A few weeks ago, Chris Lehane, vice president of Public Policies of Airbnb, said in an interview with the economic newspaper Five days that its platform “is not responsible for the rise in the rental price in large European cities.” Although the arrival of Airbnb has coincided with the rise in rents, it is not easy to see if one thing causes the other, mainly due to the lack of official data and the amount of factors that influence the housing ecosystem. Now, a team of researchers from the University of California has shown that these two situations are related and that, indeed, are causal.
Critics argue that rental housing platforms such as Airbnb increase the cost of living for people living in the city all year. This happens when homes are intended to accommodate many tourists for short periods of time instead of families throughout the year. The company insists that the objective is that the owners can rent the free rooms of their houses to get extra money, but the truth is that this is not the case with most offers. If we look at Madrid, for example, 64.7% of the 17,301 Airbnb ads are entire houses, according to Inside Airbnb, an independent portal that provides tools to analyze data related to the company’s tourist apartments.
Murray Cox, head of Inside Airbnb, says that “according to all measurements, the most common activity of Airbnb is the rental of entire houses and apartments, not of leftover or individual rooms within the owner’s houses.” The data collected by this platform in Barcelona, Bilbao, Euskadi, Girona, Madrid, Malaga, Mallorca, Menorca, Seville and Valencia for the month of November 2019, show that the offers of entire houses and apartments represent 73% of the total advertisements. “In Girona, Mallorca and Menorca, this figure is over 90%,” says Cox.
How does this practice affect rental prices? “Cities and towns have a limited supply of housing, so this process can end up increasing rental rates,” the researchers explain. In fact, un study focused on the city of Boston (United States) He already found that an increase in Airbnb offers there was associated with an increase in rents. But one of the limitations of the study is that it was not clear if Airbnb had something directly to do with the price increase, it only found a positive correlation.
This happens because there are very different factors that influence the dynamics of rental prices in all cities of the world. The population increase in the cities of workers moving to urban centers, stagnant wages, housing policies, cuts in public spending, a concentration of work talent in cities that have insufficient affordable housing … “The causes of the housing crisis in Europe are diverse and complex and are not due to a single direct link between the homes for tourist use,” says Airbnb. All these factors condition and influence the rental price. But the tourist apartment rental platforms, too. Taking the study conducted in Boston as a starting point, a team of researchers from the University of California decided to deepen the matter. To begin, they collected data from three sources:
- Information about the complete set of properties rented through Airbnb in the United States and the hosts that offer them.
- Information on the zip code, on rental rates and housing prices in the United States real estate market.
- Data on the zip code of the American Community Survey, an ongoing survey conducted by the US Census Bureau that includes average household income, population, employment rate and level of education.
They combined these sources of information to study the impact of Airbnb on the real estate market. But measuring this impact is not simple, due to external factors that also influence the market. In this study, the researchers controlled those factors and used a technique known as instrumental variables to isolate the part of the housing costs that is due only to the arrival of Airbnb.
Under this assumption, they found that a 1% increase in Airbnb offers is causally associated with (that is, causes) a 0.018% increase in rental rates and a 0.026% increase in housing prices. These effects may seem very small, but it should be taken into account that the average annual growth of Airbnb is approximately 44%, according to the data handled by the researchers. In addition, these effects add up from one year to the next.
However, these results do not tell the full story of what is happening. In the study, the researchers present other additional results that help explain the economy around this phenomenon. They showed that zip codes in which there were more homes inhabited by their owners are less affected by Airbnb. The occupying owners use the platform to rent their free rooms or maybe the entire house while they are away. However, these homes are mainly occupied by a long-term resident (the owner), so they are not reallocated houses as short-term rentals through Airbnb.
Together, the results are consistent with the idea that, due to Airbnb, homeowners who do not live in their homes are moving their properties out of the long-term rental and sale markets to make them available to tourists. “On the one hand, these platforms allow owners to earn money when they have more space than they need,” the researchers explain to HBR, although we have seen that this is not what happens in most cases.
“On the other hand, owners who rent entire houses are reducing the supply of housing, which increases the cost of living for local tenants,” they add. “According to our results, one way to reduce the negative effects while retaining the benefits of renting leftover rooms would be to limit the amount of homes that can be added to the rental market for tourists.” As Airbnb also points out, “pursuing only the activity of the hosts will harm them without solving the housing challenges.”