The Wall Street Journal reported earlier this month that Airbnb had recorded a $322 million (£248.65 million) net loss in the first nine months to September in 2019. That’s a considerable drop from the $200-million profit reported by the world’s largest online marketplace for lodgings in 2018.
For a company with a valuation of $31 billion, according to Pitchbook in 2017, it’s a sign that the horn of this start-up unicorn might just be a carrot ahead of its hotly anticipated public IPO later this year.
However, although this is disappointing news for Airbnb stakeholders and investors, cities and countries around the world suffering from extended housing crises may celebrate its diminishing market influence.
The influence of the so-called ‘Airbnb effect’ on local housing markets has grown into a significant cause for concern, particularly when looking at its impacts on housing stock, prices and communities.
But even if Airbnb really is damaging local housing markets, can anything be done to stop the hugely popular, multi-billion-dollar juggernaut?
The cost of the world’s largest holiday platform
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Airbnb currently hosts over 7 million listings and is active in more than 100,000 cities across 220 countries and regions. It’s not lacking in vision either – Airbnb aims for 1 billion guests annually by 2028.
The platform is widely enjoyed for its access to holiday lets ranging from single rooms to entire properties, varying in quality and affordability, and offering a markedly different experience to that found in a hotel.
Then there are the clear economic benefits for local economies that stand to gain from the increase in tourists supported with a wider variety of affordable and available holiday listings. Homeowners and landlords also benefit, as turning their rooms and properties into short-term lets can offer an alternative and lucrative source of revenue.
But in recent years the impact of Airbnb’s service on local economics and rental markets has come under the spotlight. And analysis conducted by the Economic Policy Institute, a non-profit, non-partisan American think tank, found that the economic costs of Airbnb likely outweigh the benefits:
‘While the introduction and expansion of Airbnb into cities around the world carries large potential economic benefits and costs, the costs to renters and local jurisdictions likely exceed the benefits to travellers and property owners.’
The ‘Airbnb effect’ is to some extent remarkably similar to gentrification in that it slowly increases the value of an area to the detriment of the indigenous residents, many of whom are pushed out due to financial constraints.
Cities, popular ones especially, seem to fare the worst. In major cities such as Amsterdam, Barcelona, Edinburgh, and Los Angeles, studies on the ‘Airbnb effect’ have found that over-tourism facilitated by platforms such as Airbnb negatively impacts on house prices and communities.
The short-term rental sector is just as affected. Research conduced by the Harvard Business Review across the US found that Airbnb is having a detrimental impact on housing stock as it encourages landlords to move their properties out from out of the long-term rental and for-sale markets and into the short-term rental market.
A separate U.S. study found that a 1% increase in Airbnb listings leads to a 0.018% increase in rents and a 0.026% increase in house prices. It might not seem like much on the surface but there’s a cost creep for those looking to rent long-term or buy.
It would be a mistake to say all markets are equal, but housing markets in the U.S. have a socioeconomic cousin across the pond, and for the city with the world’s highest number of Airbnb listings, it should indicate a warning.
A case study: What’s happening in the U.K?
Airbnb’s U.K. growth has been rapid and extensive. If you were wondering which global city has the greatest number of Airbnb listings, it’s London, with over 80,000 listings – and 55% plus of these listings are for entire properties.
Some see this as an opportunity for agents, that 2020 could be the ‘year of Airbnb’. That certainly could be true for short-term landlords, and agents looking to take a bite of that market. But of this I would be wary, as short-term gain can undermine long-term sustainability.
A recently published report from the London-based economic research consultancy Capital Economics, commissioned by ARLA, analysed the scale of U.K.’s short-term lets sector and the wider implications for the private rented sector. The research found that active listings on Airbnb in the U.K. increased from 168,000 in 2017 to 223,000 in 2018 – that’s a 33% leap, and a significant market share of the growing U.K. lettings market. It’s also not the whole picture though, as data for similar short-term lettings services like Booking.com and Homeaway are unavailable.
The report further showed that 2.7% of the U.K.’s 1.5-million strong landlord population have already made the switch from long-term rental properties in the private rented sector to short-term lets, equating to 50,000 homes made unavailable to long-term tenants.
And worryingly, around 10% of U.K. landlords surveyed responded that they are considering moving their private rented properties to the short-term market.
