Short-term rental platform Airbnb
Yet, what was once an innovative start-up offering a way to improve the travel experience while providing homeowners a simple side hustle, is now being viewed by some jurisdictions as a culprit behind an urgent housing crisis that is haunting urban centers across the globe.
Last week, Airbnb's earnings results beat analyst expectations, with an 18% revenue increase in the second quarter when compared to the same period last year. Management guidance is anticipating similar success for Q3.
Most analysts, however, maintained their previous ratings on the company, and shares dropped 2.1% in the five trading days since results were released.
Airbnb Vs. New York
For months, Airbnb has been quietly fighting a trend that could punch a hole in its bottom line: city restrictions.
On Wednesday, a New York judge dismissed lawsuits filed by Airbnb and three hosts against city restrictions that the platform claims are hampering its business.
The restrictions "appear intended to drive the short-term rental trade out of New York City once and for all," Airbnb said when filing its lawsuit in June. They would also affect competitor Booking Holdings Inc
The rules come as part of a 2022 city ordinance that is expected to begin enforcement next month. It requires owners to register with the mayor's office, disclose who lives in the property, and commit to complying with zoning, construction and maintenance rules.
Airbnb said it was forced to sue the city as the "extreme and oppressive" rules would result in a de facto ban on short-term rentals, the Associated Press reported.
Supreme Court Judge Arlene P. Bluth said that the rules are "entirely rational" and help tell apart illegal rental units before they're listed on the platform. They also prevent a worse case-scenario that would result in a full ban on short-term rental units.
Airbnb is still not happy. Global Policy Director Theo Yedinsky said that "the city is sending a clear message to millions of potential visitors who will now have fewer accommodation options when they visit New York City: you are not welcome," according to the AP.
Is Airbnb Behind The Housing Crisis?
Part of the motivation behind restricting Airbnb activity comes from the notion that short-term rentals diminish the supply of available housing, leading to the current housing crisis battering most urban centers worldwide.
Housing construction is moving at a slower pace than the need for new units across the U.S. A high cost of borrowing led by rising interest rates has made the problem worse in the past year, making existing home owners less likely to put their houses on the market.
Yet some reports claim that Airbnb is just a scapegoat in a much wider problem. According to census data gathered by an AirDNA analysis, of the 144 million housing units available in the country in the first quarter of 2023, just 0.8% -or 1.2 million- were available as short-term rentals like Airbnbs, Vox reported.
While the numbers don't look impactful on the national average, specific areas are by far more affected. A 2022 Elliman report on the New York City rental market found that there were more Airbnbs than available long-term rental units, as reported by Curbed.
Several other jurisdictions are looking to curb the impact of Airbnb-like short-term rentals on their housing market.
New Orleans is another city that's pushing to slow down Airbnb activity, with a more direct approach. In March, the city council introduced new regulations that limit licenses to one per city block and only allow Airbnb's in homes where the owner resides.
In June, Dallas joined the trend, by banning short-term rentals in residential neighborhoods, in a move that was pushed by a coalition of residents under the banner "Homes Not Hotels." The Dallas Observer reported that owners not living in the short-term rental turned houses into "party homes," that were disrupting neighborhood peace. Dallas is expected to begin enforcing the restrictions by the end of the year.
San Francisco and Seattle have also imposed hard restrictions on the number of short-term units that one person can own.
Yet the jury is still out on how much Airbnb is impacting the housing crisis. University of Southern California researcher Davide Proserpio recently told NPR Seattle/KUOW that when Airbnb enters a city, its presence drives up home prices by 20% and rental rates by 14%, according to his research.
On the other hand, AirDNA, which is not owned by Airbnb but receives data from the company, said that short-term rentals were responsible for only a 1% to 4% increase in housing prices nationwide.
Many other major world cities including Copenhagen, Tokyo, Berlin, Barcelona, Vancouver, Paris and London have placed strict limits on Airbnb activity and short-term rentals.
While Airbnb was able to survive through the COVID-19 pandemic and is growing sequentially, local restrictions in some of the most touristic destinations in the world could put a ceiling on the company's ability to grow its current business model.
