You’re Not Imagining It: Airbnb Really Does Lead to Higher Rents and Home Prices, Study Finds
Home-sharing site Airbnb has its share of critics, from neighbors who hate the idea of strangers in their building or on their block, to traditional hotels that want Airbnb hosts to receive the same tax treatment and regulatory scrutiny they do, to, of course, the occasional creep-out victims. But another consistent argument is of the bigger-picture variety: that Airbnb drives up rents in cities where housing costs are already staggering.
Many cities have tightened their Airbnb restrictions not just for the reasons above, but under the more righteous banner of protecting affordable housing for their residents.
This dynamic is perhaps most tangible in tech-savvy cities with competitive rental markets, pricey hotels, and heavy tourism, such as San Francisco, New York, and Boston. And it makes intuitive sense: If landlords who might otherwise rent an apartment to a local family for $2,000 a month instead decide to list it on Airbnb for $200 a night, that leaves the same number of local renters competing for fewer overall apartments. The law of supply and demand would inevitably mean landlords could charge higher rents for the remaining apartments.
While it’s not quite that simple, a new research paper from UCLA, USC, and the National Bureau of Economic Research studied rents, home prices, and Airbnb data in the 100 largest American metro areas from 2012 to 2016 and found that Airbnb really does lead to higher housing costs.
“Critics of home-sharing argue that it raises housing costs for local residents, and we find evidence confirming this effect,” the study’s authors write. They found that a 10% increase in Airbnb listings led to a 0.42% increase in area rents and a 0.76% increase in house prices.
“Our results suggest that Airbnb growth can explain 0.27% in annual rent growth and 0.49% in annual house price growth from 2012 to 2016,” they continue. “These effects are modest, but not trivial: the annual rent growth from 2012 to 2016 was 2.2% and the annual house price growth was 4.8%.”
The study controlled for various factors, including Airbnb’s explosive growth in that time frame and the fact that some cities may experience rising rents and home prices at the same time as an uptick in Airbnb listings simply due to a fast-growing population.
If you’re just renting out your own home when you go on vacation or visit friends for the weekend, it’s not sucking supply out of the local rental market.
In the end, the study’s authors only really see Airbnb as a problem if it’s removing long-term rental housing from the local market. In other words, if you’re just renting out your own home when you go on vacation or visit friends for the weekend, it’s not sucking supply out of the local rental market. But when a landlord lists a full apartment on Airbnb instead of making it available to local renters, that makes long-term housing more scarce, raising rents.
However, even owner-occupants renting out a spare room or their whole home when they travel has some impact on home prices and rents. Because homeowners have this new opportunity to earn more money from their home, they’re willing and able to pay more for it, driving up home prices — if only by a half a percent per year. And higher home prices will generally lead to higher rents —again, if only slightly— since landlords will need more money to cover their mortgages.
Despite its meteoric growth, Airbnb listings only accounted for 0.13% of the median ZIP code’s housing stock in 2015. But, the authors write, “perhaps the most salient comparison—at least from the perspective of a potential renter—is the number of Airbnb listings relative to the stock of homes listed as vacant and for rent.” And in 2015, Airbnb listings comprised 8.3% of vacant or available homes on average.
“This implies that in the median ZIP code, a local resident looking for a long-term rental unit will find that about 1 in 12 of the potentially available homes are being placed on Airbnb instead of being made available to long-term residents,” they write. “Framed in this way, concerns about the effect of Airbnb on the housing market do not appear unfounded.”
Still, given the opportunity for income that Airbnb provides local homeowners, the authors seem to view the site’s impact on a community as a mixed bag overall. “In our view, regulations on home-sharing should (at most) seek to limit the reallocation of housing stock from the long-term to the short-term markets, without discouraging the use of home-sharing by owner-occupiers,” they conclude, suggesting that a regulatory solution might involve levying an occupancy tax on Airbnb listings that could be waived for owner-occupants.
Personally, I would think Airbnb does more good than harm, diverting some tourist dollars from downtown and highway hotels to residential neighborhoods and small businesses throughout a city. A 0.27% rent hike seems a small price to pay for that kind of egalitarian urban investment.
But I’m speaking selfishly. After staying in a regular hotel room with our young child — and being forced to quietly hang out in the dark for hours after her 8 p.m. bedtime — we only book vacation rentals when we travel now. Having a kitchen and a separate bedroom is simply glorious, after all.