Clear Creek Board of County Commissioners Memo

To: Clear Creek Board of County Commissioners

From: Fred Rollenhagen, Planning and Building Services Manager

cc: Amy Saxton, Strategic and Community Planning Director

Date: April 13, 2021

Re: Clear Creek County Short Term Rental Policy

The purpose of this working session is to provide additional information about higher-level trends in how short term rentals are being regulated by local jurisdictions across the U.S. and how they are being regulated locally. Staff also looked into the underlying reasons and objectives as to why some communities adopted the regulations that they did. Staff also has provided the current status of the regulation of short term rentals here in unincorporated Clear Creek County.

Doing an search for “short term rentals” pulls up significant volumes of information from all over the world about the kinds of impacts STRs ( is usually targeted in articles and research papers, although there are many other companies) cause and effect. In general, there appears to be significant new research and discussion about STRs’ effect on housing, the housing market, housing availability and housing affordability; especially in communities popular with tourists. Staff pulled a few select articles and research studies and summed them up in the attached Exhibit B.

Staff also compiled information on what other nearby Colorado communities are doing to regulate STRs. Attached is a list of those descriptions. Additionally, Staff reached out to selected communities to delve a bit deeper as to why they chose to do what they chose. These are found in Exhibit A.

Most communities and studies currently appear to be mostly concerned about residential units being removed from the existing stock of housing, thereby putting more strain on housing supply, and new regulations appear to be attempting to address this issue. A few publications thought that the impact of STRs has minimal effect on local housing supply. A study conducted for Santa Barbara county identified this, and a survey of housing experts by Zillow identified that few experts thought that there would not be a meaningful impact on supply and affordability of long-term rentals.

If a community is concerned about its housing stock, some straightforward recommendations have been made by a few of these publications;

1. Regulations should limit the reallocation of housing stock from long-term to short-term without discouraging the use of home-sharing by owner-occupiers

2. Prioritize housing needs of residents over the needs of tourists when the two aims conflict

This can be achieved in a number of ways on varying levels. As examples:

1. Require that STRs be allowed only to applicants who are primary residents of the home they are renting

2. Place a limit on the number of STRs that are allowed in the community

3. Impose a limit on the number of days a STR can be rented out in a given year

Current status of the Program

As of the end of March 2021, below are the current numbers for short term rentals in unincorporated Clear Creek County:

1. # of known properties currently being rented out as STRs: 135 2. # of STR Permits issued: 96 3. # of applications currently under staff review: 9 4. # of applications begun online but application not yet submitted: 17 5. # of known STR properties that have not yet applied for a permit: 13 6. Known STR properties as a % of total number of residences in the County: ±3.8% (3581 residences in County, DRCOG Housing Data; 2018)

The total number is consistent with what we found in 2018 and 2019 when we found upwards of 135 – 137 units being advertised as STRs. In 2020, the numbers dropped to 108; most likely due to the pandemic and related lockdown. We don’t know for sure if any of those STRs were converted back to long term residences, or if the owners simply stopped listing them for rent. We think it was mostly the latter.

2 Exhibit A

What are other nearby Communities doing and Why?

1. Town of Georgetown - Town originally imposed a 7% cap in each ward (there are 3 wards in Georgetown). Which means; no more than 7% of residential units in each ward are allowed to be used for STRs. - Ward #3: full and there is a waiting list - Ward #2: has not hit its max yet - Ward #1: full with a small waiting list - In Dec. 2020, BOS approved revisions; 1. dropped limit to 5% of total (app. 47 – 48 units) 2. Must have owned the home for 2 years 3. Annual renewal 4. Life/safety inspection each year 5. No more than 2 adults per bedroom 6. A permit is not required for room-renting 7. Exception: Big Horn Crossing; condos can be rented out as STRs via the Bighorn Crossing development approval - Why? BOS wanted to discourage potential buyers of residential property from buying them for sole purpose of STR use. - Approximately 200 units are second homes

2. City of Idaho Springs - City allows only 15 STR licenses to primary residences only. (no absentee owners) - Goal was to keep as much housing available for long-term housing as possible. City acknowledges they have very limited physical space to grow and develop more housing. - Parking is challenging; requirement for onsite parking; but they allow off-site parking on a case by case basis - City council expressed concern that the City would go purely in a tourism-oriented direction if STRs were allowed more than how they are currently allowed. - There are very few second homes in Idaho Springs - STR license requires an annual building inspection

