When the Invisible Hand Fumbles: The AIRBnB Phenomenon


It’s pretty common knowledge that we have a housing crisis on Cortes. In fact, there’s a “housing crisis” in many — perhaps most — popular or attractive places in North America and Europe right now. One of the factors often mentioned is AirBnB. This phenomenon (AirBnB now has global impact and qualifies as a Phenomenon!) vividly illustrates the predicament of “good for one is not necessarily good for all” — also sometimes known as “smart for one, dumb for all”.

A classic case of negative returns: the urban car

A more familiar example of this predicament might be the private automobile. The automobile is a highly desirable technology: it offers a combination of freedom, comfort and convenience that any human would find hard to resist. It can travel faster than a horse-drawn carriage and is (these days) simpler to operate. It keeps us dry and warm while in transit, and we can come and go as we please without having to check train or bus schedules. It’s hardly surprising that once the price point fell sufficiently (hat tip to Mr Ford), everyone wanted one.

But… as with most magic-carpet stories, there’s a catch. If enough people within a limited area (like a city!) all want and obtain private automobiles, the utility of those automobiles (and the amenity of the city as a whole) starts to degrade. There are diminishing returns, and finally negative returns, as their popularity (and our investment in them) increases. In the 70’s it was estimated that the time to transit any major US city by car had fallen back to something just below horse and buggy speed; this was due to “traffic congestion,” or more plainly put, too many cars. The car had been so successful that it was undermining its own utility.

Cyclists and pedestrians suffered from poor air quality, noise, and displacement from public streets, not to mention increased risk of injury. Car drivers suffered from painfully slow and irritating trips through the congested area. So, willy-nilly, did passengers on public buses. Moreover, in sprawling cities such as Los Angeles (arguably the most car-centred city in N America), space that could have housed people or businesses was instead dedicated to parking lots, thus intensifying the sprawl… which then obliged people to drive even further… and so on. The magic carpet turned into a kind of finger trap.

What was clearly smart for one turned out to be dumb for all.

From this example and others, it’s pretty well understood now that there are some benefits, amenities, or strategies that just don’t scale well. A case can be made today that AirBnB falls into that category: if a high enough percentage of people in a given area start participating in it (as hosts) there are baked-in negative impacts on the community as whole.

AirBnB: undeniably smart for one

First, let’s consider the smart for one aspect. AirBnB has undeniable appeal. What’s not to like? In exchange for a relatively modest cut of the transaction value, AirBnB provides an online bookings database and rating service, maps, etc. It provides a moderate but somewhat reassuring level of identity verification, and acts as a payment gateway so that guests need not hand over their credit card information to hosts. It makes BnB operation easier and more convenient than ever before.

There are further incentives to participate. Visitors are willing to pay much higher daily or weekly rates for lodging than long-term local renters; an AirBnB host might make as much renting out a room or cabin for just two weekends a month, as a local renter would pay for a whole month’s occupancy. Also, these short term BnB guests are not covered by the terms of the Landlords and Tenants Act; the Act, written to protect tenants against predatory landlords or arbitrary eviction, now makes it quite difficult to oust a nonpaying or misbehaving tenant.

Every property owner, I suspect, has heard at least one story from a personal friend or family member about a nightmare tenant situation that turned into an extended, stressful drama (sometimes involving lawyers). So, for the homeowner with a spare room or a small cabin on the property, AirBnB sounds like a very appealing alternative to “ordinary” renting. It sounds “too good to be true” — high daily/weekly rates, and very low stress and risk. BnB tenants are transient and have no rights; if you get a bad one, at least they will be gone soon and you can give them a bad rating on the reputation server. Again, what’s not to like? It all makes perfect sense.

It also seems attractive if we’re trying to relocalise economies and empower more people to generate income using their own resources, to be self employed, etc. Increasing incomes without long commutes–capturing tourist dollars for local prosperity–sounds like a classic case of community economic development!

And now for the catch…

However, if enough people in a community make the perfectly smart and sensible decision to use AirBnB as a way to make some income from inhabitable space(s) on their property, eventually we start to see “externalised costs” to the community at large. Spaces that once would have been available as residential rentals, suddenly become unavailable — at least during the tourist season, and possibly year-round: landlords can make enough money in the season to leave the space vacant during the quiet months. People who can’t afford to own homes now find it harder and harder to rent a living space; if they do find off-season housing, they may well be evicted at the start of each new tourist season.

This kind of seasonal housing economy is particularly difficult for young families, who can’t as easily “just camp out” or live in a van as a young single person might do. There’s a more general demographic effect, too. The community inexorably tilts more and more towards exclusivity: property owners and relatively affluent tourists can afford to live there, but non-property-owning workers cannot.

