Maybe, but the regression they use to argue this is pretty bonkers...they need to assume that once they control for income, population, education, and employment, the coefficient on the Airbnb share captures the causal effect of Airbnb on prices. But obviously AirBnB share will be correlated with many other things that make a neighborhood nice, which will also be correlated with prices. So this just says that desirable neighborhoods are desirable.
Note that the regression is on the differences, y_t - y_t-1 not the levels, just y_t.
So the argument is more subtle, that the "change" in AirBnB share is correlated with changes in rents. So level effects such as being a nice neighborhood are accounted for.
Having said that, a large change in AirBnB share is probably still related to unobservables related to factors that would increase rent. E.g changes in hipness of a neighborhood unaccounted for by changes in demographics. Therefore the $616M figure is biased upwards, though I bet in reality still a large number.
A brief description of how they attempted to control for other factors:
> We also control for demographic and economic changes in neighborhood level by including average household income (in log form), population (in log form), and the shares of college-educated and employed residents in the neighborhood. We also included year and neighborhood-level fixed effects (dummy) variables to control for otherwise uncontrolled-for trends and neighborhood characteristics.
I can't dl the report, but based on your quote, I'd say there's nothing about this 'study' supports their conclusion. It's fine that they control for some stuff, but it's absurd attribute the remaining price effects to AirBnB.
The odd thing is that AirBnB’s entire value proposition to hosts is that it increases realizable income from the property they control and make available through AirBnB; if true, especially in the presence of supply constraints, this has to increase market clearing prices.
They are in a position where what they need hosts to believe is directly at odds with what they want policymakers (including people voting directly on policy or for politicians) to believe.
The spin is preposterous. They should just say that that's a natural outcome of better real estate utilization and that the city needs to figure out how to build more affordable housing.
Yes, but it will also increase occupants and the experience of occupants.
If you put a fancy restaurant that sells gourmet popcorn, you raise the price of popcorn in general, and you can also increase the amount of people that eat popcorn.
I ponder, are there more rooms getting listed that weren’t before (increasing supply and dropping price) or are existing rooms on the market becoming more marketable (increasing price directly with a fixed supply as you suggest). “Both” yes but ponder more with me
Two problems mentioned in the rebuttal: the study counts every Airbnb unit as a rental taken permanently off the market, and the dataset counts every blocked-off calendar date as a night the unit was booked. Both of those are obvious over-counting. A study that doesn't even try to account for those is pretty obviously political.
Airbnb should have posted estimates of how much this over-counting could distort the data, because it sounds like a lot. $616M is one of those numbers that sounds high but in context probably isn't, so it wouldn't surprise me if those two distortions wiped out the number, or at least cut it to below headline worthy.
On the surface you can't assume either way if a listing on Airbnb means the unit is permanently off the market or not, likewise with counting or not counting every blocked-off calendar date: if it's not a period of 4-8-12 months blocked off, then it's likely not being rented to a long-term renter; the lister perhaps even perhaps booked those block-off calendar dates through a different service, or did the transaction not through/off of Airbnb.
Whether it's $100MM or $616M - it's a sign that there are external costs that that city and society must shoulder because of the higher prices people can charge with shorter-term rentals, primarily to non-locals who may or may not be staying or moving to the city.
From that: < The majority of our hosts are sharing the home in which they live, not removing permanent housing from the market. In fact, as NYU researchers recently found, in order for someone to make as much money from an Airbnb guest as from a long-term tenant, they would have to share a home for 216 nights a year in New York City — more than triple the number of nights that a typical listing is shared. >
They do not address the possibility that the atypical minority (which presumably is apartments used exclusively for AirBNB and not otherwise occupied by a tenant) might cause the $626M rent increase illustrated by the study. This paragraph seems to be a diversionary tactic, "No, look only at these facts".
