 Aloha, oi nila. I'm Kaui Lucas. This is Hawaii is my mainland. Last Friday I was privileged to be able to attend a symposium on the sharing economy at UH Law School's The Law Review and one of the keynote speaker there was a the assistant professor of law at Whittier College, Erez Alani, and his keynote speech was really compelling. It speaks to something that I can't go a day in Honolulu without having come up in conversation and that is the pressure around housing and specifically with the sharing economy the effective Airbnb. So he is no longer in Hawaii unfortunately but he's joining us today via Skype from California. Welcome Professor Alani. Aloha, thank you so much for having me on your show. So it was great to have the the symposium on the subject here. We had some even the Supreme Court Justice Sabrina McKenna was there. It was very well attended and I learned a lot. I suppose you maybe didn't learn too much because you're with the keynote speaker but it is an important new topic in law and I'm grateful that you're so articulate and able to speak in a way that even those of us who are not attorneys can understand. So let's jump into this. Now Professor Alani, how big is this problem? What are we looking at? You know we are talking about a major major issue and let me just kind of explain where we are on this issue and that is we are talking about a very particular topic within this bigger topic of the on demand economy. We have a bigger issue as related to other subjects which we are not going to talk about much today as transportation and other services not only housing but particularly focusing on the housing issue. We are talking about something that is really big so just in order to get the numbers just a little bit of them. In 2015 Airbnb facilitated 155 million visits which is 22% more than Hinton Worldwide. We are talking about a company, Airbnb that is valued now at $30 billion. So that's how big of an issue we're dealing with but remember it's a tiny part of this issue of the on demand economy. Notice that I'm not using the term sharing economy as you did. No and I was very grateful. I mean right off the bat you gave an example which I'd like you to give which is a great way I've been able to use it in conversations this past week all over the place. Explain what the difference is why you don't like that term. It's not that I don't like I think it's completely inaccurate and I think it doesn't do service to really recognize what is at stake right. When I talk about sharing something I'm sharing something I'm sharing an apartment with my partner. When my mother comes we share a room with her right. So sharing has an altruistic motive, an altruistic underlying feeling but here we're talking about transactions. Transactions that are self-motivated for pursuit of money by the facilitator that is Airbnb by the consumer and by the provider. And when we use the term sharing we convey some kind of altruistic slash community motive that doesn't really exist but it's really helpful when we talk with legislature or with other people. To convince them yes it's sharing it's nice it's communal it's environmental. Yeah it's what it's what we all want deep down it's got that warm fuzzy thing built into it historically. But you gave that example of what's the difference between access and excess and I thought that was very helpful. So I think that one of the main thing that we need to understand and this is my opinion I think it's one of the underlying issues and one of the most important issues to understand is what we call the on-demand economy actually contains two different types of transactions. I think one of them is more positive and one of them has more negative externalities. One of them is when people use their underutilized goods right when I go abroad to Israel twice a year and I need someone who will take care of my cat I use Airbnb to find someone who will use the apartment while I go while I'm gone. I'm not operating a hotel. I'm using this debt capital in order to make some more money to help me pay the income and that someone will take care of the cat. But let's distinguish debt from many people who use Airbnb in other platforms in a completely different way and that is people who use it for operating a hotel like or bed and breakfast. I called this kind of distinction people who use their increased excess capacity that is using their underutilized goods right using same infrastructures that they already have versus those professionals players who either convert properties that are currently on the long-term rental and use them for the short-term rental or just buy more and more properties to operate hotels like. We call that the on-demand economy because they all use Airbnb but these are very different things I think. And you have some numbers that are helpful in illustrating that perhaps we okay. So we're looking right now at the multiple unit operators. Right. So what you see in this slide if I'm talking about the same slide as you do is a research was conducted by Penn State University and it shows you how much of the revenue of Airbnb comes from those who are full-time operator. That is people who have more than one unit or that have units that are more than 360 days a year offered for rent. Right. So those are who essentially do commercial use of Airbnb and look at the data it's overwhelming. There is 40% of Airbnb revenue in 14 cities arrived from people who have more two units or more. 40% okay it's not little. And you can see also the 26% of the people who have 300 who have their units for 360 days or more. People who rent their properties for 360 days or more essentially give Airbnb 26% of its revenue in 14 major cities. So you see that this distinction that I talk about exists. Do you happen to know if those 14 cities are in the United States or is that global? No. They just selected 14 major cities in order to understand. So it's Boston, Philadelphia etc. Okay so it's the United States. Exemining the data in these 14 cities showed them how many people are actually professional players full-time operators and that really generate a substantial amount of Airbnb revenue. So if Airbnb tells you now these are only private people working excess capacity or you know when they go on vacation you see that's not the entire story right? Right right definitely not. You want to see the situation in Hawaii? Yes. Because it's very interesting in Hawaii. So if we can see for a moment the slide in Hawaii we will see the same thing this distinction between those who operate full-time and those who operate just in excess capacity, just in increased excess capacity. So if you look at the slide shows is how many hosts, active hosts on Airbnb existed in Honolulu in February 2017 and what you see there is that there are a total of 1,519 active hosts. 