Where have all the apartments gone? On Aquidneck Island, and particularly Newport, the listing of an affordable, livable, two-bedroom home now draws a frenzy of interest.
Ali Sanfilippo learned this over the past six months, as she sought in vain to find a new home for her and her boyfriend, their cat and a 20-pound pug.
“I have two Realtors looking for me now,” she said. “I have a Craigslist tab open, a Zillow tab open, a Trulia almost all day, every day.”
When an apartment that fits their budget of $1,200 to $1,300 appears, she knows to expect a swamp of competition.
What is the story here? Disruption – an upending of the established market for year-round rentals. And it’s not just affecting rental housing on Aquidneck Island.
Within the past two years, investors and homeowners have transformed former year-round rentals into short-term units. Airbnb is the dominant player here, but other platforms in the short-term rental marketplace are present too.
Other tech-based startups also have entered Rhode Island in a host of industries and are jostling a variety of established businesses.
Want your grocery list checked off in a few hours or less while you do something else? Shipt and Instacart have that cornered.
For homeowners tired of mowing the lawn or shoveling the driveway, Rhode Island now has Lawn Love, a San Diego-based tech platform that will connect you to several local, vetted contractors.
Each of these platforms is based elsewhere but was drawn to the Ocean State by its income levels, demographics and population density.
Their arrival hasn’t necessarily set off immediate alarms among many longtime businesses. But over time, that equilibrium can shift.
‘UBER TOOK OVER’
Take Lawn Love, for example. If its ease of use starts cornering the market of homeowners who need yards tended or shrubs clipped, will traditional two-men crews without marketing prowess be left behind?
Uber Technologies Inc. and Lyft Inc., the most popular ride-hailing apps in Rhode Island, have certainly disrupted the traditional taxicab industry. Although the state in 2016 started requiring the on-demand services to pay the 7 percent sales tax, cab companies argue they have more-exacting requirements for licensing and overhead.
When asked how his taxi business competed with Uber and Lyft over the past several years, Matt Adedire, owner of City Cab Co. in Johnston, said he is hanging on with one cab, but struggling.
The Nigerian immigrant started his company nine years ago. At its peak, the company had five cabs.
“Uber took over,” he said, of the past three years. “It’s not like it was before. The state and the city, they don’t do anything.”
Disruption, as a concept, is not new, says Shelby Solomon, an assistant professor of management at Roger Williams University. But the digital revolution has speeded up the process.
“Disruption is this creative destruction,” he said. “You come up with a new way of doing business or a new technology and it makes the old way obsolete.”
The issue of when disruption becomes a problem for an economy is more nuanced.
The argument is that yes, people will lose their jobs as one industry becomes obsolete, but that whatever is replacing them will be better than what existed in the past, he said.
The fact that some startups, notably Uber, have quickly become very large companies, speaks to consumer demand for the new services, he noted.
“Due to the fact that we are kind of voting for them with our wallets and we are creating a market for them, maybe we should be the ones adapting to them,” Solomon said. “We’re the people who brought them in. If we didn’t want them, we should not use them.”
Several tech platforms for shopping services – readily available to consumers through phone apps – launched in Rhode Island over the past two years. They are among a slew of delivery-based startups that have prompted established retailers to begin home delivery.
Based in San Francisco, Instacart opened its Rhode Island operations in 2017, initially in Providence and later in the Newport area. It is valued at $7.6 billion by venture capitalists, according to the Wall Street Journal.
It now offers home delivery of any item checked on a list from a slew of popular supermarkets, including Stop & Shop and Price Rite, as well as retailers.
Shipt, a similar platform, is now a subsidiary of Target. It started operations in Rhode Island last year and offers two-hour delivery of its items, as well as those from Roche Brothers, CVS Health Corp. and Shaw’s.
The Birmingham, Ala.-based company opened 160 markets last year, including Greater Providence, said Julie Coop, its corporate spokeswoman.
“It’s all about the convenience and the quality of the service,” she said, of the appeal to consumers.
While some traditional supermarkets have adapted by adding such services themselves, or approved partnerships with the delivery companies, others are staying the course.
Dave’s Fresh Marketplace Management Inc., an independent supermarket company based in East Greenwich, has not partnered with a home-delivery service. Well-known for its prepared meals, sides and other takeout foods, such as brick-oven pizza, Dave’s operates 10 locations.