The exact same true is for hotels, only worse. ANYTHING that uses up space that is not used for housing is by definition increasing rent for everyone. Hotels have a much bigger effect than Airnb because you'll find hotels in all of the most expensive and densely populated cities. If you replaced all hotels with regular rental units, think about how much rents would go down.
To be more accurate, the report should say: NYC Renters paid extra thanks to ANYTHING that takes up space that is not a rental unit, especially hotels.
Exactly. I wonder too if they are accounting for increased tax revenue due to more travelers visiting the city thanks to AirBnb. Honestly I've been able to travel a lot more because of AirBnb, and how affordable it is compared to a hotel.
At this point, prices are starting to stabilize with hotels in some of the bigger cities like NYC and SF, but still. I prefer the idea of freeing up under-utilized space for dynamic purposes as opposed to a fixed number of hotel location.
Hotels are taxed differently. They also tend to be somewhat denser than apartments, since they typically include only bedroom and bathroom, not kitchen or living room. And people are often willing to put up with a smaller hotel room than bedroom, since they only need space for a few days' worth of stuff there.
If a few thousand airbnb units cost renters that much money, imagine how much renters would save if more and taller buildings were allowed to be built!
There's already a major building boom going on in NYC at the moment!
11+ super-talls (300m+) and 40+ talls (150m+) are under construction at the moment, and more than that has been completed in just the last few years. Massive amounts of rental units and co-ops are coming online in UWS (Riverside Center), Hudson Yards in Mid-Town etc [1]. And prices have come noticeably down as a result, you can also get more concessions than ever. I just recently received 3.5 months free on a 14 month contract in a brand new building.
Indeed, we should be increasing housing supply further.
But even at a record breaking construction pace, we're building <20K units annually (that's 50 400-unit buildings) while population is increasing by >100K annually. And that doesn't even include the people who would move here if it were less unaffordable.
Zoning laws can only control what developers choose to build so much.
If you look at the rezoned mixed use districts like the garment & flower district and the lower east side, they've been flooded with hotel development (in some cases clusters of hotels on the same block) because it's more profitable.
Yes, much of the city is limited to four or five stories or otherwise restricted [1]. Keep in mind also that much of NYC is not just the financial district of Manhattan.
In addition to actual height restrictions, neighborhood associations also fight tooth and nail to prevent new development and to limit the height of new development when they can't.
There are a few historic districts (read: well-off NIMBYs) such as Park Slope where height is strictly capped.
In Manhattan the caps are generally designed to ensure that at least some light and air still reaches the street (before they were imposed, buildings were build to their full height to the edges of lots, and contributed to the city being very dark.
Much of Manhattan is actually somewhat low-rise (3-5 stories). In those areas, developers can buy "air rights" from neighboring low-rise buildings if they want to build taller on a nearby lot.
There are height caps based on FAR(floor area ratio) that vary by zoning. The super talls are quite new and due to some changes to FAR restriction and trading of air rights.
Accidentally, in most cases. It's the parking requirements that do it. For every X number of units, you need to guarantee Y parking spaces. Building more parking lots is poor real estate utilization and underground parking is prohibitively expensive. This is why developers build hotels instead of housing when the neighborhood can't absorb more parking (which is nearly always).
I am curious, doesn’t the legality of roommates also drive up rents? It seems like if roommates weren’t a thing, it would drive rents down simply because people wouldn’t be able to afford apartments in many cases without a roommate.
I am not suggesting a ban on roommates of course, but it does seem like there are a large number of variables that affect rent prices. We could argue that AirBnB constricts long term housing supply while roommates constrict long term housing supply for single or family renters as well.
If a one bedroom goes for $4000 and there are two roommates, that means the price the market would support for a single person is $2000. So without roommates, the market would have to adjust to the price people were able to pay: $2000. But then again, that could also restrict supply since there are more people competing for a finite supply.
