Why Airbnb could be making it even harder to find affordable housing

The appeal of AirBnb is obvious. When you travel, you get to stay in the middle of trendy neighborhoods, rather than business centers and tourist districts. Instead of a fairly standard hotel room, you get homestyle amenities and a kitchen; sometimes you even get to make new friends.

It’s what’s turned AirBnb into a tech behemoth. The company, which started in the living room of two guys who couldn’t afford to pay rent in San Francisco in 2008, is now worth $25.5 billion. Much of that growth has come off the backs of cash-strapped millennials looking for cheaper (and hipper) options than hotels. The irony is that in their search for temporary accommodations, young people might be helping price themselves out of permanent ones.

As Airbnb’s presence grows throughout the world, so does the housing affordability crisis. So a question has arisen amongst anti-gentrification activists and politicians: Does this correlation imply causation? Is Airbnb at all responsible for the rise in ownership and rental prices in cities across the country?

The answer, it turns out, is pretty complicated.

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If you’re young and don’t own your own house, you’re probably already aware of this. In 1979, young people—defined as ages 22 to 34—spent on average 23 percent of their income on rent. Today, that’s jumped all the way to 30 percent. In some markets, like San Francisco and New York, the number is even higher. According to housing website Zillow, only eight percent of housing in Miami can be considered affordable, as well as only 12.7 percent in Los Angeles and about 20 percent in New York. 

And a report from New York University’s Furman Center found that in 11 of the largest U.S. cities, affordable housing availability hasn’t kept pace with demand. “With the exception of Dallas and Houston, the average renter in each metropolitan area could not afford the majority of recently available rental units in their city,” the report read. “The cities were even less affordable to low-income renters, who could afford no more than 11 percent of recently available units in the most affordable cities.”

It’s not just major metro areas that are struggling to provide cheap housing. As the Atlantic’s City Lab recently pointed out, every county in the United States is facing an affordability crisis. In 2000, 37 percent of extremely low-income families could afford to rent homes across the U.S. without assistance. By 2013, that number was down to just 28 percent.

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There are a bunch of reasons for the affordability debacle—stagnant wages mean people can afford less, the rush of college grads to cities has sped up gentrification and raised housing prices, and the demand for rentals has put pressure on the market, allowing landlords to raise prices.

Amidst all this, it can seem attractive for politicians to find a scapegoat, and Airbnb emerged as the perfect one. It’s not only a big corporation, it’s one that has played fast and loose in cities: dodging regulations, sending out misleading information to defend itself, and all along pretending it was the victim of overzealous regulators. Although that’s made the company an easy target, it doesn’t necessarily mean Airbnb is playing a major factor in today’s housing crisis.

Amidst all this, it can seem attractive for politicians to find a scapegoat, and Airbnb emerged as the perfect one

There’s little doubt Airbnb commands a larger and larger share of housing in many cities each year. There are now 1,500,000 Airbnb listings worldwide. In New York, there are more than 27,000 Airbnb rentals. In San Francisco, there are about 5,500.

The key question for whether Airbnb makes these cities less affordable is whether most of the rentals are just spare rooms, or if they’re entire apartments that are being taken off the regular rental market. It seems, unfortunately, most are the latter.

In New York, about two-thirds of the rentals are being rented out full time, despite the fact that it’s against the law to rent out apartments for fewer than 30 days, if the owner is not present. Many of those rentals are in areas that are already facing fast-increasing costs, such as Williamsburg and Bed-Stuy. The situation is similar in San Francisco, where most of the units appear to be breaking that city’s 30-day rule.

The prevalence of short-term rentals taxes cities in other ways, too. Santa Monica, for example, had to spend nearly $500,000 a year just regulating and keeping track of Airbnb rentals.

However, the evidence that Airbnb actually increases housing costs is pretty thin, at least so far. One 2015 study (commissioned by Airbnb, so take it with a grain of salt) said housing prices would only go up by $25 a month in New York if all its listings were being rented out without primary residents living there. In the same scenario in San Francisco, prices would go up by $75.

The key question for whether Airbnb makes these cities less affordable is whether most of the rentals are just spare rooms, or if they’re entire apartments that are being taken off the regular rental market.

The problem with blaming Airbnb for rental price increases is that despite the increase in Airbnbs, they still take up a tiny portion of a city’s housing. In Los Angeles, for example, one of the cities where Airbnb is most contentious, Airbnb only accounts for about half a percent of the rental market. 

But what happens when Airbnb grows even more? That prospect, in itself, calls for an option that strikes a middle ground: Allow Airbnbs to exist, but limit their use so cities don’t just become hotels for traveling millennials.

That’s exactly what San Francisco is considering. A new ballot initiative would limit individuals to renting out their houses and apartments for a maximum of 75 days. Similar regulations are being proposed in New York and New Orleans, while taxes on Airbnbs are being proposed in Philadelphia and elsewhere.

It’ll take some time to see whether any of these regulations has their intended effect, but it’s good that politicians are starting to think about these issues now, before the company becomes ubiquitous enough to bend policy to their will. That’s exactly what’s begun happening with Uber—this week New  York Mayor Bill De Blasio dropped a proposal to more heavily regulate the ride-hailing app, after the company launched a major PR offensive. 

For the sake of housing affordability, let’s hope politicians have more political will when it comes to Airbnb, before it’s too late.

Peter Moskowitz is a freelance writer in New York. He’s writing a book about the underlying economic and political causes of gentrification. He tweets @ptrmsk.

Illustration by Jason Reed