A spokeswoman says the company has had conversations with delivery services but has concerns about logistics.
“And the human element that we have built our business on has not developed with the technology,” said spokeswoman Susan Budlong. “So much of our business model surrounds customer service: providing an outstanding environment to shop in, and with high-quality products and personal attention. Moving to a delivery model, although sometimes convenient to the shopper, it shifts that sense of community from our neighborhood grocers.”
The supermarket is more than a place to buy groceries, she noted. It provides people with a connection to their communities.
“You can see your neighbors, coaches, teachers, firemen. Your neighbor’s child can wait on you,” she said in an email.
For now, the company is going to monitor the evolution of the technology.
“We like to evolve as our customers’ needs evolve,” Budlong said.
‘IT’S GOING TO BE CHAOS’
The new normal for the Newport apartment search is an unexpected result of home-sharing platforms that have all but transformed rentals in Newport and surrounding beachfront towns. Landlords can make substantially more by renting rooms to visitors, rather than year-round tenants.
The home-sharing model, which uses an online marketplace to match up visitors and available apartments and homes, or single rooms, initially jostled hotels and guest houses that are professionally managed, and which comply with the relevant industry regulations.
Now, the city’s rental housing is being affected. For the past year, city officials and residents have argued about how to best manage what some describe as an upending of neighborhoods.
Sanfilippo, a paralegal for a firm in downtown Newport, commutes daily to her workplace from New Bedford, a 45-minute trip in the winter and more than an hour in the summer.
She and her boyfriend decided to try to move back to Rhode Island this past year and started looking for a suitable apartment after the summer.
She could tell something had changed in the market when she didn’t find the small-house rentals that used to be standbys in her hometown of Portsmouth.
“There are rentals that I remember seeing, even a couple of years ago, in my mom’s neighborhood,” she said, referring to Island Park. “There is very little out there now. And when you do find something, there’s one now in Portsmouth, they’ve already told us it’s going to be chaos. They’re doing one group showing. Because so many people, when you find that one, they want to get in on it.”
Over the past year, research conducted by a Newport committee examining the short-term rental market found that almost 10 percent of the available rental inventory in the city is consumed by short-term-rental platforms.
In 2018, the city had 708 listings on Airbnb and its competitors for whole apartments or houses.
That was 19 percent more than in the prior year, said Jeff Brooks, a Newport Planning Board member who chaired the committee.
Brooks, a real estate agent, is in favor of online options but says the city needs to do a better job of tracking and regulating the platform rentals.
“There are just as many pros as cons. The pros are, people get to experience the city through the lens of people who live in the city,” he said. But, “You are very clearly eating up housing stock for people who live here. It’s taking place in areas and neighborhoods which [are] supposed to be where people live.”
Newport has received his committee’s recommendations but has yet to act upon them. They include a registration requirement for all short-term rentals and special-use permits for those in residential zones, which would require homeowner occupancy and presence at the time of the rental.
Frank Silvia manages a popular waterfront bar and owns a Newport duplex that he rents out to two tenants. He also posts his two-bedroom home on Airbnb. He occupies an attached, in-law suite, when the listing is active, and has obtained the required special-use permit from the city.
Following the rules took time and money. Silvia had to hire an electrician, for example, to comply with the fire-code requirement for emergency exit lights.
Eight months after entering the Airbnb world, Silvia has no regrets.
“My duplex, I rent out both sides. I’ve made more money in the Airbnb in the past eight months I had it open, than the whole duplex,” he said.
The option also works for him personally, because for the four months that he’s not working at The Landing, in Newport’s offseason, he occupies the full house, and skips Airbnb for the winter.
Airbnb says most hosts are middle-class residents who share their homes occasionally to help pay for the mortgage, student loans and other bills.
According to an overview of the Rhode Island market, the platform had more than 2,200 hosts who accepted 165,000 guest arrivals in 2018. The average amount of income produced for Rhode Island hosts was $8,400, the company reported. Venture capitalists value the company at $31 billion, according to the Wall Street Journal, placing it among the top three most-valuable startups worldwide.
For commercial competitors, such as hotels, the concern is not the individual who rents out a room or an apartment, but the commercialization of Airbnb rentals, according to Sarah Bratko, the state lobbyist for the Rhode Island Hospitality Association, which represents inns and hotels.
“If there is going to be competition, we want to make sure it is on a level playing field,” she said.