The factors behind this are myriad, but over one-third of landlords surveyed acknowledged that it was because of changes to mortgage interest relief, which from April this year will be reduced to a 0% deductible.
Other forms of long-term regulation including higher stamp duty, the Tenant Fees Act, and the abolishment of Section 21 legislation currently under consideration are also cited as factors persuading landlords in the buy-to-let sector that the grass is greener on the other side.
Here’s the kicker. If every landlord in that 10% does move their properties to the short-term market, up to an estimated 470,000 properties would be removed from the private rented housing supply – around 8.7% of the entire U.K. rented sector stock. And that would significantly stretch already strained housing supply.
I’ve said previously that supply and demand in the lettings market is a leaking ship that threatens to capsize landlords and tenants if not navigated correctly through rough waters. If more stock is moved into the short-term lettings market through platforms like Airbnb it could have collateral impacts on the wider market.
Airbnb claims that between July 2017 and July 2018, the U.K. economy gained £3.5 billion from hosts and guests using the platform, with an estimated 8.4-million inbound guests using the platform over this period.
Great for the economy, you might think? But a healthy housing market is the real bedrock of a healthy economy, and the U.K. housing market is not in great straits at the moment.
Restrained confidence and uncertainty due to the earlier election and Brexit are only now loosening up. But whilst market confidence is returning, low stock in both the sales and rental markets is pushing up prices.
The latest Home Asking Price Index reports that total sales stock is down 10.1% year-on-year in February; and it’s worse for the rental sector, with the supply of available rental properties in the U.K. down 18% over the same period.
Low supply and increasing rents in the U.K. are a major concern. The latest official government statistics on U.K. rental housing show that private rents have increased 1.5% year-on-year in the 12 months to January 2020. But an extended trend outlook reveals that between January 2015 and December 2019, private rents increase by 8.6%. That’s a significant increase.
It’s even worse for the London, Airbnb’s bread and butter. According to Rightmove, asking rents in the capital have increased almost twice as quickly compared with the rest of the U.K.
Many Londoners are now paying more than half their income on rent each month. And with more than 1 in 50 London homes listed as short-term lets, it’s questionable whether Airbnb can continue its free reign throughout the capital and the U.K. when the country is in such dire need for affordable housing stock.
Pushing back against the short-let industry
With spiralling costs fuelling a chronic housing crisis, the voices calling for regulation of Airbnb-style short-term lets are getting louder.
The U.K. lags behind other countries when it comes to regulation for short-term letting sites like Airbnb, and it might be time to reconsider that. Research unveiled by The Guardian on February 20 reveals that in some parts of the U.K. one in four homes is an Airbnb listing.
Simultaneously produced research from the publication highlights that Airbnb’s presence in certain barrios (neighbourhoods) in Spain has pushed rent increases by as much as 50%, forcing locals to move to more affordable areas. It’s a warning sign the U.K. would do well to take note of.
Several countries and cities have started to push back against Airbnb and other short-term lettings platform because of the impacts felt on local communities and housing costs:
Berlin has enforced restrictions against short-term lets on platforms like Airbnb since 2016, requiring landlords to acquire a permit if they want to rent 50% or more of their main residence as a short let.
New York City is currently embroiled in a legal battle with Airbnb regarding the turn-over of host data. In fact, since launching in 2008, Airbnb has been involved in at least 11 lawsuits against an American city or state, with the majority of cases taking place within the last two years.
Edinburgh will soon bring in a licensing scheme from 2021 empowering councils to regulate ‘holiday-style’ lets if they feel it’s better for local communities. And in ‘control areas’, landlords will require planning permission before they can convert a whole property for short-term lets.
Perhaps to pre-empt any future legislation in London, Airbnb introduced in January 2017 the ’90-Day Airbnb Rule’, whereby short-term rentals for entire homes are capped at 90 days per year. But this has had mixed results, and research commissioned by City Hall has suggested that as many as 23% of London’s approximately 80,000 listings at the time of study were in breach of the 90-day limit.
Airbnb has disputed the figures, claiming the data is wrong as it comes from third-party scrapers which it considers inaccurate.
There have been calls to introduce a licencing scheme for the rest of the U.K., similar to what’s being introduced in Edinburgh. But this scheme is not being introduced by the government of city councils, it’s an Airbnb initiative.