3. Summit County (My perception is that Summit County is in a similar situation as we are; just on a larger scale, in that they are trying to figure out what direction to go with their current regulations) - Current regulations allow an unlimited number of STRs with no primary residence restrictions (similar to Clear Creek) - Summit is very tourism-based and tourists need places to stay - When current regulations were adopted, the County and all municipalities got together to develop common regulations. - Recently (since 2017), they began discussing issues surrounded by STRs by talking about it during their Comp Plan update: 1. Concerned about carrying capacity of the County (how many people can the County really accommodate) 2. Concerned about STR proliferation (current # of STRs are in the 1000’s) 3. Some concern for worker housing - Community Permit Req'd? Primary Residency Req'd? # of Permits allowed Bldg. Inspection Req'd? Occupancy Limit? Clear Creek County Yes None Unlimited Yes Max 8, and based on water/sewer avalability Summit County Yes None Unlimited Depending on unit type and sewer availability Grand County Yes None Unlimited Yes, but not specified in regulations Park County Yes None One per property At County's discretion Based on water/sewer availability and house occupancy Jefferson County Yes + Spec. Exemption from BOA None Unlimited Bldg. Stds must be met Not more than 5 bedrooms in dwelling Eagle County No Lake County Yes None Unlimited No Based on sewer availability Chaffee County No? (local HOA permission req'd) None Unlimited No Based on sewer availability

Georgetown Yes No 5% of total units in each Ward Yes Max 2 adults per bedroom Idaho Springs Yes Yes 15 Yes Does not appear to be Empire Yes No Unlimited Yes No Silver Plume No Exhibit B

Summary of Articles, Reports and Studies found related To Short Term Rentals

1. Harvard Law and Policy Review How Airbnb Short-Term Rentals Exacerbate Los Angeles’s Affordable Housing Crisis: Analysis and Policy Recommendations Feb. 2, 2016 - The article indicates that “inappropriate investors” permanently remove residential units from the residential housing stock by converting many units to STRs. But on the upside, Airbnb also allows homeowners to use STRs to make some extra money to help pay for their unit. - On average, as much as 3% of apartments in the city’s neighborhoods where tourists frequent have been converted to Airbnb’s. - Neighborhoods like Venice (adjacent to the beach), up to 12.5% of apartments have been converted to Airbnb’s. - In tight housing markets, a sudden reduction in housing supply “naturally” increases rents (called supply shock). Generally, a 1% decrease in supply leads to a 0.2% increase in rent. - Additional data is needed to know how STRs affect evictions and rents. - San Francisco: has a 75-day limit on the number of days per year a unit can be listed. There is also a cap of the # of units any individual business can list in a given year. - Recommendations: prioritize housing needs of residents over needs of tourists when the 2 aims conflict. Establish policy that; a. Addresses rent increases b. Adds to the city’s market-rate and affordable housing stock c. Discourages conversion of whole units to STRs d. Eliminates incentives that encourage “hotelization” of apartment complexes e. Protects residents from displacement - Given the inelasticity of the housing supply, it is inappropriate for investors to permanently remove units from the residential housing stock in order to cater to tourists.

2. Market Watch Do push up rents and house prices? Feb. 2, 2021 - Germany study; 14.2% increase in rents as a result of units being used for STRs. - “while a large proportion of hosts can be considered home sharers, we find an increasing proportion of providers who have developed a professional business model from short-term rentals. Professional short-term rentals area available to tourists throughout the year, and thus compete directly with long-term tenants, for whom the rooms are then no longer available.” - Residential units around tourist destinations are most affected - “Regulations on home-sharing should (at most) seek to limit the reallocation of housing stock from long-term rentals to short-term rentals without discouraging the use of home-sharing by owner-occupiers”. - One suggestion; levy an occupancy tax solely on property owners who rent out an entire property for an extended period of time, and require proof that property owners live in the homes they own to avoid the tax.

3. Zillow Experts: Short-Term Home Rentals Have Little to No impact on Housing Affordability Dec. 6, 2016 - Survey was taken among housing experts to get their opinion (the article did not appear to explain who a “housing expert” is) - Only 5.1% of housing experts with an opinion thought the ability to rent out whole homes would have a meaningful impact on the supply and affordability of long-term rentals.

4. Vox CEPR Policy Portal Short-term rentals and the housing market: Quasi-experimental evidence from Airbnb in Los Angeles Dec. 20, 2018 - L.A. County study after policy change of restricting rentals of entire homes - Regulations Examples: in Berlin, a home owner must occupy the home a minimum of 50% of the time. san Francisco: 90-day per year rental maximum. Amsterdam: 30-day rental maximum per year. - Article said regulations could affect housing prices both ways; depending on the highest and best use - Study suggests a reduction in housing prices due to home-sharing ordinances (ordinances that allow for owner-occupied STRs only) - In areas that are attractive to tourists, the effect of STRs on property values can be large: 10 – 14% increase in value near beaches, and near downtown L.A.

5. Real Estate (United Kingdom) The Airbnb Effect On Housing And Rent Feb. 21, 2020 - There are about 80,000 listings on Airbnb in London. 55% of those are for entire properties (residential units) - Capital : 2.7% (out of 1.5 million) of U.K.’s landlords have switched from long term rentals to STRs - Spain: Some studies suggest rent has gone up 50% due to presence of STRs in some neighborhoods - Berlin: a permit is required if the landlord wants to rent 50% or more of their main residence as a STR.

