that a higher number of strangers passing through the building could worry tenants; in Nashville, in addition to the concierge staff for guests, the building will employ a round-the-clock security guard.
In a way, Airbnb has taken us back to an earlier time when people made the most of their property by renting it out, either by the room or by the day or week, to help cover expenses. The homeowners who offer rentals on Airbnb – especially those who stay in the apartment or home while a guest is present – are the modern-day version of a widow who took in a boarder to help pay the mortgage. It’s an old solution to the affordable housing problem that never seems to go away.