Inside Airbnb's Plan to Partner With the Real Estate Industry

Posted on September 14, 2016

The new program will let landlords get in on home-sharing.
A common story: An apartment tenant has a few short trips coming up, and decides to list their abode on home-sharing service Airbnb to turns those few days away into a few extra bucks. Meanwhile, the tenant’s landlord has no idea when and how this is happening, and has real way to keep tabs on the short-term rental activity. Frustration abounds.

Airbnb likely hears stories like this all the time. So it’s not surprising that the company has been working on a new program to bring in owners and landlords of multifamily buildings into its home-sharing world. Dubbed the Airbnb Friendly Building Program, the new initiative unveiled on Tuesday will let building owners sign up to work with Airbnb and tenants on allowing home-sharing on their properties per with whatever rules they’re comfortable. And of course, they’ll be able to share in the revenue their tenants get through Airbnb.

Jaja Jackson, Airbnb’s director of global multifamily housing partnerships at Airbnb and who joined the San Francisco company in early 2015, is leading the effort.

The program works like this: Building owners—provided they operate in a jurisdiction where short-term rental laws are clear, meaning that there’s no ambiguity nor potential for a regulatory mess—apply for the program. Once accepted, the owner then decides the terms (which units, for how long, revenue division, etc.) under which tenants can rent out their homes and submits them to Airbnb as well as amends its tenants’ leases. Eligible tenants in that can then sign up for their building’s program through Airbnb, and become part of the regular reports the company sends to the landlord.

What’s more, Airbnb also handles paying out both the hosts and their landlords, as well as collecting and remitting taxes where applicable. According to Airbnb, building owners typical take between 5% and 15% of their tenants’ earnings through the program.

For Airbnb, finding a way to involve building owners and landlord is critical. While the company regularly touts stories from hosts whose extra income from renting out their homes has allowed them to afford their rent or a much deserved vacation, it’s no secret that landlords have not been the biggest fans of the practice. According to Airbnb, this animosity largely stems from their lack of control over the activity as tenants are ones usually listing and renting out the homes. Airbnb’s solution: Involving them in the process and giving them control along with a financial gain.

The company began piloting this program in April, and to date, somewhere between 1,100 and 1,500 units are either participating or scheduled to soon join, according to Airbnb. The company declined to reveal much details about the building owners it’s been working with, though it did say they’re in U.S. cities including San Jose, Calif., Philadelphia, and Nashville, Tenn., among others. They also widely vary in size and type, from small “mom and pop”-owned properties, to large companies that manage 50,000 units.

To balance providing transparency to the landlord about the tenants home-sharing activity and the hosts’s privacy, Airbnb tells Fortune exclusively that its reports will include financial transactions from hosts who haven’t agreed to be part of the building’s official home-sharing program, but will not disclose specifics about those hosts, including their names and exact apartment unit. This follows Airbnb’s long history of erring on the side of not sharing data, even with increasingly frustrated city officials who want to better enforce their laws.

One interesting aspect of the Airbnb Friendly Buildings program is the role of design. Last month, Airbnb unveiled Samara, a new division within that company led by co-founder Joe Gebbia focused on design and architecture. Its first project is Yoshino Cedar House, a home designed in collaboration with Japanese architect Go Hasegawa that will be rentable via Airbnb.

At least one member of this design team is working with the Airbnb Friendly Buildings program to help owners and developers implement home-sharing friendly elements.

“Airbnb sees (and articulates) that incorporating home sharing elements into the design process adds significant value to a product offering,” Kevin Choquette, a real estate developer in San Diego, Calif., wrote in a blog post last summer after attending a local industry luncheon featuring Jackson as a guest speaker. Some of these elements include smart locks with temporary passwords, movable walls, and extra storage for guests’ luggage.

One common criticism of Airbnb is that it enables landlords to turn their properties into hotels, taking precious housing units away from long-term tenants. In San Francisco, for example, Airbnb is often accused of exacerbating the city’s housing crisis. Cities like San Francisco have long attempted to convince Airbnb to fork over data about its hosts so they can enforce laws against those illegal hotels. Last year, Airbnb defeated a ballot measure that would have imposed stricter short-term rental rules, but it’s now suing the city over a recent regulation aimed at enforcing its existing laws.

For that reason, Airbnb is careful to make clear that it intends its building owner program to be for landlords with long-term tenants, and not for those who wish to operate short-term rental-only units. While some real estate developers could in theory set aside a few units solely for short-term renting, if their local laws allow it, Airbnb says that at least one prominent real estate development trust has told the company that is has no interest in getting into that business.

Airbnb is also restricting the program to market-rate units, at least for now. According to the company, it wants to be sensitive to the fact that some may view it as unfair if tenants in rent-controlled or otherwise subsidized housing start to profit from their housing. Airbnb says it’s still researching how it could extend the program to such buildings someday, but for now, it wants to keep it simple.

Airbnb’s ambition to partner with real estate developers and landlords is not surprising given its fight to get home-sharing as widely accepted and understood, especially in the political arena (the real estate industry can have quite a powerful voice). But it also fits nicely into the narrative of the so-called sharing economy, whose proponents believe that full-time ownership and use of things like homes and cars will be replaced with home-sharing and ride-sharing.