6. Report prepared by the California Economic Forecast The Effect of Short Term Rentals on the Supply of Housing in Santa Barbara City and County May 12, 2016 - Found an increase in 1/10th of 1% of long term rentals available to the public as a result of the prohibition of STRs (which is not significant) - The study does not support the perception that STRs have a significant negative impact on the supply of long-term housing

7. 9 News (Denver) article by Jeremy Jojola Short Term Rentals have little Impact on Denver housing Market, City Report Says Sept. 12, 2019 - City and County of Denver’s new “primary residence rule” has helped reduce the impact of STRs on the housing market. - Therefore, STRs have very little impact on the cost of housing (Denver imposes a rule similar to Idaho Springs in that the residence must be your primary residence in order for you to apply for a STR permit).

8. CBC, Natalie Nanowski Stricter bylaws for Short Term Rentals come into Effect this Week Sept. 8, 2020 - City of Toronto enacted rules that allow only primary residents to rent out their home. - Purpose is to ensure homes are not removed from the City’s housing stock for STRs.

9. TransWorld SNOWboarding (Tyler Macleod) The Long-Term Effects of Short-Term Rentals: an examination of the Mountain town Housing Crisis Jan. 25, 2019 - First-person observations and experiences of a snowboarder trying to find housing in Grand and Summit Counties and the effects of STR industry on them over time. - In Winter Park, author checked Craigslit for housing ads. 4 properties were being advertised for rent. - At the same time, 300 STRs were being advertised on Airbnb. - AirDNA identified only a 16% occupancy rate of existing STRs, so most housing converted to STRs aren’t even being used a majority of the time. \\jciprod01\productn\H\HLP\10-1\HLP108.txt unknown Seq: 1 2-FEB-16 11:42

How Airbnb Short-Term Rentals Exacerbate Los Angeles’s Affordable Housing Crisis: Analysis and Policy Recommendations

Dayne Lee*

I. INTRODUCTION

Los Angeles, California, is in the midst of an affordable housing crisis. Rents have increased by 7.3% in 2014 alone, and the median renting house- hold already spends 47% of its income on housing.1 This crisis has added fuel to the contentious debate over Airbnb, a startup technology company that facilitates short-term rentals (STRs) of residential homes to tourists. Whereas Airbnb and its users tout its positive effects on tourism, cultural exchange, and the environment, its critics contend that Airbnb harms neigh- borhoods, distorts the housing market, undermines labor unions, and exacer- bates Los Angeles’s affordable housing crisis. In regulating Airbnb, policymakers seek to curb Airbnb’s impacts on neighborhood character and housing while harnessing the economic activity it brings.2 Employing legal, statistical, and secondary source analysis, this article explores how STRs affect the price and aggregate supply of affordable hous- ing rentals in Los Angeles, and how municipal policymakers can best regu- late Airbnb. In Section I, I briefly outline the contours of Los Angeles’s affordable housing crisis, and describe Airbnb and its growth in Los Ange- les. The topics of Section II are the effects that STRs have on rents and Los Angeles’s aggregate supply of affordable housing. Section III of this article analyzes how and to what extent Airbnb leads to displacement, gentrifica- tion, and segregation in Los Angeles’s residential neighborhoods. In Section IV, I assess strategies, regulations, and policies that municipal policymakers and stakeholders can use to regulate Airbnb. Finally, in the Conclusion, I recommend a set of regulations, taxes, and community-benefits agreements that will force Airbnb to be a partner that promotes, rather than impedes, the goals of affordable housing advocates.

* J.D. Candidate, Harvard Law School (expected 2017). The author gratefully acknowl- edges professors Rick Su and Esme Caramello, as well as Eloise Lawrence for their advice regarding this article. He thanks the dedicated Harvard Law & Policy Review editors for their thoughtful editing and comments. 1 See Los Angeles Home Prices & Values, ZILLOW (Sept. 30, 2015), http://www.zillow .com/los-angeles-ca/home-values/ [http://perma.cc/J82K-A3F3]; Rosalie Ray et al., Impacts of the Widening Divide: Los Angeles at the Forefront of the Rent Burden Crisis, UCLA LUSKIN SCHOOL OF PUBLIC AFFAIRS CENTER FOR THE STUDY OF INEQUALITY, Sept. 2014, at 8, http:// issuu.com/csiucla/docs/ziman_2014-08w/1 [http://perma.cc/P4GH-KFHW]. 2 See, e.g., Steven Leigh Morris, Airbnb is Infuriating the Neighbors. Is it Time for New Rules?, LOS ANGELES WEEKLY (Jan. 22, 2015), http://www.laweekly.com/news/airbnb-is-infu- riating-the-neighbors-is-it-time-for-new-rules-5343663 [http://perma.cc/4JG2-KAJM]. \\jciprod01\productn\H\HLP\10-1\HLP108.txt unknown Seq: 2 2-FEB-16 11:42

