Second homes have long been an aspirational dream for middle-class families.
Then in 2008, Airbnb arrived on the market. Through its online marketplace for homestays,
the Silicon Valley-based company has had a huge impact on the travel industry,
with self-catering accommodations now as popular as hotels.
But it has also created what is called the Airbnb effect, when the growing number of short-term
rentals in a location in high demand leads to a rise in both rental rates and house prices.
And many people aren’t happy about it.
We're a sort of young, newly married couple
and looking to live around here, who are competing with people who basically
buy up these properties to let out. There aren't many properties for sale.
It means the local children, as they're growing up, they can't afford to buy houses.
So therefore they have to move out of the area. It's killing the area.
Second housing, short-term rentals, Airbnb. No.
But how much of this crisis in the housing
market is due to Airbnb and its competitors? And what’s being done to solve the problem?
I totally understand that there is a housing crisis, and that people
are struggling to get on the housing ladder.
Amanda is one of many people earning an income through Airbnb.
She started her holiday vacation rental business in the Cotswolds in 2018.
There's a difference between holiday homes and holiday rentals, because holiday rentals
drive tourism. Holiday homes or second homes, are quite different, because people only go
and stay there occasionally. And the rest of the time, they're empty. So they're not
contributing to the community. The properties that I chose,
I'm not taking homes away from families, because they're not the kind of properties that families
would be able to or want to live in long term.
In a 2018 study, researchers said that Airbnb’s
presence in a market shrinks supply of long-term rentals, which results in price increases.
In the 100 largest U.S. cities, a 10% increase of short term rentals was responsible for 1/7 of
the average annual increase in housing prices and about 1/5 of the average annual increase in rents.
For a house in the centre of Los Angeles for example, where the median price for a house in
2016 was more than $500,000, nearly $75,000 would be attributed to the growth of short-term rentals.
Second homes and short-term rentals started after World War 1,
with the development of transport and better social conditions, giving workers the right
to holiday in the 1930s. The expansion of the middle-class after World War II and
the growth of commercial air travel in the 1960s led to more demand for such options.
Homesharing has always existed, but it had a boarding house, sort of Skid Row connotation.
Lily Hoffman is the co-author of the book Airbnb, Short-Term Rentals and the Future of Housing.
And what Airbnb did was legitimate and glamorise it. Airbnb marketed it as cooler,
a greener way to travel, to visitors.
The Airbnb model was very interesting,
very positive, because it was based on the real sharing philosophy.
It was followed quickly by competitors like HomeStay, HomeAway and Vrbo,
all having a share of the big short-term rental market. These companies, including Airbnb,
did not respond to a request for comment. Barring the pandemic, Airbnb has seen
consistant growth since 2008, generating $8.4 billion in revenue in 2022.
The company reached 150 million users in 2019, with an average of 6.6 million
listings worldwide. Airbnb would post its first annual profit in 2022.
In the UK, hosts make on average more than $22,000 per year; in Australia, the figure rises $28,000
and in the U.S., hosts make on average more than $44,000 per year.
In England, the number of privately rented homes has more than doubled
between 2000 and 2022 to 4.6 million.
I had a property — a very small buy-to-let in London.
I'd bought it in my 20s. I didn't have a pension, I had young children. I decided to
use the equity from the business, and very quickly grew that over the last five years
to five holiday cottages. The first one was in Bourton-on-the-Water, in the Cotswolds.
I'd always loved it, I'd gone there as a youngster. Four out of five of my properties, I've had to
refurbish, and I used local builders. And then we have local housekeepers.
A lot of cafes, and restaurants and pubs, they wouldn't be able to exist,
if there wasn't tourism coming into that area.
Turning second-homes into a fully-fledged business
is becoming increasingly popular. A 2015 study looking at Airbnb's effect on hotel sales
growth in many U.S. cities showed that multi-unit operators total nearly 40% of Airbnb's revenue.
In the Italian city of Florence, property investors have hoarded apartments,
to such an extent that a thousand rental properties are run by just 20 landlords.
The city recorded 15 million overnight stays from tourists before the pandemic in 2019,
or 20 times its population.
In the big majority of apartments on rentals, it is practically a business.
Dario Nardella is the mayor of Florence.
We have more than 7,000 apartments involved in this kind of system of short-term tourist rentals.
And now it's very difficult for a young guy or a new family to find an affordable house to rent.
They are the fastest growing segment of the market. They need an adequate supply of housing at
all times and to get more supply, if, for example, I'm a corporation and I own 20 apartments,
and I make a deal with Airbnb, I can property manage those 20 apartments
and put them into the Airbnb market. That's 20 easy ones rather than just finding one host.
A lot of people have been penalised tax-wise on long-term rentals and so a lot of people
are thinking 'Oh, it's fine, I'll just go into short-term rental.' But the problem
with that is it leads to an oversupply.
For the past 10 years, from Lisbon to
Santa Monica, local governments have been trying to balance the benefits
of tourism with a worsening housing crisis.
New York City has been in a long battle with Airbnb.
Hosts, who need to be registered with the city, can only accept two people
at a time, and the latest restrictions announced in 2023 will force owners to
prove they reside in the rented properties. In Paris, second homes need to first be
registered before renting, then the city asks for compensation, where owners have
to buy a commercial building of the same size before renovating it to be used for housing.
And in Singapore, hosts are prevented from renting out all public housing,
which is home to more than 80% of locals. Private properties, however, can be let
out for a minimum of three consecutive months.
We are introducing an urban rule which forbids
in the UNESCO area, any kind of short tourist rentals. And a zero taxes for the house for
three years if you move from a short-tourist rental contract to a resident contract.
Enforcing the rules is difficult, costly, and frustrating because the cities do not
have the exact data they need.
But short-term rentals and Airbnb
aren't solely responsible for the hike in house prices. Other factors include
boom-bust cycles in the housing market, such as the subprime mortgage crisis of 2008,
and the impact of climate change on properties. Together, these factors are predicted to
impact 1.6 billion people by 2025, exacerbated by rural-to-urban migration,
and shortages in labour and materials.
As a result, housing that is available is
being priced out of many people’s budgets. Between 2010 and 2022, property prices have increased
considerably in most countries, espeically in emerging markets such as Turkey and India.
The housing problem has been made worse by wealth inequality. In recent years,
average house prices have risen much faster than average incomes, making housing less
affordable. In New York City, a buyer will need 10 times the average yearly salary to afford
the cost of the average house, in Paris almost 20 times and in Shanghai more than 50 times.
These factors have led some to question the unintended consequences of second homes.
Commercial hosts and investors are a direct response to incentivizing housing as an asset.
There’s no way to say that Airbnb is the cause of the housing crisis, but we're talking about
a contribution. And the rent gap between a short-term rental and long-term rental
incentivizes the shift.
But would banning Airbnb and short-term rentals be the solution?
In Switzerland, for example, the government
banned the construction of second homes, following a referendum in 2012. It depressed the house
prices of new build properties but increased the house prices of the current stock, inadvertently
benefitting existing second-home owners who saw the value of their properties go up.
One of the solution for example is to invest more energy and
money on affordable and public social housing. I feel that it's a government issue, that they
have missed the house building targets, year after year after year. And that's a really huge issue.
And something that they need to rectify is to build more homes. And if they're not doing that,
then it's a really easy way for them to blame somebody else by saying, Oh, it's just because
there's loads of short-term rentals around.
As we've discussed, it has plenty of problems
for renters for Airbnb owners, for the company itself, for cities. How do you see it evolving?
If we can get our hands on enough data, and enough ways to control the
corporatization of these rentals, I think we'll have done a good part of the job.