Looking for the perfect apartment for your next big city adventure in New York? Or how about a relaxing bungalow for a beach trip to Byron Bay on the east coast of Australia? Or maybe a nice chalet for a ski trip to Whistler in Canada? If you are, you’ve probably found yourself among the many people scrolling the vast pages of Airbnb for the perfect way to ‘live like a local’ while traveling. However, I’d think twice before bragging to the local barista about the ‘great and cheap Airbnb’ you scored, unless of course you enjoy your coffee burnt.
Airbnb emerged with the ‘sharing economy’, where everyday people share, swap and sell their personal goods and services. On Airbnb, people are able to become ‘hosts’ (as the website calls them) and rent their accommodation out to others. The rental option is quite varied with people renting out entire houses, apartments, private rooms, shared rooms, a tent hitched up in their backyard or even a patch of grass if someone’s keen to BYO. The app and website allow users to connect with hosts across the globe and effortlessly book accommodation, usually at cheaper than hotel prices. The advancement and availability of the internet has made Airbnb, and other sharing apps such as Uber (ride sharing) possible.
Take a moment to consider how you would have secured a local resident’s room in Amsterdam without the web and the likes of Airbnb. Or perhaps how you’d barter a ride home with a stranger in a car without the Uber App.
What used to be a very difficult or probably impossible task can now be done in a few clicks on your smartphone.
Airbnb self-promotes as a means for homeowners to help pay off their mortgages by sharing their house through renting out spare rooms or holiday homes. However, on top of the honest house sharers that Airbnb has been designed for, the website has also become home to hosts and even commercial businesses out to make large profits. These people and businesses buy investment properties with the sole intention of capitalising on nightly rates through Airbnb instead of renting and leasing the properties out to local residents. In New York for instance, a recent study by AirDNA has shown that out of the 50,500 Airbnb hosts, 6200 are commercial operators who alone are responsible for 28% of all total Airbnb revenue in New York.
This a problem for the long-term rental markets (6 month and above leases) because properties that were once available for long term rent are now only available for short term rent at a high nightly rate.
What does this mean for the economy?
Fewer houses in the rental market results in a supply shortage, which leads to increased demand for leasing. As competition among renters in the market rises, the price of long term leasing increases.
Let me explain… Because there are fewer long-term rentals available, renters find it difficult to find a place and home owners find it easy to lease their places. This allows homeowners to raise the rental prices because people are competing to find a place and are therefore willing to pay a higher price to secure somewhere. The increased price or the ‘Airbnb effect’ has affected housing affordability in many of the big tourist hubs including New York, San Francisco, and Amsterdam, as well as smaller tourist destinations including beach towns and ski resorts.
Whistler, Canada, is home to Whistler Blackcomb, North America’s’ number 1 ski resort. The ski town is in the midst of a housing crisis. Due to Whistler’s popularity, the town has long suffered from a housing shortage. However, it is common local belief that the presence of Airbnb in the town has exacerbated the problem, causing what is now a full blown crisis. The town has a population of just under 12,000 however it’s Facebook page ‘Whistler Housing Rentals for Locals’ has over 25,000 members looking for housing.Posts of available houses on the page are scarce, and private rooms are practically unheard of. However, if you scroll through the pages of Airbnb you’ll find 17 pages of entire homes available for rent at an average nightly rate of $284, which could otherwise be leased to local tenants.
With a minimum wage of $11.35CAD (roughly $11.70 Australian) in British Columbia, these prices are unaffordable for any person hoping to live and work in the beautiful ski town. The local workers of Whistler generally pay around $1000/pm to share a room or studio apartment. Others who can’t find a place couch surf, live in their cars or commute 40 minutes from the closest town, Pemberton.
The small beach town of Byron Bay in Australia has begun to feel the same effects of the increased prominence of Airbnb. Byron Bay’s popularity as a destination extends past the town’s beautiful sandy beach. Australia has no shortage of golden beaches; however, Byron Bay is known for having ‘something in the air,’ and the town attracts visitors for its well-known mellow vibe, sense of community and interesting locals. However, just like employees in Whistler, the local workers that bring the town to life are being pushed out by the Airbnb effect. Simon Richardson, the mayor of the small surfer town stated that “Airbnb’s gutting our community”. Byron bay is at risk of losing the vibe that makes the destination so special.
‘Living like a local’ through Airbnb is an amazing experience, but what will these tourist hubs be like when the only people living local are the holiday goers? The sharing economy is still growing, and this new and disruptive technology is adversely affecting many traditional industries. The affordability of housing in tourist hubs is being exacerbated by Airbnb and the damage is being felt by the communities and locals of high tourist destinations who are facing the brunt of increased long-term rental pricing.
As this phenomenon continues to grow, traditional economies and governments across the globe are left to figure out who’s responsible for managing the impact that airbnb is having. The sharing economy is new and still very rouge. Policy makers world wide have struggled to try find regulations that meet the demand of the market and also create fair competition for existing businesses. Attempts to ban other peer-to-peer sharing companies such as Uber have failed in cities across Australia as the demand from the public is to high for government to manage. Government regulators need to work with companies in the sharing economy to find policy solutions that help the two economies blend into one.