230 Harvard Law & Policy Review [Vol. 10

Airbnb likely reduces the affordable housing supply by distorting the housing market in two interconnected mechanisms. The first such mecha- nism is one of simple conversion: any housing unit that was previously oc- cupied by a city resident, but is now listed on Airbnb year round, is a unit that has been removed from the rental market and has essentially been added to Los Angeles’s supply of hotel rooms. This leads to a real, but likely mild, increase in citywide rents, an effect that is concentrated in affluent or gentri- fying neighborhoods along the city’s central core. More disconcertingly, conversion reduces Los Angeles’s already-limited supply of affordable hous- ing. The second mechanism is “hotelization.” So long as a property owner or leaseholder can rent out a room on Airbnb for cheaper than the price of a hotel room, while earning a substantial premium over the residential market or rent-controlled rent, there is an overpowering incentive to list each unit in a building on Airbnb rather than rent to Los Angeles residents, thereby creat- ing “cottage hotels.” This decreases the supply of housing and spurs dis- placement, gentrification, and segregation. These two mechanisms distort the rental housing market, which tradi- tionally does not overlap with the hospitality sector. Tourists stay in hotels that are specifically permitted for and developed in commercially zoned neighborhoods. Residential housing is zoned and built through a wholly dif- ferent process. Airbnb facilitates the inappropriate merging of the residential and tourist markets on an unprecedented scale, and unlike with a shortage of, say, shoes or oranges, neither the market nor the public sector can swiftly replace the housing units that Airbnb removes from the marketplace. Thus, city officials regulating Airbnb—and regulating STRs generally—must ad- dress conversion and hotelization head on. As detailed in Section IV and the conclusion of this article, policymak- ers should pursue targeted bans and regulations that discourage conversion and hotelization. A simple tax on STRs alone will likely be insufficient to fund the replacement of converted units, and may serve to further incentivize hotelization. In exchange for Airbnb’s cooperation with enforcement, city officials could allow Airbnb to participate directly in expanding the hospital- ity market.

A. Background: Los Angeles’s Affordable Housing Crisis

Los Angeles, California, has become America’s least affordable rental housing market. In 2014, the average renter in Los Angeles County3 paid

3 Los Angeles is a city located within the County of Los Angeles, California. Approxi- mately one-third of Los Angeles County residents live within Los Angeles. Unless stated oth- erwise, the statistics and neighborhoods referenced in this article refer to the city of Los Angeles, not the overall county. County-wide statistics are used as they are here when city- specific statistics are unavailable. \\jciprod01\productn\H\HLP\10-1\HLP108.txt unknown Seq: 3 2-FEB-16 11:42

2016] Airbnb and L.A.’s Housing Crisis 231

$1,716 per month.4 And within the city, where most residents rent, the me- dian renting household earned less than $40,000 and spent 47% of its in- come on housing.5 One in two middle-income families and nine in ten families from the bottom income quintile are rent burdened, spending at least 30% of their income on rent.6 The city’s affordability crisis has developed because of declining real wages, population growth, and zoning policies that favor single-family and luxury housing.7 The foreclosure crisis of 2010 exacerbated the affordability crisis by pushing over 100,000 former homeowners into the rental market.8 At the same time, wealthier residents repopulated the city core, rapidly gen- trifying low-income immigrant enclaves such as Chinatown and Highland Park.9 As a result, rents increased by 7.3% in 2014 alone.10 Over the past decade, 143,000 market-rate apartments that were once “affordable” (mean- ing that rent constituted 30% or less of a resident’s monthly income) to fami- lies earning under $44,000 per year became unaffordable.11 Los Angeles’s public housing infrastructure is ill equipped to protect low-income renters. Experts consider the city’s Rent Stabilization Ordinance (RSO) to be weaker than comparable regulations in San Francisco or New York, largely because its 3% cap on annual rent increases does not apply to units built after 1978, and because it does not prevent landlords from ex- ceeding the cap in between tenancies.12 California’s Ellis Act exempts from local rent control provisions landlords who purchase a rent-controlled unit from a prior owner, provided that the prior owner is selling in order to exit the business.13 As neighborhoods gentrify, evictions of RSO-protected te- nants rose by 235% in 2014 as landlords sold their protected units to com- mercial developers, who are in turn exempted from rent control obligations