Who really has the lead on legislation?
Back in January, Airbnb won a significant victory in a top E.U. court to be ruled as an ‘information society service’, or an online platform rather than an estate agency, if you will. It means that they get to avoid stringent regulations in place across Europe affecting how the company operates, and for the time being (whilst the U.K. remains part of the E.U.) gives them stronger freedoms against regulation in cities such as London.
Airbnb is certainly happy with the result, but does it match with the platform’s recent corporate pledge to make a ‘positive contribution to society’? That could be the intended impression.
The platform this month kicked off a series of registration roadshows in cities across the U.K. The aim of which is to ‘consult on proposals for a clear, modern and simple registration system for short-term rentals in collaboration with policymakers, communities and local hosts.’ In a recent ITV interview, they stated that: “We are good partners to cities and we have worked with more than 500 governments and organisations around the world to help hosts share their homes and follow the rules. We were the first platform to work with London to limit how often hosts can share their homes and we have led calls for a national registration system in the UK.”
It should be taken as a positive that Airbnb is trying to lead the way on responsible legislation. But forgive the cynic in me if I’m a little less optimistic. What’s more likely is that Airbnb is well aware of the impacts of their service in many cities and is trying to control the narrative and build a favourable impression ahead of their expected IPO later this year, whilst safeguarding against any threats towards their future revenues.
Whilst it’s easy to slay Airbnb as the cause of rising prices and lack of rental stock in popular cities, one can’t help but wonder if they aren’t merely the backdoor escape for landlords that have been cornered into an impossible scenario, with everything from scrapped tenant fee bans to zero mortgage relief, to a list of compliancy legislation so lengthy that it’s near impossible to self-manage a property, counting against them. Perhaps Airbnb is just the tip of the iceberg, where an unforgiving approach to landlords and a lack of government capacity to deliver on their house-building promises are the bulk of the problem that’s propping up Airbnb as the visible, easily targeted problem.
Researchers found that in local neighborhoods with a lower share of owner-occupancy, Airbnb had a higher impact on rising housing prices and rents. In areas with a higher share of owner-occupancy, Airbnb had somewhat less of an impact on property prices and rents.What is the problem with Airbnb company? ›
The biggest problems Airbnb Hosts deal with? The most common problems vacation rental hosts deal with are regulations, local laws, parties, excessive turnovers, unmanageable guests, not knowing your market and finding better guests.Do Airbnb rent out properties? ›
Airbnb is a third-party website that helps short-term rental homeowners connect to travelers. Hosts can list their properties on its platform and then rent them out on a short-term basis to guests. Airbnb does charge a service fee, but in exchange, it will market your Airbnb property and take care of the payments.What are the advantages of Airbnb? ›
Airbnb offers people an easy, relatively stress-free way to earn some income from their property. Guests often find Airbnb is cheaper, has more character, and is homier than hotels. Airbnb makes the bulk of its revenue by charging a service fee for each booking.Do Airbnbs lower property values? ›
A separate U.S. study found that a 1% increase in Airbnb listings leads to a 0.018% increase in rents and a 0.026% increase in house prices. It might not seem like much on the surface but there's a cost creep for those looking to rent long-term or buy.How does Airbnb affect the residential community? ›
Airbnb proliferation causes fewer affordable housing options, higher average asking rents, and erosion of neighborhood social capital.Does Airbnb cause housing crisis? ›
High yields or the ability to have a vacation home paid for by others does make it an attractive investment. Unfortunately, the short-term rental industry causing a housing shortage both in the U.S. and abroad.Is Airbnb destroying communities? ›
Airbnb crushes renters
In addition to stripping housing supply from local communities and commodifying residential real estate, which causes house sale prices to rise, house rental prices for working families have skyrocketed.
Lack Of Quality Controls For Hosts: Airbnb is almost everywhere but there is no standard of quality control which creates problems such as less comfort and cleanliness. Poor hosts can damage a company's reputation. If in any case, any host does not comply with Airbnb guidelines, they can face the consequences.What are the disadvantages of owning an Airbnb? ›
- Less Certainty. While there is the possibility of making more money off your house as an Airbnb rental than as a long-term rental, there are no guarantees. ...
- Less Freedom. ...
- Less Early Profits.