My point is that while it’s convenient to blame AirBnB — the truth is far more complex. We also have to consider the effects of the extra income earned by owners — that income goes to buying things or investing, which, it could be argued, benefits the economy. There is also the question of how many visitors to New York actually can now afford to visit New York because of wider housing availability — if we drive up lodging rates, that’s less money coming into the city. If I have to spend $250 for a hotel vs. $150 for an AirBnB, that means I can buy more pizza, thus putting more money into pizza shops and supporting those workers. Additionally, if a hotel is $250, maybe I don’t visit at all, which would result in 0 economic benefit to the city.
The economics of this aren’t as sound-byte friendly as many might think.
If we want to be fair, we should also address how much additional rent New Yorkers pay due to rent-control and the housing illiquidity that promotes.
If the hotel industry is so concerned, then perhaps they ought to reevaluate their efficiency and pricing and reconsider their years and years of charging $10 for a bottle of water. Perhaps the city could also reconsider the occupancy taxes, sales taxes and all the other fees cities love to stick tourists with.
Tourists already pay sales taxes when they buy a meal. They buy products and experiences which generate significant economic activity, jobs and all the tax revenue that creates. But for some reason, cities see tourists as a piggy bank rather than the engine of economic activity they are.
Prohibiting roommates would drive the rent per person up and the rent per unit down. That would make the city less affordable to both renters and landlords.
The problem with AirBnB is that it benefits landlords and tourists at the expense of renters by driving the rent per unit up, the short term rent per person down and the long-term rent per unit up.
Is there really much evidence that the majority of Airbnb properties would otherwise be traditional "12 month lease" rental apartments if it were not for Airbnb.
I mean, I'm sure there are a few, but if I'm a landlord, why would I give up having a stable tenant paying market rate rent for 12 months at a time for essentially managing a hotel room?
Sure, the 'rent per day' is going to be a lot better with the hotel room model, but it seems like an entirely different business to manage say 30-100 property rentals per year rather than 1.
People have always subletted their apartments when they are out of town -- I'm guessing a lot of the Airbnb rentals are just those traditional sublets showing up in an easy to quantify form.
I'm open minded to the possibility I'm wrong -- I don't have the data on the history of the properties showing up on Airbnb -- but it seems like the profile for the landlord/apartment that ends up on Airbnb is a bit different from the ones that show up on StreetEasy with 12 month leases.
I think in general, it's very difficult if not impossible to realistically explore the counterfactual of "what would this property be if not for Airbnb".
However, in my neighborhood long term 12 month lease rentals most definitely seem to be being turned into Airbnb rentals. I live in Tahoe, so this isn't necessarily going to generalize to non-tourist areas. In the last five years there has been a steady conversion -- I personally know of four in my immediate neighborhood. (As in, they were long term rentals converted to Airbnb. I know the people that were kicked out of the long term rentals) When we'd recruit new people to Tahoe there used to be numerous options for local housing, things have gotten so bad that the company I work for opted to buy a condo to provide temporary housing for new recruits while they look for more permanent accommodations.
An additional (also anecdotal) data point: our realtor told us that investors looking to convert homes into Airbnb are very active right now.
On the plus side (potentially, not everybody agrees) Airbnb also seems to have converted a number of second homes that were previously unoccupied most of the year.
I'm not from NYC, not even from the US, but here are some reasons for locals to do that:
1) More money. Yes, stability is nice and all, and managing the reservations is annoying and/or expensive, but if the difference is big, people will choose it.
2) Renter-friendly laws. Here, if that stable leaser stops paying, it's a pain in the ass to get them out - you have to sue them in small claims court, and then have to go to another court to get an eviction order, which finally lets you kick them out. An Airbnb guest is only there for a few days, and after that they become a trespasser.
Rent stabilization rules may also prevent you from raising them as much as you could (though this is more a problem for longer than 12 month leases).
3) Fun. Some people I know really enjoy interacting with the guests and showing them around town :)
> but if I'm a landlord, why would I give up having a stable tenant paying market rate rent for 12 months at a time for essentially managing a hotel room.
