Airbnb has been called the “poster child” of the shared economy, allowing users to rent rooms, apartments, and even houses to strangers. Space can be rented for as little as a few hours to as long as several weeks, depending on the agreement between hosts (landlords) and guests (tenants). Last year, the popular service doubled its listings – 550,000 stays – and expanded to nearly 200 countries. Users proclaim that Airbnb can benefit from both sides of the peer-to-peer arrangement. Hosts can use the service to supplement rents and mortgages. Guests can visit cities that would otherwise be unaffordable for modest budgets.
While affordable, short-term rentals may lure some users to Airbnb, these same rentals may be exacerbating larger socio-economic problems in cities like New York, San Francisco and Seattle. These metros have become the poster children of a different sort – with the lack of affordable housing squeezing out lower- and middle-income families. Rental costs have gone up across the country but especially in major cities. San Francisco had the second-largest increase in rent prices among all major metros – jumping 5.6 percent just last year. That increase was beat only by Seattle where rent increased 7.1 percent in 2013.
So what is Airbnb’s role in the dearth of affordable housing? The service takes even more units out of the supply of affordable housing, a fact that caught the attention of New York Attorney General Eric Schneiderman. In October, Schneiderman’s office released a report that found:
Short-term rentals are displacing long-term housing options: In 2013, more than 4,600 units were booked for at least three months. Of these, nearly 2,000 were booked for a cumulative total of six months or more, rendering them largely unavailable for use by long-term residents. Notably, the share of host revenue from units booked as short-term rentals for more than half the year increased steadily, accounting for 38 percent of the site’s revenue by 2013.
Schneiderman’s office also found that commercial users are using the platform to run multimillion-dollar (and mostly illegal) businesses. Over 100 users controlled more than 10 different apartments that were rented out regularly through Airbnb. Together, these hosts booked 47,103 reservations and earned $59.4 million in revenue. While only six percent of hosts ran large-scale operations on Airbnb, that same group dominated the platform, generating 36 percent of all rental transactions and collecting 37 percent of total revenue – or $168 million.
Keep in mind, New York City lost 40 percent of its affordable housing units in the last decade according to a study by the Community Service Society. The ability of landlords to raise rents to market rate after renovating rent-regulated apartments and rapidly increasing rents in gentrifying areas are the main forces behind this loss.
What’s happening in New York is happening in other major metros as well. The demand for units has outstripped supply causing moderate and lower-income families to scramble to find affordable housing. Meanwhile, users of Airbnb are reducing the natural turnover in units while a handful of landlords make a hefty profit. Other elected officials should follow Schneiderman’s lead and give a closer look to Airbnb and similar platforms, examining what impact these services are having on communities and working families.