Hi @Frances56, It doesn't seem to me that you're being held 'hostage' because you really don't have any leverage at all. They will write whatever they will write.
As to a 'flaw in the system,' I can't actually see anything better that can be done... can you?
When I had hosted (before AirBnB was even around--and only students and professors), there was such scant ability to know anything about anybody except that they were somehow in the education system. A bit of a screen, but not much, and anytime you have people in an equation... well, it can get a little strange.
I see you're trying to do your best... try to revisit the scene in your mind--in retrospect, is there anything else you might have done differently? Maybe not, but worthy of examination, eh?
Sorry for this experience.
Kim