As of today, there is a lot less paperwork involved, and also the tenant has fewer rights. If you rent for 12 months, and they stop paying you, it could take you many months to get rid of that person, and you'd never get the money back. You also have to find renters and negotiate leases yourself.
With AirBnB, they take care of the finding and negotiating part, and if you manage to get a popular spot, you'll make far more money with the short term rentals, even accounting for AirBnBs cut and any service providers you might need to maintain the place.
Fair enough, although there are plenty of realtors happy to help landlords vet and negotiate w tenants for 12 month leases (and then charge the tenant a fee for their services).
I still see more risk/work in the AirBnb model, but I can see where some landlords (esp. local ones w small numbers of apartments) could find it worth it.
I'm guessing a lot of the Airbnb rentals are just those traditional sublets showing up in an easy to quantify form.
This not true for NYC. There's always demand for rooms in NYC with quick turnover. There's always real estate speculators with empty rooms.
In the end, you really answered your own question:
the 'rent per day' is going to be a lot better with the hotel room model
You're right, it is a different business to manage, and maybe you're after less risk/more passive income as a landlord, but you can't make that assumption for everyone. Plus, AirBNB takes care of most of the paperwork.
Yes, the 0.7% of "rent controlled" units of NYC's available inventory that's shrinking by 2.5%/yr is totally stifling new supply.
Feel free to tell us about how the rent stabilized units, which do compromise 1/3 of the inventory but in 3/4 of cases are within spitting distance (10%, and see 4% rent increases every 2 years) of market rate are keeping down supply though. Tell us about about how luxury condos in places like East New York, Edenwald, Brownsville, Morrisania & Crotona, and Hunts Point are going to increase affordable housing in NYC. I am very interested in learning about this.
Or instead, how about I tell you about my time working for a real estate tax certiorari firm in NYC and how landlords with multiple properties will deliberately underutilize their buildings for tax advantages.
Occupancy maximums of 90% and one or multiple buildings deliberately at 0% occupancy (usually the primary residence of the landlords' extended family members for undeclared income) is the norm.
Readit News
So the argument is more subtle, that the "change" in AirBnB share is correlated with changes in rents. So level effects such as being a nice neighborhood are accounted for.
Having said that, a large change in AirBnB share is probably still related to unobservables related to factors that would increase rent. E.g changes in hipness of a neighborhood unaccounted for by changes in demographics. Therefore the $616M figure is biased upwards, though I bet in reality still a large number.
A brief description of how they attempted to control for other factors:
> We also control for demographic and economic changes in neighborhood level by including average household income (in log form), population (in log form), and the shares of college-educated and employed residents in the neighborhood. We also included year and neighborhood-level fixed effects (dummy) variables to control for otherwise uncontrolled-for trends and neighborhood characteristics.
Did Airbnb publish what these wrong facts and substantive issues are?
They are in a position where what they need hosts to believe is directly at odds with what they want policymakers (including people voting directly on policy or for politicians) to believe.
If you put a fancy restaurant that sells gourmet popcorn, you raise the price of popcorn in general, and you can also increase the amount of people that eat popcorn.
I ponder I ponder
I bet it depends on the city
AirBnB arguably increases supply of people in beds through more efficient utilization.
Airbnb should have posted estimates of how much this over-counting could distort the data, because it sounds like a lot. $616M is one of those numbers that sounds high but in context probably isn't, so it wouldn't surprise me if those two distortions wiped out the number, or at least cut it to below headline worthy.
Whether it's $100MM or $616M - it's a sign that there are external costs that that city and society must shoulder because of the higher prices people can charge with shorter-term rentals, primarily to non-locals who may or may not be staying or moving to the city.
https://www.airbnbcitizen.com/airbnb-new-york-and-housing/
https://www.airbnbcitizen.com/airbnb-new-york-and-housing/
They do not address the possibility that the atypical minority (which presumably is apartments used exclusively for AirBNB and not otherwise occupied by a tenant) might cause the $626M rent increase illustrated by the study. This paragraph seems to be a diversionary tactic, "No, look only at these facts".
