5 Effects Of Airbnb On Rents

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As online rental real estate marketing advances, so does the demand for real-time real estate availabilities and apartment inquiries. Even though we are long past the recession, many Americans are still not buying homes, favoring leasing to buying; mostly due to affordability constraints. As at the fourth quarter of 2016, the number of Americans owning homes was at 63.7%; its lowest level in 52 years.

Businesses like Airbnb, a popular vacation and short-term rental site, are seeing this as an opportunity to expand into long-term real estate leasing. In March, Bloomberg reported that anonymous sources confirmed Airbnb enlisted McKinsey & co. to research the long-term rental industry.

The competition provided by short term rental companies like Airbnb, VRBO and WeLive; a collaboration by office space developer, WeWork and Vornado Realty Trust in New York city and Arlington, Virginia have highlighted the importance of flexibility and convenience in living communities. Airbnb has certainly disrupted the hospitality industry but it has also shown the greater rental industry the importance of evolving to better meet consumer needs.

 

While demand for rental housing still outweighs supply in many markets, Airbnb entering the long-term lease market could trigger another change for the industry. Let’s look at the current impact of Airbnb on rents

After looking at rents in America’s 100 largest metros, between 2012 to 2016, researchers led by Edward Kung, an assistant professor of Economics at the University of California Los Angeles found that a 10% increase in Airbnb listings leads to 0.39% increase in rents and a 0.64% increase in home prices.

Kung in an interview on the Wall Street Journal, postulated that Airbnb takes supply out of the long-term rental markets, which caters to residents looking for permanent homes, reallocating the space to short term rental markets which caters to temporary visitors. This reduces the supply of long-term rentals and subsequently increases price for residents looking for long term housing. On a median scale, about one in 13 potentially available homes are being placed on airbnb instead of being made available as a long term rental.

One reason for this is owner occupancy. According to Edward Kung, “We find that Airbnb listings are more highly correlated with higher house prices and rental rates in neighborhoods with fewer owner-occupiers.”

Although house sharing through sites like Airbnb allow people to more fully utilize their homes and generate additional income at the same time, it should be regulated. The percentage of people spending more than 30% of their income on rents has increased by 9% over 14 years, from 2000 to 2014. An Harvard center for housing studies research revealed that about a third of Americans spent more than 30% of their incomes on rents or mortgages in 2015. Apart from the obvious effects of the affordability crisis, which is a public concern, there is need for vetting of tenants and price control as Airbnb looks to expand into the long term rental market.

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19 Comments

  1. I think airbnbs are an interesting addition to a neighborhood! Personally, I think they benefit the area with business as long as the people are checked before renting. Would love to try and rent one someday.

  2. I haven’t used Airbnb before. Don’t know if I would trust picking a person from the internet and staying in their home.

  3. I really did not know hot to use AitBnb. Now with this information, I can use it to my knowledge. Thanks for the vivid review.

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