1,000 of them indeed have one unit right? The same thing as I likely just people who use their own residency while they're away and try to capitalize on their dead capital. But then you see that there are 238 hosts with two units and look at the end right at the right side of this slide. There you already have 117 hosts that have five units or more. These are people who work professionally and just use Airbnb to operate unlicensed bread and breakfast. And although we're talking a lot about Airbnb we know that this is just one of the players. Like Monsanto gets all the headlines but we know there's a lot of chemical companies and Airbnb gets all the headlines but we know there's other companies. So just in Hawaii you just gave us an example. A third just with Airbnb are professional. That's pretty staggering. And you brought some other numbers into the play. When you sent me this I was really shocked when you see how Airbnb is promoting it residential property as investment property in the United States. The best places to buy Airbnb investment property. Now they're not talking about hotels. They're talking about homes. To be clear it's not Airbnb. It's a company. It's a different company. Airbnb, RDNA which shows you how common now this phenomenon is that there are websites that advise people where they should buy property and convert it to Airbnb to short term rentals. It's just a phenomenon that people now just live from the money of being professional hosts. But notice the very interesting thing. You will be most interested in that. So there is a slide. One thing that you need to understand that it's important for everybody to understand is why so many people have a strong incentive to take off long term rentals, to take them off from the regular long term market and convert them to short term market. And you'll see in a moment that in Hawaii particularly the incentive is so, so, so big. So if you see there is a slide with a graph that on one side it has the average, sorry, on one side you have the average monthly rent in a particular city. And on the other you have the average revenue that an Airbnb host can make. Do you have this slide now in front of you? I mean it has many cities in this slide. I mean it shows you which cities eventually are most profitable to convert long term rentals to short term rentals. You know, I'm not seeing that one actually. It is the one with the many, many cities, with the names of the many cities across. I'm sorry, Professor Aloni. Don't worry about it. So let me tell you what it is. Tell us what we need to know. Don't worry about it. It's easy to explain that. What's essentially I'm trying to say is the following. In Honolulu, Hawaii, the average rental cost of one bedroom in a long term rental is 1,300. But the average revenue for an Airbnb host, the average, is 2,800. 1,300 if your apartment is in the long term rental, 2,800. More than double if you are converting it to a short rental. If you are a superstar Airbnb host that is in the 19th then you will have more than 4,500 a month. Okay, the 90th percentile would be in the 90th percentile of what? Of our best hosts in the area. So you really know how to promote your property. You know how to get good reviews. You will be able to rent for more and more days. That will mean that your the average typically is 2,800. You will be able to make 4,500 a month. So an apartment on the long term rental is 1,300. And I think that explains it all. Really explains why. And notice one of the two in the entire U.S. Two of the cities that are really most profitable to convert short long term to short term are Honolulu. And California looks like. And the other Hawaii city that I remember you named in the moment. Yes, yes. So Professor Aloni we're going to break for a minute and then come back and talk more about this. Hi, I'm Jay Fidel. That's Ted Ralston. You know Ted is the host of Where the Road Leads. It shows every Friday from 4 to 5 p.m. It's about technology. It's about how people collaborating and solve problems with modern technology. It's where the road leads. We all know that. We should all be listening. Join us there 4 to 5 p.m. Every Friday. Now what about that you agree with? All of it. I knew we'd say that. Aloha. Say Aloha. Aloha. Good. Hello. My name is Crystal. Let me tell you my talk show. I'm all about health. It's healthy to talk about sex. It's healthy to talk about things that people don't talk about. It's healthy to discuss things that you think are unhealthy because you need to talk about it. So I welcome you to watch Quok Talk and engage in some provocative discussions on things that do relate to healthy issues and have a well balanced attitude in life. Join me. Welcome back to Hawaii is my mainland. Today I have via Skype Professor Erez Aloni from Whittier College in California who was recently in Honolulu for the Sharing Economy Symposium at UH's Richardson Law School. Thank you Professor Aloni. Oh, what happened to the light here? I'm sorry. There is some natural light at some point. Sorry. Okay, so we rolled up our sleeves and got into some numbers. Let's keep going. We, you have some other statistics here, not about Hawaii. So let's look at those for a minute about Vancouver and let's talk about some of the things that are being done in other places to sort of relieve the pressure. Sure. So look, what I just described in Hawaii and that is that there is an incentive to convert long term to long term to short term is really true everywhere or in many other cities in the US and that creates a problem and the problem is housing shortage. And we already see the way that Airbnb and other singular platforms contribute to the housing shortage in many other places. So what do we do about it? I think that currently there are in a very rough way three different categories of responses. One kind of response is what Berlin in Germany did and that is let's completely ban short term rentals, right? Let's just don't have short term rentals of entire units forever. Wow. And I'll tell you why. I think that there is a virtue when people do what I do, right? When I use it twice, twice a year, when I'm on