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Digital Transformation

The Airbnb effect – Part 1: How do short term vacation rentals impact people and places?

Short-term rental properties have changed the way we holiday. But as the market has grown, cities and communities have been hit by a series of unforeseen and largely damaging consequences.

Professor Claire Colomb, Dr Tatiana Moreira de Souza
2 September 2021

The advocates of short-term rentals (STR) argue, first, that they democratise travel through lowering the cost of short-term accommodation for consumers (compared to traditional holiday accommodation such as hotels), thus benefitting families or travellers with less income.

Moreover, STR are argued to foster beneficial forms of social and cultural encounters between hosts and guests[1] [2] – an argument valid in the case of home-sharing in a strict sense. By contrast, the critics of STR – who come from different sectors – argue that such forms of accommodation pose safety issues for guests and generate unfair competition for hotels, in particular, those at the lower-end[3] – though evidence is not clear-cut.[4] [5] STR are generally subject to less stringent regulatory requirements than traditional hospitality establishments in terms of fire safety, accessibility, health and service standards, or taxation.

From the perspective of the operators of STR (so-called ‘hosts’), STR generate a source of income that can help homeowners or tenants improve or maintain their living standards. Airbnb contends that it is “democratizing capitalism by expanding the economic pie for ordinary people, allowing them to use their home, typically their greatest expense, to generate supplemental income to pay for costs like food, rent, and their children’s education”.[6] In cities where housing costs are very high, home-sharing is portrayed by Airbnb as “part of the solution to the housing crisis”[7], an argument heavily contested by other social groups, as we will see.

A number of studies have shown that not all urban dwellers can equally seize that opportunity, and that the operation of STR may reflect or reinforce existing spatial, socio-economic, labour and racial inequalities.[8] Individual operators of STR tend to be disproportionately white property owners (or tenants), highly educated and in possession of particular forms of cultural, social or financial capital (e.g. IT skills, presentation and communication skills or aesthetic taste).[9] [10] [11] In the USA, studies have noted a positive correlation between the educational level of hosts, the number and price of listed properties, and the income generated.[12] And it has furthermore been noted that “those with spare and marketable space to rent to tourists are generally not the primary sector of the population experiencing the greatest housing need”[13], thus contradicting the oft-mentioned argument that home-sharing is a significant ‘housing affordability’ strategy. This does not exclude the possibility that lower-income households may derive benefits from STR practices, particularly in neighbourhoods considered increasingly desirable by travellers seeking ‘off-the-beaten-track’ locations. 

Airbnb contends that it is ‘democratizing capitalism by expanding the economic pie for ordinary people, allowing them to use their home, typically their greatest expense, to generate supplemental income to pay for costs like food, rent, and their children’s education.’

Moreover, many studies have shown that in large cities, the STR offer available on the biggest platforms is no longer primarily composed of individual owners (or tenants) renting a room in their primary residence or renting their home when they are away, but instead is increasingly dominated by professional short-term rentals (defined as the letting on a commercial basis of an entire property not used as a primary residence to visitors staying for short time periods). This was first shown in North American cities[14] [15]. Another study of Paris, London, New York, Sydney and Hong Kong, showed that in 2016, between a quarter and half of all Airbnb listings were traditional holiday-let businesses, rather than examples of home-sharing.[16] Other studies have shown similar patterns of concentration of the Airbnb  offer in the hands of a small number of multi-property  operators in the cities covered in this report, for example, Barcelona[17], Paris[18] or Rome.[19]

The aggregate data extracted from the InsideAirbnb website in the autumn of 2019 confirms this finding.[20] The share of whole units as a proportion of the total listings offered on Airbnb (as opposed to rooms in a shared flat) ranged from 47.5% (Berlin) to 86.8% (Paris). While some of the whole-unit listings might be primary residences rented a few weeks per year while the host is away, a large proportion were available for more than 60 days a year (a percentage ranging from 28.2% in Berlin and Paris to 87.5% in Rome). In addition, the proportion of ‘multi-listings’ advertised by a single ‘host’ varied between 19.9% (Paris) and 67% (Lisbon). This demonstrates a professionalisation of hosts – more visible in some cities than others (for example, in Prague or in Madrid[21]). In Barcelona, 76% of entire homes and 50% of private rooms advertised on Airbnb in early 2020 were managed by multi-listing hosts.[22] Other authors have shown that this is accompanied by an unequal distribution of revenues among hosts: in Paris in 2015, almost 27% of hosts earned less than US$ 1,000 while 3.4% earned more than US$30,000.[23] For those reasons, critics have argued that the STR offer available on large platforms can no longer be described as forming part of the ‘sharing economy’.[24]

In Paris in 2015, almost 27% of short-term rentals hosts earned less than US$1,000 while only 3.4% earned more than US$30,000.

