To be, or to Airbnb (That is the question)

Last year my friends and I decided to take a trip to London. Since we were all students, we were looking for something relatively cheap. We searched in all kinds of hotel websites until we found ourselves on Airbnb. After a short browse on their website, we decided on a room in Bethnal Green, which could fit all four of us for an incredible £50 a night. The room turned out to be one of three in a shared flat and although it was by no stretch of the word amazing, we certainly wouldn’t have been able to find the same price at a hotel. This got me thinking. Prices in that area fluctuated a lot from our modest £50 to a whopping £200-300 a night. If the landlords of these high-cost places earned £1500 a week, then surely they were making more money from short-stay lettings. But how was this affecting the people who were renting long-term? Moreover, in what way was it impacting the neighbourhood?

In order to get the wider picture we need to take a step back. Although Airbnb now boasts an astonishing portfolio of more than 6 million rooms, flats, houses and other properties worldwide, the company’s origins are far from impressive. In 2007, current CEOs Brian Chesky and Joe Gebbia were living together in a flat in San Francisco and struggling to pay their rent. In order to make some extra money on the side, they figured that they could take advantage of the fact that the city was experiencing a shortage of hotel rooms at the time. They put an air mattress in their living room and started charging tourists $80 a night to stay in their flat. A few months later they were joined by Nathan Blecharczyk and the website AirBedAndBreakfast.com officially launched by August 2008.

The rapid expansion of the company was an unexpected phenomenon. By 2012, 10 million nights were booked through the platform, while between 2015 and 2016 the business’ revenue nearly tripled. Despite its humble beginnings 11 years ago, Airbnb is estimated to be worth more than £23 billion today, offering dwellings virtually everywhere. What the founders originally had in mind when creating the company, though, has found little realisation in real life. Instead of householders listing an odd empty room in their property where people can experience a culture and community-centred holiday, people often get a room in a place where the owners don’t actually reside. What’s more, nowadays more than 55% of dwellings on Airbnb are entire homes. In big hubs like London, where more than 70 000 properties are being listed annually, the number is even bigger.

That being said, a lot of concerns have been raised regarding the way these short-term occupants are affecting communities around the world. Although the socio-economic environment that we live in has altered drastically in the last few decades, little has changed about what makes our housing situation successful: the neighbourhood we live in. Each community is comprised of people with different backgrounds, social status, ideas, and interests, and their needs often shape the architectural setting of the neighbourhood as well. A successful neighbourhood is an inhabited neighbourhood, where social interactions are encouraged through spatial planning. In his book ‘Cities for People’ Jan Gehl argues that lively cities are defined by safety, sustainability and health, but for that to be achieved, the citizens should act towards arranging their environment in a way that promotes public interactions and unified city life. 

However, in recent years locals have reported that short-term lettings are impacting their neighbourhoods negatively by taking out the human factor. In major cities like New York, Barcelona, and Amsterdam, a large portion of the dwellings in city centres are being let to tourists, rendering parts or even whole buildings into makeshift hotels. A study by the University of Lisbon found that in 2015, 9.6% of all properties in Barcelona’s Old Town were being converted into holiday rentals, with an even bigger number of 16.8% in the Gothic Quarter. A backlash from long-term residents about the problems holiday rentals create for them has resulted in numerous negative reviews on websites like Airbnbhell.com and various media outlets. In addition to being dragged in a whirlpool of ever-changing circumstances – people coming and going every few days, often causing problems like noisy parties, littering, parking problems and even verbal abuse toward neighbours, locals are often concerned about the character of their neighbourhood. The architectural qualities of some buildings are being altered in order to attract a larger spectrum of consumers while still retaining some uniqueness. This practice often leads to the creation of a weird architectural hybrid, somewhere between generic and historical. Townhouses are turned into a commodity by cramming in as many rooms as possible in order to maximise their rental revenue. At the same time, many of these renovations are not in line with local regulations, in particular, sizing requirements are often overlooked. Moreover, safety devices like fire alarms, which are compulsory for the hotel industry, are non-existent in most Airbnb listings. This creates risks not only for the holiday-makers but for locals as well. 

While holiday rentals undoubtedly bring back revenue for the local economy, studies show that actually a large number of properties in big cities were owned by real estate agencies or a single individual. For example, a third of the landlords of Airbnb who listed entire houses in Melbourne owned 3 or more properties in the area.

This leads to the second (and larger) issue, namely the way Airbnb is affecting the housing market. The trend of peer-to-peer economy is a relatively new phenomenon and it took a while to recognise the effect it produces on housing prices. In New York, a team led by David Wachsmuth studied Airbnb’s data for the period between 2014 and 2017 and discovered that a tenth of all the hosts in the city was renting out 50% of all holiday homes. These individuals earned around half of the entire revenue for 2017, or around $318 million. What’s more, the study estimated that in three years, rents in areas with clustering of Airbnb listings increased by 1.42%. In reality, Airbnb-listed properties earned up to three times the normal long-term rent. Although the city is suffering from a major housing crisis, with some 70,000 people living on the streets, around 50,000 short-term listings are available online.  On a nation-wide scale, a study suggested that with a 10% increase of Airbnb listings in any given area, rent shot up by 0.42% and housing prices by 0.76%. Of course, housing markets are affected by a lot of different factors; however, the fact remains that holiday homes are being taken off long-term rental lists, thus limiting the options available for people permanently living in the cities.

This creates a direct connection with our first point and it creates a vicious circle. Landlords let out holiday rentals in sought-after neighbourhoods in cities, therefore limiting the availability of permanent lodgings. This leads to an increase in housing prices in the area and forces people out. Tourists populate the central areas and this leads to a boost of the neighbourhood economy, therefore business owners raise prices. In turn, the long-term tenants move out into different parts of town, which leaves the neighbourhood devoid of its local community. After that, commercialisation ensues and soon what was a historically authentic part of town becomes a mishmash of ‘chic’ accommodations and tourist attractions. The heart of the city erodes.  

This brings forth the question:  What governmental actions are being taken to control the effect short-term rentals have on the housing market? Since 2015, London’s hosts can let whole properties for up to 90 days. In other cities, such as Amsterdam and Paris, holiday rentals can be offered for up to 60 and 120 days respectively. However, there is little local authorities can do to enforce these laws. Moreover, many hosts try to find loopholes to rent out their entire houses, for example by listing each room separately. New York has taken a stricter approach by ensuring that the property can’t be rented out for less than 30 days unless the host permanently resides there. This, however, has led to some homeowners renting out their properties illegally. Governments argue that it is up to Airbnb to make sure that their policies are being enforced, but an agreement has not been reached. 

Nevertheless, holiday rentals have proven to be an undisputed source of revenue for local tourism. In Edinburgh, while the residents fear that the spirit of the city is being changed by the 5000 rooms available for rent, they acknowledge the pros for small businesses. In London, it was estimated that Airbnb brought back £1.3 billion in revenues for locals just in the first half of 2018 alone.

On Airbnb’s tenth anniversary, the company’s CEOs predicted that by 2028, they would have hosted 1 billion people. With such a rise in tourist activity, the aforementioned issues are likely to exacerbate. The pricey holiday rentals contribute to a rise in housing prices and force people out of the city centres while affecting communities, which lose their original members. That being said, Airbnb should recognise the issues connected to its current practice and take a closer look into their original idea of community-based peer to peer rentals, forcing out landlords or letting agencies with a monopoly on holiday homes.  On another note, the local authorities should aim to draft legislations, which can be actively implemented to avoid malpractice both on behalf of the landlords and Airbnb. Hopefully, this would lead to protected communities and promotion of affordable housing while allowing tourism to thrive.