The short-term rental industry has taken the hospitality world
by storm — only a few years ago, most travelers stayed in hotels,
but home-sharing platforms like Airbnb, HomeAway and VRBO have changed this habit.
Home-sharing or short-term rental platforms, particularly have grown rapidly over the last
decade as property owners have capitalized the opportunity to rent out rooms, apartments,
and even entire homes to travelers looking for short-term rentals.
Among these Home-sharing platforms, Airbnb is the market's largest player, with over 7
million listings in 220 countries and territories, dwarfing the world's top ten largest hotel chains,
which together have 5.48 million guest rooms . However, this most popular home-sharing platform
have been accused of snatching up homes that would otherwise be listed in the residential,
rental or housing market, and hence reducing the supply. Moreover, according to research,
short-term rentals through apps like Airbnb have also contributed to increase in rents.
But is this really happening? Is sharing not caring anymore?
Join us today to find out how Airbnb effects housing and rent,
particularly in major touristic cities? We will also be discussing how is it such a big problem?
So, let’s begin… Airbnb was founded in 2008
in San Francisco by two former schoolmates, and its first offering was breakfast and
an air bed in the founders' living room. The company was thus named AirBedandBreakfast.com,
which was later shortened to Airbnb. The business expanded rapidly,
and has since become a global platform for anyone to be able to easily rent out a spare room or an
entire property for short-term stays, at more affordable rates than traditional accommodation.
Airbnb currently hosts over 7 million listings and operates in over 100,000 cities in 220 countries
and regions. It also has a big vision that Airbnb wants to have 1 billion guests per year by 2028.
And if you're wondering which global city has the most Airbnb listings, it's London, with over
80,000 listings on app – and more than half of these listings are for entire properties.
So, the platform is well-liked for its access to vacation rentals varying in quality and
affordability, and providing a significantly different experience than that of a hotel.
However, in recent years the impact of Airbnb’s service on local economics and rental markets
has come under the spotlight. Because of the legal and ethical issues involved with such businesses,
its services have sparked considerable debate. What seems to be the case is the rapid growth
of short-term vacation rentals such as Airbnb has exacerbated the housing crisis and affordability
in many major cities. Or we can say that,
A byproduct of Airbnb’s unprecedented growth, the company’s extensive catalogue
of properties has profoundly impacted housing markets across the world.
Now you must be thinking, what Airbnb really does? Is it really a contributor to the housing crisis?
Well, The growth
of Airbnb is influencing housing values, transforming communities, and making it more
difficult for long-term renters to find affordable housing options specially in touristic cities.
Although, Airbnb and other short-term rental companies take pride in providing regular people
with an additional source of income. And for a long time, the company has positioned itself
as a platform powered by local hosts. But the reality is quite different…
Despite its marketing as a home-sharing platform driven by local people looking for extra money,
many Airbnb listings act like hotels; there are entire properties dedicated
to servicing short-term visitors, managed by companies handling multiple listings.
And the growth of these short-term rentals has contributed to housing shortages across the
major touristic cities. According to the stats, in cities like London and Edinburgh, one out of every
four properties are listed on this platform. According to a report, Airbnb has transformed
between 7,000 and 13,500 housing units from New York City's long-term
rental market into short-term rentals. Likewise, Toronto has also faced a housing
shortage in recent years, with vacancy rates for rental units hovering around 1.1 percent,
well below the "healthy" rate of 3 percent and much of the blame for the
crisis has been placed squarely on Airbnb. Officials in Paris have also blamed Airbnb
for a lack of long-term rental property in the city, which has driven up rents
and forced the middle class out, although it is one of the Airbnb’s biggest markets.
According to a report released in the year 2019, by the Paris Urban Planning Institute,
the number of dwellings in the city that are occupied as a short-term primary residence have
increased by nearly 30,000 between 2012 and 2017. In fact, if we talk about the biggest market of
Airbnb, London, it also has a chronic shortage of affordable homes, both for owner-occupiers
and renters. Since 2016, supply in the private rental sector has been decreasing.