4 Richard K. Green et al., 2014 USC Casden Multifamily Forecast, USC LUSK CENTER FOR REAL ESTATE, Feb. 2014, at 12, http://lusk.usc.edu/sites/default/files/2014-USC-Casden- Multifamily-Forecast.pdf [http://perma.cc/AM24-EN57]. 5 Ray, supra note 1, at 8. 6 Id. at 9 (citing US Census American Community Survey data from 2009–2011). 7 Id. at 6, 13. 8 How Los Angeles County’s Housing Market Is Failing to Meet the Needs of Low-Income Families, CALIFORNIA HOUSING PARTNERSHIP COALITION REPORT, May 2014, at 2, http://www .chpc.net/dnld/Housing_Need_LA_Final_060414.pdf [http://perma.cc/7BVZ-TCXT]. 9 See, e.g., York & Fig, AMERICAN PUBLIC MEDIA (2014), http://yorkandfig.com [http:// perma.cc/UYK9-RA46]; see also infra Fig. 2. 10 See ZILLOW, supra note 1. 11 Ray, supra note 1, at 8 (acknowledging that the authors’ affordability benchmark is 30% of income). 12 See Economic Study of the Rent Stabilization Ordinance and the Los Angeles Housing Market, LOS ANGELES HOUSING DEPARTMENT, 2009, at 8–9; see also Ben Bergman, Has Rent Control Been Successful in Los Angeles?, SOUTHERN CALIFORNIA PUBLIC RADIO, (Sept. 12, 2014), http://www.scpr.org/news/2014/09/12/45988/la-rent-has-rent-control-been-successful- in-los-an/ [http://perma.cc/H5G3-P24R]. 13 California Ellis Act of 1985, Cal. Gov’t Code § 7060.7 (West). \\jciprod01\productn\H\HLP\10-1\HLP108.txt unknown Seq: 4 2-FEB-16 11:42

232 Harvard Law & Policy Review [Vol. 10 pursuant to the Ellis Act.14 Meanwhile, the Section 8 voucher waitlist has been closed for nearly a decade due to limited funding.15 City officials have been similarly unable to increase the stock of afford- able housing. Since 2006, the city has been able to build only a fifth of the 5,300 affordable units that Los Angeles needed to add each year.16 This is largely because funding has plummeted; the Los Angeles Affordable Hous- ing Trust Fund fell from $100 million in 2008 to just $19 million in 2015, while $1.7 billion in state funds have been cut from the California Redevel- opment Agency and the Community Development Block Grant program.17 For renters, an affordability crisis is the downside to Los Angeles’s ubiqui- tous taquerias, Korean barbeque restaurants, and perennial beautiful weather.

B. Airbnb and the Short-term Rental (STR) Phenomenon

Los Angeles’s affordability crisis has developed alongside the transfor- mation of its tourism sector by STRs—rentals of entire apartments to tour- ists for fewer than thirty days—arranged through Airbnb. A pair of art students founded Airbnb in 2008 to help travelers bypass expensive hotels and gain local experiences by “couch surfing” with strangers.18 Tourists use the Airbnb website or mobile application to browse and reserve accommoda- tions in a city or neighborhood of their choice; instead of staying at a hotel or motel, a tourist can “couch surf” with, or rent an empty apartment from, a stranger in another city during their vacation. For “hosts,” Airbnb is a platform through which apartment owners or lease-holders can rent out anything from a spare living room couch to entire apartment units, with Airbnb collecting “host service”19 and “guest service” fees from each transaction.20 On its platform, Airbnb allows both hosts and tourists to exchange pictures of the units, “review” apartments and guests on a five-star system, communicate privately, and securely exchange money.

14 Leo Duran, Ellis Act Evictions in L.A. on the Rise, SOUTHERN CALIFORNIA PUBLIC RA- DIO (Apr. 24, 2015), http://www.scpr.org/news/2015/04/24/51256/ellis-act-evictions-in-l-a-on- the-rise/ [http://perma.cc/N8XZ-ZAEY] (describing how the Ellis Act allows rent-controlled properties to be sold to commercial developers). 15 Ray, supra note 1, at 13. 16 Id. 17 Ben Bergman, Garcetti Wants Airbnb to Help Solve L.A.’s Affordability Crisis, SOUTH- ERN CALIFORNIA PUBLIC RADIO, Apr. 16, 2015, http://www.scpr.org/news/2015/04/16/51042/ garcetti-wants-airbnb-to-help-solve-la-s-affordabi/ [http://perma.cc/EW8J-L7NC]; CALIFOR- NIA HOUSING PARTNERSHIP COALITION REPORT, supra note 8. 18 Jessica Pressler, The Dumbest Person in Your Building is Passing Out Keys to Your Front Door! The War over Airbnb Gets Personal, NEW YORK MAGAZINE (Sept. 23, 2014), http://nymag.com/news/features/airbnb-in-new-york-debate-2014-9/ [http://perma.cc/4ZYV- CMRX]. 19 What are Host Service Fees?, AIRBNB, https://www.airbnb.com/help/article/63/what- are-host-service-fees [http://perma.cc/Q24Q-7AMJ]. 20 Brittany McNamara, Airbnb: A Not So Safe Resting Place, 13 COLO. TECH. L.J. 149, 151 (2015). \\jciprod01\productn\H\HLP\10-1\HLP108.txt unknown Seq: 5 2-FEB-16 11:42