But the immediate impact on local renters and community demographics is not the only gotcha. The local economy (which at first glance seems like it should benefit) also experiences some negative externalities. As it gets harder to find affordable rentals (i.e. rentals that can be afforded on entry level and service wages) employers now start to have trouble finding workers for the summer, because there’s nowhere for those workers to live.

This labour shortage makes it harder to run the same local businesses that serve and depend on the tourists who are staying in the AirBnBs. The growth in tourism which in theory should benefit those businesses, is simultaneously undermining their labour force. And since the amenities provided by those businesses are a large part of the appeal of the destination, a threat to those businesses — in the end — is a threat to the AirBnB activity as well.

There are other externalised costs and unforeseen outcomes. If enough people start AirBnB’ing, their combined accommodation starts to add up to the equivalent of a mid-size hotel. I’ve heard it said that there are over 50 BnB accommodations on Cortes Island. If someone wanted to build a new 50-unit hotel on the island, there would be hearings, zoning considerations, traffic studies, public process, and (probably) considerable resistance. The impact on local roads and ferries would be discussed.

But when the 50-unit hotel materialises slowly, one perfectly sensible decision at a time, there’s no public process and the impacts ramp up slowly into a fait accompli. I want to emphasise here that no one intends any harm. Everyone is just doing what makes sense. There are no bad guys here. And yet the long-term impacts are substantial.

Predicaments vs problems

Communities around the word are now struggling to come to terms with mass tourism and the AirBnB phenomenon. Cortes Island is far from alone in experiencing this predicament.

I choose the word “predicament” here, because there’s a big difference between a predicament and a problem. A problem is what happens when something goes wrong with a working system — something is not working as it’s supposed to — and the thing that has gone wrong can be fixed within the parameters of the system. A predicament is a negative situation that’s fully implicit in the system itself; it’s a result of the system working exactly as intended, not malfunctioning in any way.

The AirBnB situation and its negative impacts are fully implicit in interlocking systems: the money economy, the cultivation of tourism as an industry, and the rise of Ebay-like technologies which, inevitably, someone was going to apply to BnB management and promotion. The negative impacts are not the result of anything “not working” — they are the result of systems working exactly as they are supposed to. They are the result of success, not failure.

Again I emphasize that no one is setting out to do any harm. But decisions that are smart for one sometimes turn out to be dumb for all — taken too enthusiastically and too far, they can threaten the quality of life (and the economic basis) of the community. This is when the core tools of governance become useful: public process, planning, and regulation.

The only way out of a predicament is to re-tune or redefine the system to generate different outcomes. No one wanted the outcome “the ferries are so crowded that I can’t get to Campbell River and back in one day.” No one wanted the outcome “young families have to spend the summer season living in tents,” or “I can’t find enough staff to operate my tourism-related business.” And yet those outcomes were baked into the unplanned growth of AirBnB (just one example of the negative returns of excessive tourism generally).

As we think about community politics, planning, zoning, and similar issues in future, one question to bear in mind at all times is “what outcomes do we want, and what outcomes do we want to avoid? how can we obtain outcomes we want, without painting ourselves into corners we may regret later?”

Asking the tough question: how to be smart for all?

Challenging questions such as these are being asked on the Cortes Island Facebook groups and in our local press, as our housing crunch gets more painful. Island organisations are grappling with the paradoxical externalities of success — groups such as CCEDA (the successor organisation to CIBATA*) and the Cortes Community Housing initiative with its ambitious Rainbow Ridge project aimed at providing affordable housing.

So this seems like a good moment to consider those big questions: what outcomes do we want as a community, what kind of community do we want to be? Can we find economic development opportunities that build towards those outcomes? How can we recognise and avoid apparent opportunities that over time, actually undermine those outcomes?

Since predictive power is never perfect, we can never be 100% sure about the consequences of today’s choices; but by looking forward consciously and learning from our present predicaments, we may at least mitigate the downstream costs of our successes. With honest dialogue and democratic process, we can hope to become smarter for all.

[Title Photo by Jacek Dylag on Unsplash]

(*) – CIBATA’s eponymous emphasis on Tourism (Business And Tourism Association) led to a marked increase in Cortes Island tourism; according to the organisation’s mission and goals, this counts as a success. Yet many locals now feel that “we’ve gone a bit too far” in developing tourism, as the diminishing (or negative) returns and externalised costs have become more obvious. This is why the organisation changed its name and focus.

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