Airbnb is collapsing and
that might translate to some good news in our ongoing housing crisis.
But before we can really understand why,
we need to take a look at the housing market as a whole.
In an effort to highlight the absolutely dire nature of the housing crisis,
Zillow released new data that shows that the United States
is short by more than 4 million in housing units.
The study, which included both homes for sale and rental properties,
reveals that the housing shortage in America is so
severe that the number of Americans looking to move out on their
own outnumbered available housing by nearly two to one.
There were roughly 8 million individuals or families who lived in
another person's home in 2021 and just 3.7 million homes for
rent or sale, leaving a deficit of 4.3 million homes.
And it should come as no surprise that these housing deficits
are notably worse in some parts of the country, such as Los Angeles,
San Francisco, San Jose, San Diego and Boston.
I mean, California not doing too well, let's just keep it real.
Take a look at this chart from Zillow,
which lists cities with the worst shortages.
New York tops the list with a housing deficit of more than 376,000 units.
Los Angeles comes in at a close second with a shortage of nearly
334,000 houses or housing units.
San Francisco, Boston, DC and Seattle also topped the chart,
with each in need of hundreds of thousands of housing units.
Thanks to the explosion of remote work and super low interest rates on mortgages,
housing availability and affordability took a massive hit during the Pandemic.
Keep in mind that homes were already in short supply to begin with, so
demand rising sharply during the Pandemic pushed the housing prices to record highs.
During the Pandemic, both rents and sale prices soared.
In the last year, typical rents rose by close to percent, up to $2,048 per month,
while the value of a typical home jumped to nearly $347,000.
Now Zillow argues that the only way out of this mess is to have
policymakers focus their efforts on loosening zoning regulations and
other governmental red tape in order to boost construction.
Researchers suggest that speeding up building permitting, tax incentives to
rehabilitate underutilized housing stock and expanding affordable housing
trust funds could all help ease the shortfall in new construction.
But we can't just blindly call for
the construction of new housing without some safeguards in place.
A senior economist at Zillow makes clear that new construction needs
to focus on the types of houses that ordinary Americans can afford.
Rather than the astronomically priced luxury real estate that's been
developed over the last few decades.
He argues that there are simply not enough homes for millions of people.
Unless we address the shortage of smaller, more affordable starter-type homes,
we risk leaving families without a seat, and it will only get worse over time.
And it has been getting worse year after year.
The housing crisis seems to be exacerbated by this housing crisis and shortage.
It's true that those who happen to be lower in the socioeconomic
status are hit hardest by the housing shortage.
The bulk of families doubling up have consistently lower incomes,
highlighting the need for smaller, more affordable housing.
Of the families that are doubling up,
68% had an annual income of just $35,000 or less.
So in addition to loosening zoning regulations, we also have to make
sure that policymakers restrict construction to affordable housing.
Luckily, there are some positive developments with new housing
construction.
Housing starts jumped to an annual rate of 1.63 million units last month,
up from 1.34 million in April, according to Census Bureau data.
Single-family and multifamily construction experienced monthly increases as well.
Now, single-family starts jumped by 18.5% over
revised April figures to a rate of 997,000 units,
while starts for buildings with five or more units was 624,000.
But look, it's also worth focusing just a little bit on vacant homes,
which continue to drive people like me absolutely insane.
Now, Zillow's analysis found that while there is a deficit of 4.3
million housing units, there are an estimated 12 million vacant homes.
Of the nearly 12 million housing units that were not available for
rent or for sale, only 6.3 million vacant units had either recently been purchased,
rented, or were for the owner's occasional use.
That leaves 5.6 million vacant homes that aren't available.
Now Zillow believes that most of the vacant housing is inhabitable,
meaning that they're in good enough condition for people to actually live in.
So why are they sitting empty while we're dealing with a severe housing shortage?
Now, the Census did its own analysis just a month ago in late May.
They found that most vacant housing is seasonal.
These are vacation homes for
the haves as the have nots struggle to put a roof over their heads.
In 645 of the nation's 3,143 counties,
seasonal units made up at least 50% of the vacant housing.
In 1,313 counties, seasonal units outnumbered the combined
total number of units for rent or sale that were vacant.
Riverside County, California, Broward and Miami-Dade counties in Florida and
Maricopa County in Arizona, had more vacant units that were for seasonal,
recreational, or occasional use than vacant units for rent or for sale.
Which brings me to the ongoing collapse of airbnb.
Now, revenues for the San Francisco-based company have dropped by
nearly 50% in cities like Phoenix, Arizona and Austin, Texas,
suggesting that the company might be facing an unfolding crisis.
This is according to recent data from all the rooms comparing
Airbnb profits in May of 2022 and May of 2023.
The short term rental industry is absolutely struggling and
if owners of these properties end up selling these homes,
it could significantly increase inventory in some parts of the country.
Let's take a look at the areas hit hardest by the so called Airbnb collapse.
The chart that you're going to look at right here, was put together by Nick Gerli
who is the CEO of Venture Consulting which provides advice to home buyers.
The chart shows that cities that have seen significant drops this year
compared to 2022 are San Antonio Texas with a 43.8% decline in revenue.
Nashville Tennessee with a 39% drop, Denver Colorado
with a 38.6% drop, New Orleans with a 37% drop and
Seattle Washington with a 35.2% drop in revenue.
All data was calculated as a three month average revenue per listing for
May of 2023, compared to May of 2022.
Now Gerli added that the collapse in revenue for Airbnb might force
the owners of these properties to essentially sell the homes.
But he thinks that's actually bad news for the housing market.
And it is bad news for some people, if you're looking to put your house up for
sale and if suddenly there's this massive influx of homes on the market.
You might have more difficulty selling the home, I mean,
it's just simple supply and demand.
You might end up selling it for
less than what you would have gotten if Airbnb wasn't collapsing and
if Airbnb property owners weren't putting their homes on the market.
Now in a subsequent tweet though he argues that, what's scary for
the US housing market is just how many Airbnbs there are.
Data from all the room shows 1 million Airbnb and
Vrbo Rentals compared to only 570,000 homes for sale.
This creates huge home price downside if struggling Airbnb
owners elect to sell and I hope they do elect to sell.
In the case of Phoenix, Gerli wrote,
the number of short term rentals estimated at 18,000,
is more than double the number of homes for sale, okay, an estimated 8000.
Mix the huge Airbnb supply with revenues down 50% and
you get a cocktail for massive forced selling, he tweeted.
All right, let's just break that down for you, here's the translation.
This could lead to more inventory of homes on
the market which would lower housing prices.
And for those who had the means to invest in short-term rental properties in
the quest for passive income.
They should know that real estate speculation is sometimes pretty risky and
you might lose money if you're forced to sell your investment during
an economic downturn.
Local lawmakers though, should never have allowed the short-term rental industry to
grow this large in the first place.
As we continue to suffer through a persistent housing shortage.
The fact that little to nothing was done to mitigate these investments in order
to preserve housing for those who actually need to live in it,
tells you a lot about the lack of governance by our elected leaders.