2016] Airbnb and L.A.’s Housing Crisis 233

Now worth thirteen billion dollars, Airbnb is among the most lucrative poster-children of the so-called “,” in which technology companies circumvent business regulations and well-established competitors by facilitating direct, peer-to-peer exchanges of goods and services.21 Similar cottage-scale rentals have been possible since the dawn of the Internet, but Airbnb’s unique success stems from its secure and exceptionally well-de- signed website, and from its users’ positive experiences. Airbnb has transformed Los Angeles’s hospitality industry. In 2014, Los Angeles city residents listed 11,401 units on Airbnb, including 7,316 whole-unit STRs.22 By comparison, Los Angeles has 97,000 hotel rooms, though these are dispersed throughout the county.23 Approximately 135,000 of the forty-five million tourists to visit the city in 2014 stayed in an Airbnb unit.24 Airbnb reports that in 2014, it generated $314 million in economic ac- tivity in Los Angeles, and that by redistributing revenue from corporate ho- tels, it helps everyday Angelenos cope with rising rents and economic instability.25 Airbnb touts its positive effects on cultural exchange, and 37% of surveyed guests state that they would not have been able to travel to Los Angeles for as long a period of time without the service.26 Finally, Airbnb presents home-sharing as a sustainable, energy-efficient, and environmen- tally conscious alternative to hotels.27 But criticism of Airbnb’s business practices has mounted at a rapid pace. The Venice Neighborhood Council contends that STRs are illegal be- cause they blatantly violate zoning codes banning sub-thirty-day rentals in residential or multifamily zones.28 Hosts’ neighbors allege that rowdy tour- ists undermine public safety.29 And unions and hotels complain that Airbnb unfairly competes with hotels by avoiding occupancy taxes and zoning laws, skirting public health regulations, and undercutting unionized hotel workers by connecting its hosts with independently contracted cleaners.30 Los Angeles’s “Airbnb economy” does not match the idyllic image Airbnb promotes, in which artistic, young professionals couch surf from Los

21 Molly Cohen & Corey Zehngebot, What’s Old Becomes New: Regulating the Sharing Economy, BOSTON BAR JOURNAL (Apr. 1, 2014), http://bostonbarjournal.com/2014/04/01/ whats-old-becomes-new-regulating-the-sharing-economy [http://perma.cc/NN7V-HPU2]. 22 Roy Samaan, Airbnb, Rising Rent, and the Housing Crisis in Los Angeles, LAANE (Mar. 2015), http://www.laane.org/wp-content/uploads/2015/03/AirBnB-Final.pdf [http://per ma.cc/MTJ4-DLJA]. 23 Hugo Martin, Lacking Sufficient Lodging, L.A. Tourism Growth, L.A. TIMES (Apr. 13, 2014), http://www.latimes.com/business/la-fi-tourism-wars-20140423-story.html [http://perma .cc/5CZ6-G25J]. 24 David Owens, Positive Impact of Home Sharing in Los Angeles, AIRBNB (Dec. 4, 2014), http://publicpolicy.airbnb.com/positive-impacts-home-sharing-los-angeles/ [http://perma.cc/ B4W3-LCTL]. 25 Id. 26 Id. 27 Id. 28 Morris, supra note 2. 29 Id. 30 Samaan, supra note 22, at 15, 22–26. \\jciprod01\productn\H\HLP\10-1\HLP108.txt unknown Seq: 6 2-FEB-16 11:42

234 Harvard Law & Policy Review [Vol. 10

Angeles to New York to Madrid, exchanging apartments through Airbnb with their fellow travelers. In practice, 64% of Airbnb listings in Los Ange- les are for STRs of units that are never occupied by their owners or lease- holders, and operate year-round essentially as independent, unlicensed hotel rooms.31 Chances are, an apartment booked through the service is managed by a full-time investor or company that also owns or leases dozens of other Airbnb listings.32 Such companies contract in bulk with decorators and cleaners, manage reservations, and negotiate above-market rent leases with building landlords in exchange for the privilege of renting units out on Airbnb.33 Airbnb’s emergence has significant political and policy implications for Los Angeles’s tourism sector, sustainability efforts, and labor movement. As a bona fide cultural phenomenon, Airbnb has galvanized opposition among neighborhood organizations, labor unions, and affordable housing advocates. Yet it has also mobilized a groundswell of support from hosts and guests alike. The narrow focus of this article, however, is the effects that Airbnb STRs have on Los Angeles’s affordable housing market.

II. AIRBNB INCREASES RENTS, INCENTIVIZES HOTELIZATION, AND REDUCES THE AFFORDABLE HOUSING STOCK

An Airbnb-affiliated economist claims that Airbnb is a scapegoat for broader economic trends in Los Angeles, and that it has increased monthly rents by just six dollars over five years.34 Rental pricing is certainly a com- plicated topic, but there is a simple underlying dynamic between STRs and the rental market. Tourists and renters are non-overlapping populations with different needs, traditionally served by non-overlapping markets. But be- cause 64% of its listings are STRs for tourists, Airbnb brings an increasing number of the forty-five million tourists who visit Los Angeles each year into direct competition with renters, distorting the housing market.35 Each apartment or home listed year-round on Airbnb is a home that has been removed from the residential housing market and added to the city’s aggregate stock of hotel rooms; I label this phenomenon “conversion.” So long as a property owner or leaseholder can earn a substantial premium from Airbnb rather than renting to city residents, there is an overpowering incen- tive to “hotelize” entire buildings, further reducing the aggregate housing

