Airbnb: Not good for the neighbourhood?

Airbnb might be great for travelers, but according to research by assistant professor of urban planning David Wachsmuth, BA’04, the popular short-term rental company is damaging the availability of affordable housing in several major cities.

Story by Sylvain Comeau

February 2018

Since its debut in 2008, short-term rental company Airbnb has developed a huge web presence, operating in 65,000 cities and 191 countries. In under 10 years, it has become a multi-billion dollar phenomenon, one with which governments and local residents are still trying to come to grips. Since the beginning of last year, assistant professor of urban planning David Wachsmuth, BA’04, McGill’s Canada Research Chair in Urban Governance, has led a research team looking at the impact of Airbnb.

Last August, they released a report about Canada’s three largest metropolitan regions (Montreal, Toronto and Vancouver). In January, they released their follow-up report, on the world’s third largest Airbnb market, New York City. They are currently looking at a group of Airbnb’s international markets.

The McGill News spoke to Wachsmuth about some of his group’s findings so far.

What were the similarities and differences in your results, when you compare the Canadian cities and New York?

We are looking at the impact of short-term rentals on long-term housing. We have found that the increase in Airbnb activity has made housing scarcer for residents. We are also trying to look at the market for short-term rentals, particularly who is earning the money. On both of those questions, we found a lot of consistency [in our results]. In pretty much every city we’ve looked at, roughly 10 per cent of the Airbnb hosts earned about half of all the revenue. That’s what surprised us the most.

When it comes to home sharing, most people picture something like this: You’re away for the weekend and you rent a room or home while you are away. In fact, that represents a very small percentage of the activity on the Airbnb platform. The real money is being earned by commercial operators, with something similar to a hotel.

Some people have become a kind of Airbnb tycoon?

Right. Looking at the example of Montreal, there is an operator on Airbnb with more than 100 listings, earning millions of dollars per year. This is dramatically different from the notion of renting out a spare room for the weekend, which was the original idea for the platform. And the commercial operators represent the fastest-growing segment of this market.

One of the conclusions of your study on Canadian markets was that Airbnb activity has removed over three per cent of housing units available for locals. How did this occur?

For example, up to December 2017, there were about 5,000 Airbnb listings in Montreal. Among the ones we call “frequently rented” — so that they have likely been removed from the long-term housing market — the number was 4,000. And we saw similar patterns in the other Canadian cities. If a property is being rented out for 300 nights per year, that used to be a place where someone could live. That reduces the amount of housing available for local residents.

So the commercial operators are landlords who own rental apartments, but decided that it’s more profitable to rent them out to visitors on a short-term basis?

Yes, residential landlords who either evict their tenants or, when a tenant leaves, start using that apartment for short-term rentals. Unless regulation is put in place to slow down this activity, we are likely to see more housing lost in the next couple of years — to a percentage higher than the three per cent figure that we observed.

Is this contributing to homelessness in Canadian and American cities?

Homelessness is ultimately the result of a shortage of affordable housing, for people at the bottom end of the income spectrum. Our research, and that of other academics, shows that Airbnb is aggravating those problems.

Affordability and availability are interconnected?

If you reduce the supply of housing available for long-term residents, you’re bidding up the price of housing. With lower supply but the same demand, prices will rise. Another factor is that you increase the economic value of homes when you make it easy for someone to rent out their basement, for example, on a short-term basis. That, in term, increases housing prices.

As part of your reports, your team issued regulatory recommendations. Is there any evidence that these are being adopted?

Toronto regulations that were passed in December look pretty similar to what we recommended. The big paradigm is restricting short-term rentals to residents, not large scale commercial operators. Both Toronto and Vancouver are moving in that direction. Another one is to place limits on the number of nights per year [that you are allowed to rent out]. But the trickiest part, which I don’t think anyone in Canada has been able to pull off, is to get Airbnb and its competitors to enforce these regulations on their platforms. That’s the tough part, but I hope cities will keep pushing for it.

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