World Tourism Day, Thursday September 27th: Airbnb/Short term rentals, "overtourism" and impact on housing supply

-- World Tourism Day website

Given that this year's theme for WTD is "Tourism and the Digital Transformation," it makes sense to address the impact of digital/e-commerce enabling technologies on fractional rentals, to wit, home stay digital platforms like Home Away, Airbnb, and VRBO, which enable people to stay in non-traditional properties--homes and apartments--while traveling.

The thing is that in general I think "sharing services" like Airbnb are fine. Especially because they allow people to stay in real neighborhoods, and experience stays more like how a resident would, rather than a more homogeneous experience within a hotel.

But I wonder if I am not totally objective as a user of such services myself.  E.g., the place I stayed in in Hackney Wick, across from a London Overground station, was awesome.  Same with a basement apartment in the Capitol Hill neighborhood of Seattle.  Etc.

Who rents properties, individuals?  Airbnb, the market leader, was originally created by some apartment dwellers who wanted to rent out space in their apartment to help pay the rent.

Or firms?  But over time, it and similar services have become marketing platforms that in terms of properties with the most frequent use are dominated by professional firms rather than individuals, and are "whole unit" use rather than fractional.

-- The State of Airbnb Hosting: An in-depth analysis of Airbnb and the home sharing industry, LearnAirbnb.com

Hotel opposition over profits, employment.  Plus, hotel workers unions and hotel firms are vociferous opponents, figuring it cuts down on hotel stays and thereby profits and employment ("Airbnb fight is about hotel profits, not workers," Albany Times Union).

My sense is that this impact is minimal, because the type of people using this form of travel are not likely to be a major proportion of the people who normally rent hotel rooms.  The same goes for patrons of bed and breakfast establishments, etc.

Is non-traditional home stay a driver of Overtourism?  Answer: generally no. NotionsCapital shares an article with us from the Guardian, "Airbnb and the so-called sharing economy is hollowing out our cities."

Relatedly, there was a piece in the New York Times about "Overtourism" attributing this in part to airbnb.  Earlier they ran a story about how Palma on Spain's island of Majorca has banned airbnb ("To Contain Tourism, One Spanish City Strikes a Ban, on Airbnb)

 Still, I don't think these services are is what is making places like Venice or Barcelona "overtouristed." It's not like the thousands of people who go into those cities from cruise ships are then using Airbnb.

But sometimes the answer is yes because small reductions in housing supply make a big difference in strong markets.  But I think what we've learned from the housing market is that even small and "marginal" changes in supply and demand make a big difference in price and availability, particularly in high demand real estate markets.

These graphics showing the NYC neighborhoods with the highest number of Airbnb rentals and the percentage of the local housing supply dedicated to short term rentals were produced by a student at Pratt Institute.





I can't remember the exact price of my stay in Hackney Wick/London, but it was less than £20 per night and literally, right across the street from the train station.

Combining the impact of housing sharing systems like Airbnb removing housing from the local rental market simultaneous with increases in demand to live in the city can result in significant price appreciation for rental properties.

Therefore, it's reasonable to regulate such short term housing travel arrangements, in high demand markets like  Barcelona ("How Barcelona Is Limiting Airbnb Rentals," CityLab), New York City or San Francisco ("Airbnb's Impact on San Francisco," five-part series, San Francisco Chronicle), etc.

Although according to this graphic produced as part of the study by the NYC Budget Office, the rent appreciation attributed to the impact of the short term rental market was relatively small in most neighborhoods.

Source: Statista.

However, many studies do not find a significant impact in various communities such as Denver ("Does Airbnb hurt Denver's rental market? Not much numbers suggest," Colorado Public Radio) or in Australia ("What impact does Airbnb have on Sydney and Melbourne housing markets," SGS Economics and Planning).

Recommendations

1.  Accommodating Airbnb and similar services should be considered both within a comprehensive accommodations element within an overall community's tourism development program and planning initiative and as part of a community housing master plan.

2. In hyper strong residential real estate markets like NYC and SF, depending on the neighborhood, short term rentals may need strict limits and regulation, because shifting even 5% of properties away from residential use will make a big difference in terms of rents, etc.

While I tend to hate the imposition of what I think of as often arbitrary limits through zoning and building regulation process, I would put a ceiling on the number of "whole unit" rentals that can made through sharing services. In DC that would be in places like Capitol Hill, Georgetown, Dupont Circle etc.

I could see a maximum number of 5% of total housing units being able to be let via fractional home stay services.  I would probably start with a low number like 2%, and evaluate it yearly.

3.  Still, weak market neighborhoods in otherwise strong market cities should be treated differently.  E.g. in DC there has been a lot of discussion of airbnb as a force of gentrification in lower income communities like Anacostia, when the reality is that most of the activity is west of the river.  And, increasing visitation and business for local businesses can be seen as an economic plus ("Airbnb: Stays east of the Anacostia River grew 65 percent since mid-2017," CurbedDC).

In any case, all neighborhoods should be regularly monitored as part of housing planning and limits set as needed.

4. It should be illegal to convert apartment buildings to ersatz hotels as some property owners have attempted ("D.C. sues company for allegedly treating rent-control apartments like ‘hotel rooms’," Washington Post.

5. But years ago, I thought apartment management firms should use the idea of a "bed and breakfast" service of a unit or two as a way to let people try a building out.  Why not?

Separately, generally fractional rental of an apartment is a lease violation, but some companies are considering the ramifications of allowing it ("Using Airbnb to your advantage," MultiHousing News).

6. Regardless, all such uses should require licensing and payment of local hotel taxes for each stay.

7. However, I wouldn't put a limit on people doing fractional use rentals--making a room available in their house or apartment when they still occupy it. They should still have to collect the equivalent of hotel taxes.