How Airbnb Forces Up Housing Prices

Commentary about business and finance.
Feb. 13 2014 8:08 AM

More Guests, Empty Houses

Airbnb is great for tourists. Is it great for the housing market?

A Marfa sign is seen on the outskirts of town on December 25, 2012 in Marfa, Texas.
Welcome to Marfa, where the housing market is tightening.

Photo by Scott Halleran/Getty Images

When I first began listing my one-bedroom adobe house in Marfa, Texas, on Airbnb, the service seemed like a godsend. When I took a weekend trip, I’d host tourists from Austin; their rental fees would more than cover the cost of a few tanks of gas and a nice dinner. The rewards weren’t just financial: The people who stayed in my house felt more like houseguests than clients. After a visitor left, I’d find a handwritten thank-you note on the kitchen table, leftover snacks in the fridge, and once, a charming pencil drawing of my cat scratching his ear. And since the hotel options in town are limited, plenty of visitors were happy to pay below-market prices for an authentic Marfa experience, housecats and all.

This utopian vision of regular people helping each other out (and making a little money along the way) is a cornerstone of Airbnb’s PR strategy: “It’s like the United Nations at every kitchen table. It’s very powerful,” Airbnb co-founder Brian Chesky told attendees at a hospitality conference last year. “For us to win, no one has to lose.”

But that’s a more contentious claim than it might seem. Recent years have shown there are plenty of profits to be made in the short-term-rental world—and big profits tend to produce both winners and losers. Airbnb’s top 40 hosts in New York City have grossed more than $35 million combined. It didn’t take long for the original hosts of the so-called sharing economy to find themselves competing with enterprising property owners. “There are entrepreneurs out there who see that there’s a huge difference between the cost of a hotel room and what you can get on Airbnb, and they take advantage of it,” says Neal Gorenflo, co-founder of the nonprofit Shareable. “Basically, there’s a dramatic difference in the price of the same commodity that’s normally in two separate markets. People who have the means realize they can exploit that difference.” In a recent blog post, Gorenflo calls this “the dark side of the sharing economy.”

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It’s easy to see why many landlords would be tempted: They stand to make much more renting apartments to short-term guests at higher rates than they would if they signed up tenants for yearlong leases. In many cities (although not in Marfa), laws protect tenants somewhat, but property owners are finding creative workarounds. In San Francisco a man is suing his landlord for unjust eviction, claiming that he was kicked out of the rent-controlled apartment where he’d lived for nearly a decade, allegedly so his landlord could list it on Airbnb.

“We have a dwindling stock of rent-controlled units in San Francisco,” says Steven Jones, editor-in-chief of the San Francisco Bay Guardian. “Any of those precious few units going to visiting tourists rather than permanent residents certainly adds to the housing crisis here.”

One of the touted benefits of the sharing economy is that it enables people to make more efficient use of their resources. But increasingly, the effect is the opposite—property owners have a financial incentive to keep their houses empty more of the time, in anticipation of potential tourist dollars. “In my time here, I’ve seen about 20 percent of the housing stock become unavailable, through weekend rentals and out-of-town owners,” Marfa resident and Presidio County Judge Paul Hunt told a public meeting recently. “Forget affordable housing—we need available housing.”

In a tight housing market, the results can be dire: fewer places on the rental market, increased evictions, and rising rents for everyone. The battle over short-term rentals has gotten the most attention in New York City, where Airbnb is enmeshed in various legal battles. “By far Airbnb's most significant obstacle has come from those who want to protect the status quo—hotel companies and governments,” Andy Kessler wrote in the Wall Street Journal recently. But it’s not as though Airbnb is a little guy fighting the man—for one, the company has been valued at $2.5 billion. Furthermore, while most people would be glad to see overpriced hotel rooms go, with them might go important systems of protections, from union wages for hotel workers to complex rent control laws.

In Marfa the casualties of the short-term-rental economy include Cat Cox, a chef and founder of the local roller derby team, who is leaving town after her long-term rental got converted to vacation housing. What rankles Cox most is how the new rental economy favors tourists over locals. “Instead of having someone live in that house who’s contributing to the community, you’re turning the house into a place that gets rented out a couple of times a month,” she says. Increasingly, Marfa properties are owned by people who don’t live here, creating a slightly absurd situation in which a visitor from Portland pays Airbnb fees to a property owner who may well live in Portland herself.

A view of the Marfa water tower on December 24, 2012 in Marfa, Texas.
Hey, tourists need water to drink.

Photo by Scott Halleran/Getty Images

Airbnb causes costs to rise across the board, but benefits are spread in unequal ways. Median household income in Marfa rose 84 percent between 2000 and 2009, but more than a third of the population still lives in a household earning less than $20,000 a year. Home values rose at even more dramatic rates during the same period (more than 131 percent between 2000 and 2012). Starting next year nearly everyone will owe more in property taxes—but not everyone is augmenting her income with vacation rental profits. And a Marfan who does list her house on Airbnb or VRBO may stand to make more money than others if she’s a young, white host: A recent Harvard Business School study found that black hosts on Airbnb consistently charge less than nonblack hosts listing similar properties. (Airbnb reps questioned the study’s methods.)

Marfa City Council Member David Beebe sees the raging popularity of short-term rentals as a symptom, not a cause, of Marfa’s affordable-housing crisis. Shareable’s Gorenflo agrees: “I definitely don’t think it’s fair to pin this on Airbnb.” But even if housing issues aren’t Airbnb’s fault, it’s disingenuous for the company to present itself as a source of pain-free solutions, rather than a player in a complex system that does, indeed, have consequences.

New York isn’t the only city where Airbnb has run into legal obstacles: After rental rates began to skyrocket in Berlin, increasing more than 8 percent between October 2012 and October 2013, lawmakers became concerned that peer-to-peer rentals were contributing to the problem and driving up costs for long-term residents. As of Jan. 1, the city Senate instituted a strict new policy that experts hope will put 12,000 apartments back on the rental market.

I ended up deleting my house’s Airbnb listing a few months ago, both because I’m troubled by some of the implications of the short-term-rental economy and because I’m too lazy to keep my place that clean. I’m lucky, of course, in that I can afford to soothe my conscience without worrying about foreclosure. And I’m not alone: The Bay-Guardian’s Steven Jones also rented out his apartment on Airbnb for a few months before becoming one of the company’s critics. “I understand people’s individual motivations, and I’m sympathetic,” he says. “But those individual actions are adding up to a civic and societal problem.”

Rachel Monroe is a writer living in Marfa, Texas.