AirBnb: Why Feeding this Beast is Probably Not a Good Idea in the Long Run

The short-term rental industry has been repeatedly accused of driving housing prices up by contributing to the housing shortage both in the U.S. and abroad.  Some of the top travel destinations like Amsterdam, London, New York and Los Angeles gets the brunt of much of the criticism for the sheer size of their operations.  In fact, New York reportedly now has more AirBnb locations than actual apartments for rent!  That’s insane.

The theory is that AirBnb (and other short-term rental company’s like VRBO and HomeAway) are converting long-term rentals that would have housed local residents and families and putting them up on the short-term rental market for visitors, thus further decreasing an already short supply of housing.

Some data suggests that this change in the renter’s market can potentially be costing renters thousands of dollars as a result of price pressure.  Essentially, there are less rentals available, therefore the ones that do become available have inflated prices.  Supply and demand that is drastically hurting the local residents’ pockets.

It’s a tricky knot to untangle, though, because there are a lot of factors at play in the market.  Outside of New York and their insane imbalance of rentals, the rise in local prices as a direct cause of AirBnb seems to hover around only one percentage point.  It is known though that converting long-term rentals to short-term rentals shrinks a housing market already experiencing historic shortages. But how much companies like AirBnB directly cause a rise in housing prices is hard to measure.

What is clear is that as discontent grows and cities start to take action, we may see a shift in the short-term rental landscape over the next few years.  Many cities have already passed restrictions against the short-term rental market, ranging from near-total-bans, to limits on how long a property can be rented, to limits on how many people can get licenses to open an AirBnB.  I would expect these kinds of restrictions to continue to get even tighter in the coming years.

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