Australian economist Karl Fitzgerald has been analyzing the impact of Airbnb tourist rentals on the housing market for years. In addition, the non-profit organization Grounded is responsible for it, which proposes measures to facilitate access to the residential market for those who are currently excluded by the prices set by the market. Through this organization, it has just published the study “My Airbnb: From a housing problem to a solution”, in which it analyzes the situation in seven large cities and proposes possible solutions to achieve a sustainable model. The objective, that this type of short-term rentals, with licenses and controls, also generate income for administrations with which to finance social and affordable housing.
Their analysis, focusing on cities such as Berlin, Vancouver, London, Los Angeles, Paris, Sydney and Barcelona, confirms how the rental platform is driving up prices and addresses the shortage of long-term rental housing, the shortage of people who actually live in these cities. Meanwhile, income from tourist apartments provides high profits to those who invest in them.
According to the cities they studied. What impact do Airbnb and vacation rentals have on rentals?
The analysis we have carried out reveals that the additional profitability of tourist rentals for owners is 81% higher than that obtained by owners who rent long-term. When we analysed what is happening in Barcelona, we found that the difference between what an owner who rents tourist apartments and a traditional owner can earn reaches 176%. This is a very clear signal to the market: bet on tourist rentals because you will earn more money.
What was the impact on supply?
In Australia, where we saw the impact on housing supply over a decade, growth in Airbnb listings was equivalent to 74% of all new homes built. This means that some new homes and many existing homes are moving from the traditional market to tourist accommodation. In Barcelona, rental prices are increasing by more than 6% each year, outpacing wage growth. With a population growth rate of less than 0.5%, holiday rentals have become a factor to consider.
Are there any differences or common patterns between tourist rentals in the different markets you have studied?
We studied seven cities around the world and found that Berlin and Barcelona are the two with the widest gap in profitability between tourist rentals and traditional rentals. I was surprised that in London, investors are moving fewer homes to holiday and temporary rentals. In Barcelona, the growth in income from temporary rentals is at a significant 15%, leading to an increase in apartments listed on Airbnb of 3.3% per year. If we see this continue for much longer, there will be more and more water pistols protesting against excess tourists, as the shortage of rents will accelerate further.
Which classes or social groups are most affected by this temporary rental model?
The social groups most affected by tourist rentals are young people and those who do not have a strong family or social network to rely on. These are the people most likely to have to fight for good references to get a rental and who do not have the income to be able to afford more expensive rentals.
We can expect venture capitalists to start buying Airbnb portfolios as the commoditization of housing progresses.
And the most benefited?
Real estate investors. Investors of all stripes are benefiting from the demand. I would like to know how many short-term rental investors are Spanish and how many are international. We are seeing increasing portfolio creation [de inversión] of short-term rentals in the world and it is something that should concern us all. Spain had the “build to rent” [inmuebles que se construyen solo para alquilar los pisos] Already firms like Blackstone are promoting the commercialization of the rental market; and now Airbnb is striking from the other side, with a significantly better proposition for investors. We can expect venture capital firms to start buying Airbnb portfolios as the commoditization of housing progresses.
Barcelona and New York have taken steps to reduce or ban vacation rentals. What is the most effective measure to mitigate the impact of this rental model?
Barcelona and New York have decided to eliminate tourist apartments and, although recent data from New York shows a 90% drop in short-term rental listings, stories abound about the emergence of a black market for short-term rentals, perhaps in the dark web. I think this may continue to happen as aggressive government policy meets consumer demand. I like Airbnb, but I would rather it not grow so fast that my friends can’t find a place to rent a house. It becomes an ethical issue if we continue to use Airbnb and I think it undermines the growth of tourist rentals at all costs. Some cities have also limited the number of days a home can be rented short-term, such as 90 days. This has been one of the most popular measures, but I think that over time this measure could also be repealed.
We need to find a middle ground. We have developed a model [que denomina] “cap and trade” to encourage the return to the market of empty or little-used tourist homes for rental and channel part of the income from holiday homes, those that obtain higher incomes, to finance social housing at affordable prices, either for rental or ownership. Also the creation of a kind of license so that those who invest in tourist rentals can walk down the street with their heads held high, knowing that they are supporting the financing of social and affordable housing in perpetuity. This can help cities with high debts. Barcelona, for example, could make a potential profit of $37 million, which could reach $185 million in the eighth year.
Would these houses and apartments return to the residential rental market? Would the prices residents have to pay for traditional rentals go down?
In the seven cities we studied, the percentage of active Airbnb listings was only 55%. This means that 45% of these tourist residences have not been rented once in the last year. This suggests that they may be second homes, vacation homes or investor residences. For workers who have to travel for hours every day to get to work, realizing that Barcelona has almost 10,000 apartments on Airbnb that are practically uninhabited must be very frustrating. The “cap and trade” system would encourage these empty apartments to return to the traditional market. This would lower prices.
Barcelona has just under 10,000 apartments on Airbnb that are virtually uninhabited
Some political voices claim that Airbnb-type vacation rentals are an opportunity to develop tourism. Based on your research, do you agree?
As real estate speculation accelerates inequality, we need to ask ourselves several questions. How many tourist residences are necessary? How many Airbnbs are appropriate and what percentage of housing should we aim to reserve for the people who make our cities unique and special? Tourism is very cyclical, there are many people on weekends and few on weekdays.
Traditional long-term, permanent rentals inhabit homes on a daily basis and require public support for the workers who live in them. This is where the construction of a stock of public housing and cooperatives is necessary to ensure the long-term survival of housing.
Some inner-city neighbourhoods in European cities are left without long-standing neighbours. I imagine the same thing is happening in the suburbs of big cities like Los Angeles or Sydney. Do you think that with tourist housing, neighbourhoods could disappear as they were, where our parents or grandparents lived?
Tourism could empty our cities. There has been talk recently that Sydney could become a city without grandchildren if it does not improve housing affordability. Operators like Airbnb can afford a $3,000 licence and thus fund affordable housing in the long term. We need to protect our communities and the future requires policies that work for both the left and the right. We need to address the factors that drive gentrification, the tax incentives that encourage property speculation. In Spain for example, cadastral revaluations mean that property investors pay very little in relation to the capital gains they receive.
We need niches of hope to emerge. After 20 years of studying different housing models, I support one based on the community land trust. [similar a un sistema cooperativista]. This keeps housing affordable in perpetuity because affordability is guaranteed so that the next buyer can also buy it at an appropriate price. Instead of borrowing from banks, you borrow from your community. You pay them back through a land lease over time. Then, when you sell, there are exit fees that act as a sort of capital gains tax. Additionally, residents can be helped to develop savings plans so that they can create a reserve fund if they have to leave.