In general, Airbnb generates a greater nightly fee than a traditional rental. Several hosts have even claimed to make four times as much as they would have with standard renting. However, this only applies to Airbnbs with a high occupancy rate.Is Airbnb worth it or renting? ›
Airbnb is a valuable resource for many types of travelers, but it can be especially valuable for those looking for long-term stays. Booking a monthly rental on Airbnb can save significant amounts of money over shorter-term bookings, but it may still cost more than using a local resource.What are the pros and cons of an Airbnb? ›
- Pro: Airbnb Delivers Variety. ...
- Pro: Airbnb lets you live like a local. ...
- Pro: It's great for long-term stays. ...
- Con: Exorbitant fees. ...
- Con: Service is not consistent. ...
- Con: What you see may not be what you get. ...
- So is it time to ditch Airbnb?
The largest and best-documented potential benefit of Airbnb expansion is the increased supply of travel accommodations, which could benefit travelers by making travel more affordable. There is evidence that Airbnb increases the supply of short-term travel accommodations and slightly lowers prices.Is hosting Airbnb stressful? ›
The fact is that Airbnb can be an extremely fun, profitable way to earn money. But it can also be an extremely stressful experience if you don't take steps to minimize this.Do vacation rentals increase property value? ›
It's a Bit of an Investment, but Totally Worth It
Considering it can increase your property value and provide additional income (or help pay off your mortgage or rent), allowing short term rentals is definitely worth undertaking.
The annual occupancy rate of your property on Airbnb is paramount. If you're able to maintain an occupancy rate of 60-70% on your property, Airbnb would almost always be the most profitable option.Why are cities against Airbnb? ›
Some localities have outlawed or put restrictions on hosting Airbnb's for several reasons. One is that it takes away tax revenues normally paid to lodgers (although now Airbnb works with cities to collect such taxes), or takes away business from traditional hotels or B&Bs.What happens when Airbnb comes to the neighborhood the impact of home sharing on neighborhood investment? ›
Our instrumental variable estimates show that a one-percent increase in Airbnb listings raised the number of residential renovation projects by 0.527 percent and the value of retail renovation investment by 3.691 percent in the following quarter.Can I stop my neighbor from running an Airbnb? ›
If she cannot control her guests, call 311 to file complaints to the Fire Department, the Department of Buildings, and the Department of Housing Preservation and Development. Report the problem to Airbnb, which has a platform where neighbors can report problems with noise, trash and safety.
And the hotel industry is no exception.
The rise of Airbnb has not only drastically impacted the supply-side of the hotel industry equation, it has also altered guest expectations, changing the fundamental nature of the hospitality industry's demand-side, as well.
- Property damage to your Airbnb or Vrbo. ...
- Preventing guest injuries at your Airbnb rental. ...
- Theft of personal belongings. ...
- Squatters in your rental. ...
- Loss of use can equate to loss of income.
According to the latest stats, the hotel industry loses approximately $450 million in direct revenues per year to Airbnb. Not only that.Why Airbnb is killing the housing market? ›
The theory is that Airbnb — and other short-term rental companies like VRBO and HomeAway — are converting long-term rentals that would have housed local residents and families and putting them up on the short-term rental market for visitors, thus further decreasing an already short supply of housing.Is Airbnb losing popularity? ›
Still, demand for short-term rentals has risen, AirDNA data shows. September demand for Airbnb and Vrbo rentals was up 24% year over year, and was 26.6% higher compared with the same month in 2019. In addition, nights booked for future travel were up 19.3% year over year, according to AirDNA.What is Airbnb being sued for? ›
Hidden Cameras. In recent years, several Airbnb and Vrbo guests have filed lawsuits alleging that they were recorded without their permission.Is Airbnb still good 2022? ›
And yes, whether you're buying properties and listing them, or doing rental arbitrage or even cohosting, it's still a viable business. Even here midway through 2022, as markets melt and bubbles burst and I feel like I've basically been put through a meat grinder and turned into a nugget.Why did Airbnb Host decline? ›
If your reservation request is declined and the listing for the stay shows that it's still available, the host's calendar may not be up-to-date or they may want reservations of a different length or time.Will Airbnb be successful in the future? ›
For the first quarter of 2022, Airbnb expects its revenue to rise 59%-67% year over year. Analysts expect its revenue to rise 32% for the full year.How much does an Airbnb owner make a year? ›
Average Annual Host Revenue By Review Count: 2021/2020
Airbnb listings with 51-100 reviews on average earned $21,569 in the U.S. in 2021, and listings with more than 100 reviews on average earned even more - $23,862 in 2021. Properties with zero or a few reviews tend to make less for their hosts.