31 Id. at 8. 32 Adrian Kudler, Meet LA’s Most Prolific Airbnb Host with 78 Units for Rent, CURBED LA (Mar. 12, 2015), http://la.curbed.com/archives/2015/03/airbnb_los_angeles_most_prolific_ host_ghc.php [http://perma.cc/4WMD-7MXH]. 33 Id. 34 Kristen Lepore, Apartment Conversions to Airbnb Hotels Driving Up LA Rents, Critics Say, SOUTHERN CALIFORNIA PUBLIC RADIO (Mar. 16, 2015), http://www.scpr.org/news/2015/ 03/16/50321/are-apartment-conversions-to-airbnb-hotels-driving/ [http://perma.cc/PF4S- KBST]. 35 Bergman, Garcetti Wants Airbnb to Help Solve L.A.’s Affordability Crisis, supra note 17. \\jciprod01\productn\H\HLP\10-1\HLP108.txt unknown Seq: 7 2-FEB-16 11:42

2016] Airbnb and L.A.’s Housing Crisis 235 stock. Compounding these market distortions, neither the market nor the public sector can swiftly replenish the housing stock, given the time, cost, and legal barriers to developing affordable housing in Los Angeles. In light of this basic dynamic, the following sections detail how this market-mixing function raises rents and reduces the supply of affordable housing in Los Angeles.

A. Airbnb Increases Rents in Neighborhoods with a High Density of Airbnb Listings

Airbnb listings are concentrated in just seven of the city’s densest, most expensive neighborhoods: Venice, Downtown, Miracle Mile, Hollywood, Hollywood Hills, Echo Park, and Silver Lake.36 These tourist destinations account for nearly half of Airbnb listings, and 69% of all Airbnb-generated revenue in Los Angeles.37 In 2014, rents in these neighborhoods were 20% higher, and increased 33% faster, than rents citywide.38

36 Kudler, supra note 32. 37 Id. 38 Id. \\jciprod01\productn\H\HLP\10-1\HLP108.txt unknown Seq: 8 2-FEB-16 11:42

236 Harvard Law & Policy Review [Vol. 10 , 41 IMES Whole Listings L.A. T , 40 Total Units Unit 39 Mapping L.A. Neighborhoods Vacancy Avg. EIGHBORHOODS N IRBNB 7 A Renters Household OP 1: T . IGURE F % of Airbnb Residents Vacancy Rate) VAILABILITY IN – note 22, at 18. Population and household data are from A 40,885 68.80% 28,128 1.9 4% 15,422 882 supra 267,092 78.04% 208,440 104,266 3,104 Population that OUSING H (total units) x (LA average whole unit STR %). ENTAL R (Estimated Renters / Household Size) (1 Neighborhood (2010) Rent (Estimate) Size Rate (Estimate) Top cities and vacancy rates are from Samaan, Estimate: Miracle Mile STRs estimated from 39 40 41 Venice DowntownMiracle MileHollywoodHollywood HillsEcho ParkSilver LakeTotals 34,811 6,197 22,988 93.40% 85,489 59% 46.50% 32,413 92.40% 43,832 10,689 32,890 3,656 78,992 1.6 76% 64.30% 1.8 2.5 2.1 21,148 4% 10,689 3.50% 3.50% 3% 21,168 2.3 3 7,154 38,979 1,508 3.50% 220 3.50% 315 646 9,528 543 11,507 268 230 http://maps.latimes.com/neighborhoods/ [http://perma.cc/U3XF-FRUM]. \\jciprod01\productn\H\HLP\10-1\HLP108.txt unknown Seq: 9 2-FEB-16 11:42

2016] Airbnb and L.A.’s Housing Crisis 237

Figure 1 shows that 3,104 whole-units are listed on Airbnb in these neighborhoods, which have a rental stock of 104,265 units.42 To the extent that whole-unit STRs are listed throughout the year, as much as 3% of the apartments in these districts—which have a low 3.5% vacancy rate—have been removed from the market and converted to tourist accommodations. This distortion is particularly acute in beachside Venice, where, according to one study, 12.5% of the neighborhood’s apartments are listed on Airbnb.43 In tight housing markets with near-zero vacancy rates, a sudden reduc- tion in supply naturally increases rents, particularly because neither the mar- ket nor the public sector can swiftly add to the housing stock. Unlike with most commodities, a shortage in housing supply cannot be ameliorated by importing or quickly building additional units. Assuming that a given neigh- borhood permits and can physically accommodate the construction of new housing, building an average unit of rental housing in Los Angeles requires an investment of $315,000, three years just for permitting, and additional time for construction.44 Thus, a sudden removal of between 3% and 12.5% of a neighborhood’s housing stock constitutes a supply shock. The price effect of a supply shock in Los Angeles is compounded by annual increases in residential demand, and by the upward pressure that the allure of STR profits puts on property values, which in turn affect property taxes and rents. Even under a simple economic model holding the demand for rental housing constant against a relatively flat supply curve that has a price-elasticity coefficient of 0.200, each 1% decrease in supply would lead to a 0.2% rent increase.45 Under this model, the rent on a $2,680 one-bed- room apartment in Venice would increase by an additional sixty-seven dol- lars per month from the reduction in local supply alone.46 In addition to a supply-related rent increase, the market could be af- fected by demand pressures from the allure of STR profits, and from acceler-