Deleted Comment
To be more accurate, the report should say: NYC Renters paid extra thanks to ANYTHING that takes up space that is not a rental unit, especially hotels.
At this point, prices are starting to stabilize with hotels in some of the bigger cities like NYC and SF, but still. I prefer the idea of freeing up under-utilized space for dynamic purposes as opposed to a fixed number of hotel location.
11+ super-talls (300m+) and 40+ talls (150m+) are under construction at the moment, and more than that has been completed in just the last few years. Massive amounts of rental units and co-ops are coming online in UWS (Riverside Center), Hudson Yards in Mid-Town etc [1]. And prices have come noticeably down as a result, you can also get more concessions than ever. I just recently received 3.5 months free on a 14 month contract in a brand new building.
[1] https://ny.curbed.com/maps/nyc-new-development-hudson-yards-...
But even at a record breaking construction pace, we're building <20K units annually (that's 50 400-unit buildings) while population is increasing by >100K annually. And that doesn't even include the people who would move here if it were less unaffordable.
If you look at the rezoned mixed use districts like the garment & flower district and the lower east side, they've been flooded with hotel development (in some cases clusters of hotels on the same block) because it's more profitable.
In addition to actual height restrictions, neighborhood associations also fight tooth and nail to prevent new development and to limit the height of new development when they can't.
[1] https://www1.nyc.gov/site/planning/zoning/districts-tools/re...
There are a few historic districts (read: well-off NIMBYs) such as Park Slope where height is strictly capped.
In Manhattan the caps are generally designed to ensure that at least some light and air still reaches the street (before they were imposed, buildings were build to their full height to the edges of lots, and contributed to the city being very dark.
Much of Manhattan is actually somewhat low-rise (3-5 stories). In those areas, developers can buy "air rights" from neighboring low-rise buildings if they want to build taller on a nearby lot.
I am not suggesting a ban on roommates of course, but it does seem like there are a large number of variables that affect rent prices. We could argue that AirBnB constricts long term housing supply while roommates constrict long term housing supply for single or family renters as well.
If a one bedroom goes for $4000 and there are two roommates, that means the price the market would support for a single person is $2000. So without roommates, the market would have to adjust to the price people were able to pay: $2000. But then again, that could also restrict supply since there are more people competing for a finite supply.
My point is that while it’s convenient to blame AirBnB — the truth is far more complex. We also have to consider the effects of the extra income earned by owners — that income goes to buying things or investing, which, it could be argued, benefits the economy. There is also the question of how many visitors to New York actually can now afford to visit New York because of wider housing availability — if we drive up lodging rates, that’s less money coming into the city. If I have to spend $250 for a hotel vs. $150 for an AirBnB, that means I can buy more pizza, thus putting more money into pizza shops and supporting those workers. Additionally, if a hotel is $250, maybe I don’t visit at all, which would result in 0 economic benefit to the city.
The economics of this aren’t as sound-byte friendly as many might think.
If we want to be fair, we should also address how much additional rent New Yorkers pay due to rent-control and the housing illiquidity that promotes.
If the hotel industry is so concerned, then perhaps they ought to reevaluate their efficiency and pricing and reconsider their years and years of charging $10 for a bottle of water. Perhaps the city could also reconsider the occupancy taxes, sales taxes and all the other fees cities love to stick tourists with.
Tourists already pay sales taxes when they buy a meal. They buy products and experiences which generate significant economic activity, jobs and all the tax revenue that creates. But for some reason, cities see tourists as a piggy bank rather than the engine of economic activity they are.
The problem with AirBnB is that it benefits landlords and tourists at the expense of renters by driving the rent per unit up, the short term rent per person down and the long-term rent per unit up.