Apartments are Cheaper
To guarantee success for Airbnb rentals, it is usually advised to buy a property that is relatively centrally located to attract people and be more appealing to guests.
The Host service fee, which is generally 3% of your booking subtotal ($10.80 USD), is deducted from your earnings, and a service fee of 14% ($50.40 USD) is charged to guests and included in the total price they pay. In this example: You'd earn $349.20 USD.What type of Airbnb make the most money? ›
For Airbnb hosts looking to make a living on the hospitality platform, full apartment rentals are the way to go. Rates for full apartments are significantly higher than those for single rooms and income after expenses ranged from $15,000 to $31,000 in our analysis.How much do Airbnb hosts make on average per month? ›
Airbnb Host Monthly Income Ranges
15% of hosts earn $0 to $99 per month. 38% of hosts earn $100 to $499 per month. 22% of hosts earn $500 to $999 per month. 11% of hosts earn $1000 to 1499 per month.
- Rent your rental.
- Property management.
- Airbnb affiliate.
- Airbnb experience host.
- Airbnb house-sitter.
- Airbnb co-host.
My colleagues aren't alone. A 2021 study of more than 125,000 Airbnb complaints on Twitter found that 72% of the issues were related to poor customer service and 22% were related to scams.Why do people stay in Airbnb? ›
Tourists are mostly motivated to book Airbnb accommodations because of their low cost, convenient location, and household amenities. They are generally less motivated by the opportunity to interact with the host or other locals, or by the promise of an authentic, local experience.How Airbnb is creating value? ›
By making their customers partners, it has created a platform which creates value for everyone: hosts (that create value out of an unused asset), guests (that get a customized, affordable and authentic experience), and share that value by orchestrating the network and facilitating connections.Is Airbnb a positive example of sharing economy? ›
Airbnb is one of the business models that represent the expansion of the sharing economy into digital environments. The model offers several different benefits to its own customers, who are guests and hosts.Is Airbnb good for the local economy? ›
According to Airbnb, 74% of properties are located outside of the main hotel district. Of the vast majority of Airbnbs located outside of central hotel districts, 42% of guest spending is done in the neighborhoods where they stayed. Therefore, BnB rental directly benefits the local economy.
Their research found that, on average, a 1 percent increase in Airbnb listings led to a 0.769 percent increase in permit applications, suggesting that Airbnb can play a significant role in supporting local real estate markets, while boosting the local tax base at the same time.Why are cities cracking down on Airbnb? ›
COVID-19 sparked a boom in short-term rentals, and AirDNA found listings hit a record high in 2022. Some locals and officials in hot cities say they deplete housing stock or cause noise disturbances. 18 cities across North America are looking to rein in Airbnbs and short-term rentals.What are the weaknesses of Airbnb? ›
Weaknesses: Relying on strangers to host leads to legal violations. Airbnb faces problems stemming from housing laws and regulation violations. Hosts are paid for offering their rooms for a set time. It seems like easy money, and who doesn't want quick cash?What are the cons of Airbnb? ›
Con: Service is not consistent
When your stay is uneventful, there are no service issues at all. Airbnb customers report problems sometimes when there are issues at the property. Some hosts don't tell customers when there is loud or unsightly construction in the neighborhood.
Nuisance can be restrained by either civil proceedings for an injunction or action by the Local Authority under statute. Civil proceedings are expensive but the threat of such action, and the likely liability for costs, may be effective in itself to ensure your neighbour ceases such nuisance.Does Airbnb cause gentrification? ›
The proliferation of such rental services can be understood as a new factor that contributes to tourism gentrification, accelerating a process of neighborhood transformation and displacement that was already underway. Studies have found that STR services such as Airbnb increase gentrification.Can Neighbours complain about Airbnb? ›
You can report a party, noise complaint or neighbourhood concern here. For help with a reservation, hosting or your account, contact Airbnb Support – our Neighbourhood Support team is only available to help with concerns related to home sharing in your community.