After Airbnb hosts converted New York's available housing stock to unlicensed hotel rooms, rents soared

Airbnb hosts are supposed to be smallholders: people who rent out a spare room or let out their homes while they're out of town -- but in New York (and other cities), the system is dominated by professional landlords who have illegally converted huge swathes of the city's available housing stock into unlicensed, highly profitable hotel rooms.

Because supply and demand is a thing, removing available stock from the rental market has made rents go up and contributed to the housing bubble (because a private home that can be rented on Airbnb can be turned into a very profitable asset relative to a traditional long-term rental-based income property, bidders who intend to remove the home from the supply of housing stock are willing to pay more for the same house than people who just need a place to live).

In The High Cost of Short-Term Rentals in New York City, a group of academics from McGill's School of Urban Planning analyze data scraped from Airbnb's site to quantify the effect of Airbnb rentals on the already drastically undersupplied NYC housing market.

They analyzed 80,000,000 datapoints spanning 2014-2017 and conclude that 28% of the revenue for NYC Airbnbs goes to commercial operators, who use predatory pricing to force out the smallholders and spare-room-renters who are supposed to be the backbone of Airbnb; 42-46% of the listings from these commercial hosts are illegal under New York's Multiple Dwelling Law.

Especially hard-hit are neighborhoods where racialized people live; these are particularly profitable places for commercial landlords to convert whole homes to Airbnbs. Black neighborhoods are six times more likely to have their housing converted to hotel rooms than white neighborhoods.

The research was partly funded by the hotel lobby, who have a vested interest in banning Airbnb.

The economic power that this fraction of commercial operators wield forces smaller sharers to trim their rates to compete. And they are getting less profit relative to their rent, since the platform contributes to a general increase in rental prices. Using Zillow’s Rent Index, Wachsmuth and his team estimate that over the last three years, Airbnb has increased long-term rents in the city by 1.4 percent. The median household looking for a new apartment will pay $384 more per year than they would have three years ago, due to the growth of short-term rentals.

In other words, using Airbnb to help pay your bills in a space-strapped city is a bit like using an air conditioner to combat global warming: It might help keep your apartment bearable, but overall it’s just making the environment worse.

The High Cost of Short-Term Rentals in New York City [David Wachsmuth, David Chaney, Danielle Kerrigan, Andrea Shillolo and Robin Basalaev-Binder/ Urban Politics and Governance research group, School of Urban Planning, McGill University]

What Airbnb Did to New York City [Alastair Boone/Citylab]

(via /.)

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