🏡💚 Are vacation rentals fueling the housing crisis?
May 31, 2024
The growth of short-term rental platforms like Airbnb and Vrbo have made possible a whole new array of vacation stays. But have they also made the housing crisis worse? Evidence from California seems to suggest yes, and others are taking note.
The reason for this is pretty intuitive. Instead of just offering the choice of different hotels (or, you know, actual Bed & Breakfasts), Airbnb opened up the possibility for people and corporations to convert homes into more lucrative short-term vacation rentals. Rather than providing long-term housing for people, these units were effectively taken off of the housing market and into the hospitality industry.
The results are pretty staggering. Since its founding in 2008, Airbnb has drastically changed the hospitality industry, and has reshaped communities. Stories abound of entire neighborhood blocks being converted to Airbnbs, and small towns being overrun by an explosion of tourists.
This only increases the speculative appeal of housing for investors and corporations looking to profit off of this opportunity. In turn, this drives the rent up for everyone else who actually live in the community, as they compete for less and less available rental housing.
Of course, Airbnb contests any arguments that they are driving the housing crisis, pointing out that short-term rentals are a tiny fraction of local housing stock, and that there is a myriad of complex causes of the housing affordability crisis.
While that is certainly true, evidence is also mounting that tamping down on short-term rentals causes rents to decrease. One of the best case studies is Irvine, CA, which barred rentals of 30 days or less in all residential areas starting in 2018. Unlike many other cities that tried to ban short-term rentals before it, Irvine took the next step to actually enforce their ban.
When researchers looked at the impact of this two years later, the results were significant. They estimated that the roughly 60,000 rental units in the city saw a 3% rent decrease on average, concluding that their findings “provide local governments with empirical evidence that [short-term rental] regulation policies could be helpful in reducing rents in cities."
This has spurred a number of other cities and governments around the world to take similar actions. In 2023, New York City put a ban on short-term rentals of 30 days or less. Sedona, AZ has a pilot to incentivize homeowners to convert their short-term rentals to long-term rentals for local residents. Other communities in California have followed suit as well, with Palm Springs limiting Airbnbs in 2022, and just this month Marin County put a cap on short-term rentals in unincorporated places. Interestingly, a lot of the discourse on the Palm Springs policy was that it caused home prices to go into “free-fall” — almost as if short-term rentals were causing rampant speculation…
The island of Maui reveals a striking example of how this intersects with climate disasters. After the Lahaina fire in August displaced thousands of residents, the housing crisis on Maui has become even more acute. The impact of short-term rentals on Maui is especially dramatic, where vacation rentals account for 15% of the island’s total housing supply. Earlier this month, Hawaii Governor Josh Green signed into law SB 2919, which gives counties the power to convert short-term rentals into long-term housing. Maui was quick to take advantage of this, with the Mayor proposing a phase-out of 7,000 short-term rentals, converting them back to long-term housing.
To be clear: this is not meant to guilt you for using Airbnb (I also rent Airbnbs). But it is worth considering the different tools we have to address the housing crisis, and what structures and policies we have in place that allow corporations to maximize profits at the cost of our housing stock.
And it’s true that this alone wouldn’t be enough to solve the housing crisis. But could we disincentivize Airbnbs through some kind of tax and use that money for social housing? Hmm… that’s not a bad idea. Oh wait — that was a bill proposed last year, SB 584 (Limon), that was backed by the Building Trades and would have imposed a tax on short-term rentals, with money set aside to go to “laborforce housing” (which has a very similar definition to social housing). That was turned into a two-year bill last year, and doesn’t seem to be moving this year, but it shows how this idea is already percolating up to the state level. Perhaps with the backing of a strong united coalition dedicated to green social housing, something like this could one day become a reality.
Lahaina Strong organizers and supporters rally for dignified housing for local residents. Source: Hawai’i Public Radio
WHAT WE’RE READING
State and Local Housing Decommodification Efforts and Their Implications for Federal Policy (Urban Institute)
Unhoused Californians Are Getting Older, And They’re Staying Unhoused Longer (LAist)
Looking to vacation on the California coast? Marin County just made it harder (LA Times)
California home prices hit a new record. How much higher could they go? (SF Chronicle)
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