Thanks to Airbnb. Moreover, the most
significant and well-documented potential cost of Airbnb expansion is a reduction in housing supply
as properties shift from serving local residents to serving Airbnb travelers, which in turn harms
local residents by raising housing costs. The growing popularity of short-term rentals
via platforms such as Airbnb demonstrates that the higher rates landlords can obtain on the vacation
rental market has led some to convert their properties from long-term to short-term rentals,
narrowing the rental market and driving up prices. And Paris is its biggest example, where thousands
of Parisian landlords have converted their apartments or commercial spaces
into short-term rentals, which generate more income and profits than traditional leases.
With rising rent and real estate prices throughout the city, an increasing number of Parisians are
relocating to cheaper suburbs or other cities. Furthermore, according to the Florentine branch
of the Italian tenants' union, 1,000 Florentine residents are forced to leave the city center
each year, either because landlords are looking to cash in on short-term
holiday lets evict them or because they are priced out as more investors move in.
Now let’s talk about Airbnb fueling the house rents…
As must be number of questions popping up in your mind like…
Does home sharing making it more expensive to rent or buy a home in a specific market?
Or how exactly does it make housing less affordable?
Well, it does it by removing rental properties from the long-term rental
market and placing them in the short-term rental market,
as well as unfairly competing with hotel chains by undercutting their profits.
Most of the owners now prefer to list their apartments or homes on Airbnb rather than
the traditional rental market because a well-managed Airbnb listing can earn
nearly double what a traditional lease can. So, it removes supply from the market,
and pushes up real the estate valuations. That's basic supply and demand.
According to one study, a one percent increase in Airbnb listings leads to a 0.018 percent increase
in rents and a 0.026 percent increase in house prices in the United States.
This means that the growth in home-sharing through Airbnb accounts for approximately
one-fifth of the average annual increase in US rents and approximately one-seventh of the
average annual increase in US housing prices. In fact, in New York City, the popularity of
Airbnb has increased the median long-term rent by 1.4% over the last three years,
resulting in monthly rent increases of more than $700 USD in some Manhattan neighborhoods.
Likewise, in Barcelona, the Airbnb activity has estimated to increase the housing rents by 7%
in the year 2016 alone. In the UK, private rents increased by 8.6 percent between January 2015 and
December 2019 which is a significant increase. Moreover, according to the national statistical
office INSEE, real estate prices in Paris have also risen by nearly 25% since 2015.
That makes Paris the second most expensive capital in the Europe to buy an apartment,
with only London in the lead. So, the presence of Airbnb actually
raises the local housing costs. And this does not end here…
The impact of Airbnb and other short-term rental platforms is not just limited to the shortage
of rental properties or increased costs. It also has an impact on the neighborhoods…
As having a short-term rental in your neighborhood can cause plenty of problems, including loud
parties, clogged parking, and property damage. The major issue is that the visitors aren't actually
from your neighborhood, so they may not feel bound by the normal rules of polite coexistence.
Moreover, local residents are concerned that the presence of short-term vacation rentals
in their neighborhood will change the character and quality of life. This has previously sparked
violent protests in major cities such as New York and San Francisco. Smaller cities, like Santa
Monica, are also experiencing such complaints. So, how have the major cities responded to this?
Policymakers around the world are grappling with how to best regulate
home-sharing platforms, particularly the Airbnb. Various towns and cities have attempted to limit
Airbnb's influence on their housing market in response to the negative effects of short-term
rentals. Cities like Montreal, have used zoning laws to limit the areas where Airbnb can operate,
whereas Airbnb hosts in Toronto are required to register with the municipal government.
In the United States, New York City has some of the most stringent policies,
prohibiting short-term rentals in apartment buildings and fining violators up to $7,500
USD. While, Boston is putting together rules that would ban many rentals for more than 30
days and require owners to be registered. The city of Los Angeles has also passed
regulations restricting short-term rentals such as Airbnb in the hopes that more Angelenos
will use it to share space in their homes. Furthermore, in Edinburgh will implement a
licensing scheme that will allow councils to regulate 'holiday-style' activities.
In 'control areas,' landlords will also need planning permission to convert an
entire property for short-term rentals. However, even with these rules in place,
regulatory agencies are frequently overburdened, and savvy listers can
easily find their ways to avoid compliance. While the home renting company has reached
voluntary agreements with most of cities, in many cases it is also fighting regulation and
taxation attempts on a regular basis. If you found this video informative and
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