vacation, when people use their excess capacity, right? When they increase their excess capacity, I think it's good for especially with places like Berlin, Hawaii and everywhere in which housing prices are skyrocketing, people can help them to pay the mortgage if they every once in a while do this kind of sublet. So I do not support a Berlin type of solution. But Vancouver, BC, however, has recently proposed something that I find very interesting and more balanced and that really distinguished between those who are just professional workers to those who work in excess capacity. So in order to know a little bit what's going on in Vancouver, it's interesting to know that Vancouver experience is a serious shortage in housing. House prices there has been skyrocketed. It has been ranked as the three least affordable city in the world in terms of housing, et cetera. That's significant. And of course, blaming Airbnb or short term rental is the wrong answer, right? There are many other factors that are relevant to why there are housing shortage. But if you look at Airbnb in Hawaii in Vancouver, you'll see the same thing that we see in Hawaii. And that is if you look at the slide in Vancouver there for just a moment, you'll see the same thing that we saw in Hawaii. And that is there are some people who just rent their apartment for a few days a year. Some people do it as you can see for more than nine months a year. So currently in Vancouver, all 97% of Airbnb are illegal in Vancouver at the moment because it's because it's illegal there to rent for less than 30 days. But the new suggestions to how to handle that the bill that is currently pending is to limit the ability to do short term rentals only to people who are principal residents. Well, that sure has my vote. So they're looking at that in Vancouver. Right. That is currently a bill that is pending. And it should be notice it should be very simple, right? It can be online application. You should get a license, you should apply for a license. But it's a very it's very quick. It's $40, I think going to cost it's inexpensive, very easy, recognizing that these are simple people who do, you know, who are just micro earners, right? At the same time, what you need to prove is that you're the principal resident, right? So and the assumption is that principal residents don't don't use their own home for hotel like operations. So that's the situation in Vancouver and what would be the result estimating that 1000 units will go back to the rental market in Vancouver. Vancouver rental market is horrendous and 1000 units that are currently used for condos for investments and etc. Back in the market would be very, very helpful. Well, thanks to you. I did some research. Well, I actually came into my inbox serendipitously yesterday on this the idea of those those empty units or how how how what is the volume that we're talking about for Honolulu? And we have a another slide on that housing inventory specific to to Hawaii and so total housing units. If you look down to units not available, long term vacancies vacant for seasonal use 11,000. Wow, that's on Hawaii Island. Even more than I mean, when you percentage wise way more than than Oahu, but that's still 10,000 units that would would make a huge difference here. This is a huge problem everywhere, but not everywhere in particular destinations like Hawaii, which are very favored on some for some population is having, you know, summer homes or investment homes. And so you need to do two things. I think, you know, I think that there are two things that you could do. There are two things that Vancouver is currently doing. One is make sure that these housing are not used for short term rentals. But other problem is just how to avoid this, you know, ghost towns, right, these places where you have all these vacancies that are essentially empty. What Vancouver did, which I think is extremely innovative. And perhaps in the US is unthinkable. And that is imposing 15% tax on foreigners. That is people who are not Canadian citizens or do not have lawful residency who buy properties in metro in Vancouver metro. So additional 15% tax. So think about those photos. If you're buying a home for $3 million, you'll pay additional $200,000. And you know what was the result? What result was a segment. Well, that came into that took effect in August 2016. We're talking about a very new thing. But the result is very, very clear that the prices are very clearly trending downward now in Vancouver for the first time in one of the hottest and craziest housing markets in the world. In fact, one statistic and I'm not going to, one statistic and take it with a grain of salt, but here is one statistic and that is as follows before this tax in 2016 foreign buyers accounted for 13% of the residential purchases in the region. Foreign buyers, I'm sorry, were 13%, 13% before the tax down to 1.2 or 1.3% after the tax of foreign capital by housing in Vancouver. Again, controversial, new, innovative, perhaps unthinkable in the US, but notice how these two supplement one another. One is handling this vacancy. What about the next county over? I don't know how the geography works in Canada, but okay, it's going to cost me $200,000 more if I buy a house in Vancouver. So what's next door? Is that sort of a thing happening? It's not a thing because Vancouver is very, very attractive city. There are very few places that are as Vancouver. It has a mild winter relatively. It is very, very, very friendly to foreigners of all kinds. You know how they treat their immigrants as there isn't immigration ban in Vancouver. Let me tell you, they actually called immigrants, they're a new Canadian, they have great schools and best air pollution, etc. No, we have little time, right? So maybe just let me tell you another approach, and that is in San Francisco. San Francisco took a relatively similar approach, but it's based on number of days. So there is a limitation on the number of days in which a tenant or owner can do short terms. So we are talking about owner or tenant cannot rent for more than 90 days a year. In addition, they need a license, and in addition, they need a few types of licenses. Okay, well, we are going to have to sign off here very quickly. Thank you. This is a dense subject, and you have given us a lot of ammunition for working on our problems here, and something tells me this won't be the last time you and I have a discussion about it. Thank you so much, Professor Aloni. Aloha.