How Airbnb and similar online services have changed the market rent

The proliferation of online services that allows you to quickly and without intermediaries (peer-to-peer, or p2p) to rent a home, they quarreled residents of large cities with the authorities and hoteliers. Latest sure the cause of the problems in the rental market in the first place sky-high rents, is Airbnb and similar services. “Tranio” understand the situation.

A scandal in a noble family

In November 2015 in San Francisco (California, USA) held a referendum, which among other issues, the residents had to decide whether to limit the abilities of users of the online service Airbnb. The authors put to a referendum “Proposal F” (the name given to a package of legislative amendments that have been made by opponents of Airbnb) proposed to introduce measures to control rent using p2p service:

• to limit the ability to deliver housing in the short term rent of up to 75 nights a year (it does not matter whether the owner of the property at this time in the house or not; recall that the current rental housing in San Francisco in the absence of the owner is limited to 90 nights per year and is not restricted in his presence);
• to require landlords to make quarterly reports about how many days were rented their housing.

The results of the referendum, 55 % of the residents of San Francisco voted against the adoption of the amendments. Disagreement of the majority of voters was due to the fact that Airbnb significantly facilitates the process of housing delivery in rent, which in this overheated market like San Francisco, brings great profit. At the same time, online rental significantly reduces the market supply of long-term lease and thereby contributes to an increase in rental rates, which annoys the citizens interested in such a lease. According to the group of activists of the Share Better SF, 70% of apartments, which could take long-term local, they rent out to tourists through Airbnb and similar services.

Due to high rents in San Francisco getting harder to rent an apartment

With the new digital reality faced not only the inhabitants and the authorities of San Francisco- a similar situation can be observed in Barcelona. In August 2015 the mayor of Hell Cola (Ada Colau) lashed out on Airbnb and Booking.com “the Internet should not become a way to bypass laws and be a cover for illegal renting to tourists.” Residents of Barcelona have joined the outrage and held several protests against the surrender of apartments for rent to tourists at inflated prices on the Ramblas (La Rambla). “The apartment that was previously rented for 300-400 euros per month now rented for 600-700 euros,”— said the representative of the local activists Oriol Casabella (Oriol Casabella).

So whether Airbnb and similar services have such a strong pressure on the real estate market of big cities? To answer this question is to turn to the history and development of this p2p platform.

The housing problem

Airbnb was launched in 2008 and almost immediately became popular with tourists. Today on Airbnb you can rent accommodation in 34 thousand cities around the world. Renting an apartment for a month can fetch the amount in two to three times greater than in its delivery to one tenant for 30 days.

While in less popular tourist destination cities the share of apartments offered on Airbnb, relative to the total number of free for rental housing is quite low. For example, in Austin (Austin) via the Internet service for only 6 % of apartments in Nashville (Nashville) — 3 %, while in new York — 18 %.

Moreover, the impact of Airbnb on the rental market is uneven, even in large cities: in some areas, as a rule, popular with tourists, the share of apartments rented through Airbnb was very high, in others the service may not actually affect rates.

For example, in London most apartments via p2p-service for rent in London (57 %), which is not surprising, because it is the city center where a lot of tourists and businessmen willing to pay for an expensive, but short-term lease. Slightly below the number of such ads in Kensington and Chelsea (40 %) and Camden (28 %), home to wealthy people, usually do not require any earnings on rent. In a less prestigious Greenwich bet is significantly lower, and landlords less (5 %), and in a not very successful Croydon the percentage of apartments rented on Airbnb, and it is 1 %.

Hotels under attack

The convenience of Airbnb already appreciated by investors: even with the high costs in the delivery of apartments for short term revenue is much higher than for long term rentals. Even if this apartment will stall without a tenant two months in the year, its yield will amount to 6-7 %, whereas long-term lease will bring only 3-4% per annum.

In addition to such a high level of profitability comparable to the income from commercial buildings, the apartments are handed over p2p services, there is one more important competitive advantage over other investment: it is cheaper than, for example, shopping center or hotel, so be the investors many. Now about a third of the ads on Airbnb place the owners of two or more apartments, which, in fact, become competitors of the small hotel business.

Airbnb and similar sites are really affecting the rental property markets of major cities. At the same time, the activity of local inhabitants and authorities is likely to lead to the fact that eventually there will be laws governing the use of such services and tax payments for their users. Some measures are taken now. For example, if you buy an apartment in Barcelona, you can rent an apartment for short term rental only with a special license from the local authorities. Investors hunt for these apartments, and those who do not have time to issue a license, are forced to take shelter only in the long term.

Marina Filichkina

Head of sales Tranio

Ivan Chepizhko, “Tranio”