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What’s good for investors may be very bad for renters.
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Airbnb, a publicly traded company based in San Francisco, is a giant in the world of short-term rentals. It may also be one of the reasons the U.S. finds itself in a housing crisis. While Airbnb staunchly denies it’s part of the problem, a growing number of cities worldwide are working to limit the damage short-term rentals are inflicting on their housing supply. Here’s how Airbnb is contributing to the housing crisis.
1. The industry is growing at a faster pace than local governments can keep up with
Many factors went into creating the housing crisis, including the COVID-19 pandemic and builders’ inability to secure the building supplies needed to build more structures. However, it’s difficult to deny the role Airbnb — and, to a lesser extent, its smaller competitors — played.
We know that Airbnb offers more than 6 million rental listings in more than 100,000 cities around the globe. We also know that property owners, referred to as “hosts” by Airbnb, can make far more money renting their property to out-of-towners on a short-term basis than they would collect in monthly rent from a traditional renter.
That may help explain why the sale of vacation homes surged by 44% in 2020 over the previous year. Many people purchased property to use as short-term rentals. And it’s not just individuals who want to join the ranks of Airbnb hosts. Real estate investment firms have gobbled up as much property as possible in an effort to cash in on the Airbnb craze.
According to the watchdog group Inside Airbnb, real estate investment firms have contributed dramatically to the growth of Airbnb. In fact, about one-quarter of hosts on the Airbnb platform own nearly two-thirds of the listings. The return on investment is just that good.
2. Airbnbs limit the number of rental units available to locals
Airbnb hosts snapping up property as soon as it hits the market diminishes the housing supply available to everyday families. Renters have been hit especially hard as rental costs have soared.
For example, the average rent nationwide rose by 15% between 2021 and 2022, with some cities impacted more than others. Seattle, Cincinnati, and Austin have experienced rent spikes of more than 30%. New York, Los Angeles, and Nashville have been clobbered even harder. For renters without enough money in their bank account to cover the monthly increase, options are limited.
There’s nothing inherently wrong with short-term rentals. The problem is that local governments have a tough time reining in the number of short-term rentals operating in their cities. The overwhelming number of Airbnbs makes it difficult to provide enough housing for permanent area residents.
With listings in more than 100,000 cities worldwide, Airbnb is everywhere, from tiny hamlets to huge cities. Here’s a partial list of cities that have imposed restrictions to minimize the number of parties that open an Airbnb:
New York CityBarcelonaBerlinParisAmsterdamLondonMiamiSan FranciscoSanta MonicaCharleston, South CarolinaJersey City, New JerseyBangkok, ThailandReykjavik, Iceland
3. Restrictions may not work
Strict restrictions appear to be working in Santa Monica, California, but it remains to be seen if other cities can throw enough obstacles in the way of Airbnb hosts to slow the growth of the industry.
In New York City, where there may now be more Airbnb listings than available rentals, a new measure goes into effect this month. The measure will require Airbnb hosts to register their property with the city and provide proof that they themselves live there. Failure to do so could lead to fines of $1,000 to $5,000. The city hopes to reduce the number of Airbnbs in New York City by at least 10,000.
4. There’s no clear picture of whether Airbnbs can be reined in
Because the proliferation of short-term rentals is a new problem, it’s yet to be determined how local governments will balance the needs of the community with the rights of the investors. It may be that they will set a strict limit on the number of Airbnbs allowed in their cities. They may also impose a high enough tax on short-term rental operations to discourage hosts from settling in their city.
As municipalities work to find a solution to address the issue, local renters continue to struggle to find an affordable place to call home.
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