Q: Does Airbnb Cause Rents to Increase?

A: Yes! Since hosts can make 50 to 200 percent more on short-term rentals than on long-term rentals, Airbnb affects purchase prices as well.

Does Airbnb Cause Rents to Increase? Yes it does. This graphic explains how.

A: Yes.

Despite its preferred image as a home-sharing platform, Airbnb actually involves tens of thousands of rental units that have been pulled off the rental market entirely, constricting housing supply. Since hosts can make 50 to 200 percent more on short-term rentals than on long-term rentals, Airbnb affects purchase prices as well.

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This question appears in the Winter 2018-19 edition of Shelterforce magazine. Subscribe here.

8 COMMENTS

  1. So let me get this straight: 1. New housing that increases housing supply doesn’t reduce rents because,you know, gentrification. (I realize that NOT all Shelterforce posts endorse this view, but some do).

    2. Yet if Airbnb reduces housing supply, that increases rents.

    I don’t see how both can be true.

  2. What the article fails to realize is that owning rental property is a business. Business owners are motivated to optimize the return on investment.

    The article also does not mention the amount of additional work required to operate an Airbnb. Property owners may be make more of a profit, but less in an hourly basis. That is why I am not converting my rentals to Airbnb’s.

  3. Whether it’s a business or not (of course it is) doesn’t really change its effects on rents, though, which is all this piece is addressing.

  4. Michael, it’s not that complicated for growing areas. Let me give a Seattle example. Almost all new housing is built for our rapidly growing population. These new people make significantly more (see: tech sector) than the people who live(d) in the city. So developers build for the high end of the market. Given that there isn’t enough housing already and the amount they are building is not enough to meet demand (and that the housing they are building is unlikely to EVER age into affordability), prices reman high: your point one. Point 2 pretty clear from basic supply demand perspective, if one believes economists. The nuance is key and I *think* you already know that.

  5. New housing supply alone does not reduce rents; it needs to be new housing supply for all incomes and not just new housing supply at market rates, which is typically what is predominantly being developed.

  6. If demand is increasing, then new supply doesn’t necessarily reduce prices – supply has to increase faster than demand. New supply might moderate the rate of increase in rents, but that’s not going to solve the problems of millions of low income households paying more than half their gross income on rent. While it certainly benefits them to have lower rent increases, what they need is close to a 50% reduction in rent. New supply won’t do that.

    As for short-term rentals like Air BnB – it may be a profit-maximizing business, but it may also be illegal if they are essentially operating a hotel in a residential zone in violation of zoning and land use laws.

  7. Re Jeff Levin’s stimulating post:

    1) It seems to me that zoning law’s division of housing into “hotels” and “residences” is inherently foolish. In the early 20th century, there was no distinction between short- and long-term rentals: a building that was designated as a “hotel” functioned as an apartment and vice versa. As a result, everyone had more choices and housing was cheaper. (For a more detailed historical discussion read Living Downtown by Paul Groth, one of the best historical books I have ever read about American housing policy).

    2. I agree that there are some people who are so poor that new supply won’t do much for them; that’s why people in cheap Rust Belt cities like Detroit and Milwaukee struggle with rent. The difference between those places and expensive markets is that in the latter, everyone struggles with rent. A pro-supply housing policy minimizes the number of people who need government assistance; an anti-supply policy maximizes that number.

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