The largest platform, Airbnb, has produced a series of city-based reports on the economic impacts of its STR offer, starting with San Francisco in 2012.[25] Those reports argue that in popular urban destinations, the increase in STR contributes to a better territorial spread of tourist accommodation across neighbourhoods and generates sizable ‘trickle-down effects’ on local economies – claiming that 42% of guests’ spending ‘stays local’. The reports emphasise positive impacts for consumers and the tourism industry, for neighbourhoods and local businesses, and for resident households. Besides, an entire economy of new intermediary services has developed around, or been boosted by, the exponential increase in STR, involving the refurbishment of properties, the management of hosts’ profile, online communication, cleaning, key-picking and reception services. These services can be offered by individuals (often informally through precarious and low-paid activities) or by companies, some delivering highly professionalised packages (e.g.  Hostmakers or Airsorted). 

According to Airbnb, its reports are based on ‘the findings of host and guest surveys, Airbnb bookings data, and analysis by local economists’[26], although the detailed evidence base, econometric modelling assumptions and methodology for the calculation of those impacts are not explained and thus difficult to verify. The claims made in the company’s publications have consequently been contested, at times, by researchers and activists. Several studies have in particular sought to explore the geography of Airbnb listings in specific cities, revealing a mixed picture. In most cities, listings have indeed spread over time from central areas to more distant ones characterised by a smaller hotel supply and a higher residential stock.[27] [28] [29] [30] However, another study of 14 European cities, showed that Airbnb properties were, in 2016, sparsely located, if not absent, in poorer or ‘rougher’ areas of those cities.[31] The undeniable process of dispersion of STR does not invalidate the fact that, in all cities, the offer tends to remain, on the whole, highly concentrated in central neighbourhoods or in those near major tourist sites and leisure opportunities.[32] [33] In Paris, the Deputy Mayor in charge of housing – a  vocal opponent of professional short-term rentals[34] – has argued that ‘in the four central arrondissements of Paris, a quarter of all properties are now no longer homes but purely short-term rentals for tourists’.[35]

Rapid increases in short-term rental properties within a neighbourhood can contribute to a shift in the offer of services and shops towards the needs of visitors rather than residents.

In those areas with high concentrations of STR, the potential adverse impacts on the daily life of long-term residents have been at the core of fierce critiques and controversies. STR located in residential apartment buildings can be a source of disturbance for permanent residents due to the constant movement, and possible noise or anti-social behaviour, of guests. We heard anecdotal accounts of STR properties sometimes being used for criminal activities such as drug dealing. Daily life can also be disturbed by the increasing pedestrian traffic or waste generated by high concentrations of visitors. In neighbourhoods that may already be affected by processes of gentrification (i.e. the gradual displacement of lower-income residents by higher-incom e ones), the rapid increase in STR can contribute to a shift in the offer of services and shops towards the needs of visitors rather than long-term residents.

Finally, the issue of tax avoidance/evasion is often raised as problematic at two levels: that of platforms[36] [37], and that of individual STR operators who do not always declare the income from their activity. In Greece, the loss of tax revenues from the STR market was estimated at approximately EUR 270 million per year.[38] Additionally, in cities where a visitor or occupancy tax exists, it is often not remitted by hosts to the relevant authorities, unless it is automatically collected by the platforms. Critics also argue that the extra pressure on public infrastructure and public services generated in areas of heavy concentration of STR is a form of ‘free-riding’, as hosts and guests do not contribute to the costs of meeting the additional demand that they generate.

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This excerpt is taken from the Property Research Trust report Regulating Short-Term Rentals – Platform-based property rentals in European cities: the policy debates.

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References

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