The Financial Struggle is Real for AirBnB Homeowners
If you are a homeowner who utilizes Airbnb to rent your property, chances are you were getting pretty excited about profit opportunities back in January. That’s because at the beginning of 2020, Airbnb — an online marketplace that helps homeowners, also called hosts, to rent their lodgings — was gearing up to go public and offer shares of the company to be traded on the public exchange.
Airbnb was working to reclassify homeowner hosts as a new type of corporate employee so that they too would benefit from the company’s public offering (gig-workers are typically excluded from benefits of the publicly held companies they work with). But COVID-19, and the resulting travel bans and stay in place orders, changed the trajectory of Airbnb’s growth, and the hosts are being hit hard.
Worried that many travelers would keep their reservations in order to avoid cancellation fees, Airbnb began offering refunds hoping it would keep people home and reduce the spread of COVID-19. To address this concern, on March 13th Airbnb updated its “extenuating circumstances” policy to ensure all guests were refunded for their reservations booked before March 14th, with check in dates between March 14th and April 1st. This move allowed Airbnb to permit cancellations, overriding the host’s personal cancellation policies, and resulted in the hosts taking the financial hit.
Understandably, many hosts were upset by the move. According to a recent study conducted by Airbnb, “53% of responding hosts said short-term rental income helped them stay in their homes and 49% said they host on Airbnb to make ends meet.”
Richard White, an Airbnb host in Carolina Beach who saw many of his bookings disappear when the city council announced a ban on short term rentals said, “Right now, none of us knows what the future holds. There’s a misconception that Airbnb hosts are these big businesses. But we’re just regular people trying to make a living.”
After receiving a fair bit of backlash from Airbnb hosts and the press, on March 30th Airbnb announced a $250 million relief fund to help accommodation hosts. This fund will provide support payments for reservations booked on or before March 14th, with a check-in date between March 14th and June15th (recently extended from the original end date of May 31st), that were canceled by the guest for COVID-19 related reasons. As a host, if you have qualifying cancelled reservations you’ll receive:
- 25% of what you would’ve received for a guest cancellation based on your cancellation policy. For example, if you would normally receive $400 USD through your cancellation policy, you’ll receive 25% of that—or $100 USD.
- Monthly payments for all eligible guest cancellations.
- Retroactive payments, for any cancellations you may have had since March 14th.
But for many hosts, it’s too little too late. “It makes for a nice press release but it does nothing to alleviate hosts’ dire financial straits,” one host told The Real Deal. “I know many hosts that have already sold or listed their units for rent.”
Airbnb has also created a $17 million Superhost Relief Fund, offering grants of up to $5,000 for Superhosts giving priority to those “who’ve been with Airbnb the longest and who’ve suffered the greatest decline in earnings compared to last year.” All invitations for relief are scheduled to be sent by May15th and chosen Superhosts should receive their funds within three business days of qualifying.
In a letter to Congress sent in the beginning of March, Airbnb asked for legislation to provide tax credit for money made as Airbnb hosts, defer taxes on their short-term rental income, and make Airbnb property owners eligible for the loans being provided through the Small Business Administration for coronavirus relief.
Airbnb is pushing for these terms in order to help stabilize the economy and support the travel industry which has taken a hit due to COVID-19. And while the legislation aims to help the hosts directly, it will no doubt help Airbnb as well who has seen bookings drop by 96% in some places.
“Under current law, people who rent out a room in their house or other property for 14 or fewer days don’t have to report the income from those transactions to the federal government or pay taxes on it,” according to Business Insider. “Airbnb asked Congress to bump that limit up to 60 days.”
At the end of March, this legislation passed providing hosts with grants to cover operating costs, loans, unemployment assistance, tax relief, and other opportunities to increase access to capital.
Hosts who haven’t been forced to sell their rental properties are finding new and creative ways to fill the vacancies.
Hosts who own upscale or isolated properties are finding renters by offering self-quarantine getaways. By highlighting the property’s no contact perks and cleanliness, and oftentimes tacking on a healthy discount, hosts across the country are finding renters to fill their homes and help offset some of their lost income. In early April, Airbnb updated its policies for listing titles and property descriptions, advising hosts to refrain from using COVID-19 and related terms to drive sales.
Moving from Short Term to Long Term Rentals
With many cities placing restrictions on short term property rentals Airbnb hosts are marketing their properties as long term bookings: Airbnb is claiming 80% of hosts are now accepting longer term stays. Hosts are offering discounts to encourage longer bookings.
Hosting Frontline Workers
Hosts are using Airbnb’s Frontline Stays program to link up their available rental units with essential workers in need of a place to stay. Some frontline workers are worried about infecting their families after returning home from work on the frontlines. Nurses, doctors, and other essential employees are in need of places close to work to self-quarantine and Airbnb hosts are stepping up to meet their needs.
For homeowners who depend on income generated by rental income to make ends meet, the struggle will continue until COVID-19 is resolved. In order to hang on to Airbnb rental property income, owners will need to find their own creative solutions in addition to the assistance Airbnb provides.