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Is Airbnb All Bad?

By Catherine Velarde.


Airbnb has long been the subject of controversy, with critics arguing that its proliferation in major cities has contributed to increased home prices, soaring rents, and the displacement of residents. In Texas, Austin is Airbnb’s largest market (accounting for 30% of guest arrivals in 2017), followed by Houston and Dallas. The challenges associated with Airbnb have led local governments to enact new policies- Austin’s City Council voted to make short-term rentals illegal in residential neighborhoods where the owner does not reside, by 2022.


Are local governments right in placing bans and limitations on Airbnb? This article provides insights and data from both sides of the debate, revealing a complex issue- which is anything but black and white.


Does Home-Sharing Impact Home Prices?


A 2017 study explored the impacts of home-sharing on housing prices and rents. The researchers reviewed the 100 zip codes in the US with the most Airbnb listings, and found a positive impact on rents and housing prices. Specifically, the researchers found that, “a 1% increase in Airbnb listings leads to a 0.018% increase in rents and a .026% increase in housing prices” (Barron et al., 2017). Additionally, it was found that the effect was strongest in zip codes with the lowest shares of owner-occupied units. Researchers are finding that the extent to which home-sharing impacts local markets depends on the number of homes being used for intense commercial use (solely for investment purposes, with the entire home for rent), as compared to the total rental housing stock. While Airbnb originally set out to challenge hotels (by letting tourists pay hosts instead), critics argue that these tourist subsidies are actually paid for by locals- bearing higher rental prices.


Is Airbnb All Bad?


While moving a long-term rental to the home-sharing market diminishes the long-term rental stock, owner-occupied Airbnb hosting increases housing stock. As such, the owner-occupied model is one that Los Angeles is seeking to encourage- the City passed regulations requiring that Airbnb hosts must live in the residence for six months a year. As stated by Los Angeles City Councilman Mike Bonin, “the regulations were aimed at balancing homeowners who are renting out spare space to pay the bills with the real estate investors and landlords who are converting homes and buildings into hotel-like stays” (Curbed, 2019).


What the Advocates are Saying


Advocates also argue that because some Airbnbs are in hotel-less locations, these short-term rentals provide increased revenue for local businesses that are otherwise insulated from tourists. Airbnb argues that their guests positively contribute to local tourism, stating that Airbnb guests stay 2.1x longer than typical visitors and spends 2.1x more. The company also states that hosting helps homeowners financially; 52% of hosts are low to moderate income and 48% of host income is used to pay for household expenses. Additionally, Airbnb states that 81% of hosts share the home where they live.


In reviewing the arguments, it is clear that there are both advantages and disadvantages for home-sharing within a local community. The extent to which Airbnb disrupts the local housing market depends on numerous factors, such as whether or not the homes are owner-occupied and the percentage of short-term rentals versus long-term rental availability. That said, owner-occupied Airbnb listings can provide welcome additional income for hosts, while providing tourists with a more “local” experience. As such, perhaps we should move away from labeling home-sharing as either “good” or “bad”, and instead, consider focusing on the elements which benefit local communities- while restricting the elements which do damage. Policies, such as those passed in Los Angeles and Austin, may provide a pathway forward- as these policies focus on owner-occupied home-sharing, while freeing up investor-only Airbnb properties for the long-term rental market.


What are your thoughts? Are local governments right in placing bans and limitations on Airbnb?


Further Reading:


Barron, Kyle and Kung, Edward and Proserpio, Davide, The Effect of Home-Sharing on House Prices and Rents: Evidence from Airbnb (March 29, 2018). Available at SSRN:

https://ssrn.com/abstract=3006832 or http://dx.doi.org/10.2139/ssrn.3006832


https://phys.org/news/2019-08-airbnb-affect-rents-housing-prices.html


https://www.theatlantic.com/business/archive/2018/02/airbnb-hotels-disruption/553556/

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