Hotels and inns are required to have full safety and fire inspections, and the unlicensed rentals of homes and apartments do not.
“Now we’re seeing commercial buildings,” she said. “Someone will buy an apartment building. And instead of having it as traditional housing, they turn it into an Airbnb. Essentially, it is a hotel. It is just an unregulated hotel.”
Lawn Love, which launched in Providence in 2017, has since signed up more than 60 providers. These contractors mow lawns, hang Christmas lights, shovel driveways or weed gardens, depending on the job.
The service is one of many startups nationally that link landscapers to homeowners, but among the few operating in Rhode Island.
“What we saw, is the lawn-care industry is one of these very large, well-existing markets that has been around forever, but where existing service providers – while they’re great at doing the actual work – aren’t historically that tech-savvy or great at marketing and customer acquisition,” said CEO Jeremy Yamaguchi.
“As a result, the customer experience can vary wildly,” he said.
“It involves calling a bunch of people on Craigslist or Yelp, and physically having them out to your home just to get a quote. You’re leaving checks under the doormat and trying to leave messages or texts,” he added.
Lawn Love prescreens its lawn-care and snow-removal pros – it requires three years of professional experience – and provides them with insurance to cover any problems on a property. Most of the companies are two-person crews, the CEO said, but have eight to 10 years of experience.
When someone requests a service, Lawn Love uses mapping tools to get the dimensions of the yard in question and provides a specific quote.
“You can get a quote by simply punching in your address,” Yamaguchi said. “We create a blueprint of your yard, from front, side, back areas and driveway.”
Contractors keep the bulk of the assignment payment, and Lawn Love takes a percentage. The company’s “take rate” is in the range of 5-15 percent, Yamaguchi said.
For companies that come onboard, Lawn Love provides software to help them optimize their business, he said, including job siting and route clustering, as well as back-office support for taxes, scheduling and payment.
“We can acquire customers far more efficiently than they can,” he said.
Sean Vann, a contractor for Lawn Love, started using the service to pick up additional work two years ago. The bulk of his work is in the summer, with regular mows, but he’s worked occasionally this year plowing snow.
He primarily uses the company service to fill gaps in his own business, he explained. He learned about it while scrolling through Craigslist one afternoon, looking for gigs.
Vann estimates he earned a couple hundred dollars a month for them in 2017, when he picked up more bookings.
“I just like the convenience of it, the idea that you can take which jobs you want,” he said. “And … you don’t have to go out and get a quote.”
The transportation industry is among the most affected by the arrival of ride-hailing platforms.
For years, taxicab companies argued that services such as Uber and Lyft escaped the level of state regulation that they had to comply with. In July 2016, the state began to require that all transportation-use companies – including ride-hailing companies, taxicabs and shuttles – pay the 7 percent state sales tax on fares.
That same year, the state approved new regulations designed to put the services on similar footing with traditional taxicabs for insurance and driver screening, as determined by the R.I. Division of Public Utilities and Carriers.
A spokesman for Uber did not respond to a request for information about its Rhode Island services.
The company, valued at $72 billion in August 2018 by venture capitalists, according to the Wall Street Journal, is expected to go public this year. Since launching, it has branched into other services, including Uber Eats, a food-delivery service.
In the last year, it purchased JUMP bikes, a bike-share that as an independent company was contracted by Providence to provide bike transportation in the capital. The five-year contract began in 2017.
Lyft, valued at $15 billion, according to the Wall Street Journal, is also planning an IPO this quarter. The company, which began operating in R.I. in 2014, issued a statement saying it looks “forward to continuing to build relationships … throughout the state to help our riders have frictionless transportation.”
For Scott Avedisian, head of the R.I. Public Transit Authority – the ride-hailing services represent an opportunity for partnerships.
He sees them as complementary to the public-transit function, particularly the JUMP bikes, which are stationed at Kennedy Plaza and at other spots around the city.
The transit agency is examining whether to partner with Lyft or Uber for what’s called “first-and-last mile” service – the first mile to the transit center, or the last mile home.
His hope is to make the transportation system “seamless” among the various operators, which would allow someone to move from a ride-hailing company to a public-transit service without having to pay separately.
“We are talking with other transit agencies as to how they have made that service work,” Avedisian said. “Get an idea of what works elsewhere first, before we start having our discussion here.”
Mary MacDonald is a staff writer for the PBN. Contact her at Macdonald@PBN.com.