Deleted Comment
I mean, I'm sure there are a few, but if I'm a landlord, why would I give up having a stable tenant paying market rate rent for 12 months at a time for essentially managing a hotel room?
Sure, the 'rent per day' is going to be a lot better with the hotel room model, but it seems like an entirely different business to manage say 30-100 property rentals per year rather than 1.
People have always subletted their apartments when they are out of town -- I'm guessing a lot of the Airbnb rentals are just those traditional sublets showing up in an easy to quantify form.
I'm open minded to the possibility I'm wrong -- I don't have the data on the history of the properties showing up on Airbnb -- but it seems like the profile for the landlord/apartment that ends up on Airbnb is a bit different from the ones that show up on StreetEasy with 12 month leases.
However, in my neighborhood long term 12 month lease rentals most definitely seem to be being turned into Airbnb rentals. I live in Tahoe, so this isn't necessarily going to generalize to non-tourist areas. In the last five years there has been a steady conversion -- I personally know of four in my immediate neighborhood. (As in, they were long term rentals converted to Airbnb. I know the people that were kicked out of the long term rentals) When we'd recruit new people to Tahoe there used to be numerous options for local housing, things have gotten so bad that the company I work for opted to buy a condo to provide temporary housing for new recruits while they look for more permanent accommodations.
An additional (also anecdotal) data point: our realtor told us that investors looking to convert homes into Airbnb are very active right now.
On the plus side (potentially, not everybody agrees) Airbnb also seems to have converted a number of second homes that were previously unoccupied most of the year.
https://www.sfgate.com/travel/article/Study-Tahoe-s-Airbnb-l...
1) More money. Yes, stability is nice and all, and managing the reservations is annoying and/or expensive, but if the difference is big, people will choose it.
2) Renter-friendly laws. Here, if that stable leaser stops paying, it's a pain in the ass to get them out - you have to sue them in small claims court, and then have to go to another court to get an eviction order, which finally lets you kick them out. An Airbnb guest is only there for a few days, and after that they become a trespasser.
Rent stabilization rules may also prevent you from raising them as much as you could (though this is more a problem for longer than 12 month leases).
3) Fun. Some people I know really enjoy interacting with the guests and showing them around town :)
As of today, there is a lot less paperwork involved, and also the tenant has fewer rights. If you rent for 12 months, and they stop paying you, it could take you many months to get rid of that person, and you'd never get the money back. You also have to find renters and negotiate leases yourself.
With AirBnB, they take care of the finding and negotiating part, and if you manage to get a popular spot, you'll make far more money with the short term rentals, even accounting for AirBnBs cut and any service providers you might need to maintain the place.
I still see more risk/work in the AirBnb model, but I can see where some landlords (esp. local ones w small numbers of apartments) could find it worth it.
This not true for NYC. There's always demand for rooms in NYC with quick turnover. There's always real estate speculators with empty rooms.
In the end, you really answered your own question:
the 'rent per day' is going to be a lot better with the hotel room model
You're right, it is a different business to manage, and maybe you're after less risk/more passive income as a landlord, but you can't make that assumption for everyone. Plus, AirBNB takes care of most of the paperwork.
Or from rent control stifling the development of new supply?
Feel free to tell us about how the rent stabilized units, which do compromise 1/3 of the inventory but in 3/4 of cases are within spitting distance (10%, and see 4% rent increases every 2 years) of market rate are keeping down supply though. Tell us about about how luxury condos in places like East New York, Edenwald, Brownsville, Morrisania & Crotona, and Hunts Point are going to increase affordable housing in NYC. I am very interested in learning about this.
Occupancy maximums of 90% and one or multiple buildings deliberately at 0% occupancy (usually the primary residence of the landlords' extended family members for undeclared income) is the norm.
Rent controlled apartments were 1% of the total housing stock in NYC as of 4 years ago. That number has only decreased since then. So not at all.