42 Estimated using household size data from Mapping L.A. Neighborhoods, supra note 39. 43 Samaan, supra note 22, at 3. Like the Samaan report, Section II.A of this article as- sumes that whole-unit listings are listed year-round on Airbnb. However, it is likely that the whole-unit STR figures cited from the Samaan report include some housing units that are in fact occupied by the owner or leaseholder for most of the year, and are not listed year-round on the service. Such units are not removed from the residential housing market. 44 Cost per unit from California Department of Housing and Community Development, see Affordable Housing Cost Study: Analysis of the Factors that Influence the Cost of Building Multi-family Affordable Housing in California, CAL. DEP’TOF HOUS. & CMTY. DEV. ET AL. 32 (2014), http://www.hcd.ca.gov/housing-policy-development/docs/finalaffordablehousingcost- studyreport-with-coverv2.pdf [http://perma.cc/A98W-WG6T] [hereinafter Affordable Hosu- ing Cost Study]. See also Ben Bergman, LA Rent Crisis: Why Aren’t There More Affordable Apartments?, SOUTHERN CALIFORNIA PUBLIC RADIO (June 12, 2014), http://www.scpr.org/ blogs/economy/2014/06/12/16821/la-rent-crisis-why-aren-t-there-more-affordable-ap/ [http:// perma.cc/6N8L-Q3UE]. 45 See, e.g., John M. Quigley & Steven Raphael, Regulation and the High Cost of Housing in California 26 (Berkeley Program on Housing & Urban Policy, Working Paper No. W04- 008, 2004) (finding that the price elasticity coefficient to supply is .360 for non-rent controlled rental markets). A regression analysis would be needed to specifically determine the Los An- geles housing market’s price elasticity. 46 See Venice Home Prices & Values, ZILLOW, http://www.zillow.com/venice-los-angeles- ca/home-values/ [http://perma.cc/87J8-3TJE]. \\jciprod01\productn\H\HLP\10-1\HLP108.txt unknown Seq: 10 2-FEB-16 11:42

238 Harvard Law & Policy Review [Vol. 10 ated inflation at the tail-end of the distribution in a housing market with near-zero vacancies. Put simply, a renter in an Airbnb-saturated neighbor- hood seeking to occupy one of the handful of available apartments is no longer bidding against the local residential rent price, but is instead bidding against the extra profit that STRs can bring. By incentivizing the conversion of residential units to tourist housing, Airbnb causes a small, but notable, increase in citywide rents. In the neigh- borhoods with the greatest concentration of Airbnb listings, this rent-increas- ing effect is much greater; Airbnb accounts for a significant portion of the accelerated rent inflation seen in neighborhoods such as Venice and Silver Lake.

B. Airbnb Reduces Supply by Encouraging Illegal Conversion, Hotelization, and Evictions

In addition to causing a small increase in rents, Airbnb substantially reduces Los Angeles’s aggregate supply of housing. Thus, as residents bid for a smaller number of available units, an increasing number of residents are priced out of their neighborhoods, or even the city, entirely. The phe- nomenon of “hotelization” accelerates this process. Airbnb creates a strong incentive for property owners and renters to permanently “hotelize” entire buildings by renting each unit to tourists through Airbnb rather than finding long-term tenants. This reduces the housing supply, and places demand-side pressure on Los Angeles’s dwindling stocks of subsidized and unsubsidized affordable housing. Although Airbnb claims that it mostly provides middle-class renters and homeowners with supplemental income, it generates 89% of its revenue in Los Angeles from whole-unit STRs without on-site hosts.47 To the extent that such units are listed on Airbnb year-round, these figures suggest that Airbnb’s business model is based on encouraging hotelization and evictions, not on helping renters lease out spare rooms to make ends meet.48 Although it is unclear what percentage of full-time Airbnb listings whole-building “hotels” constitute, news reports paint a vivid portrait of the hotelization phenomena in action. Entrepreneurs approach landlords in popular neighborhoods expressing their intent to list rental units year-round on Airbnb.49 Investors in Silver Lake and Venice have also bought homes and apartments for this purpose.50 In the Ellison Suites building in Venice, where the average monthly rent is $1,500, one woman rents fourteen units and lists them on Airbnb for $200

47 Samaan, supra note 22, at 9. 48 The rental of spare bedrooms may also distort the housing market by pushing up prices. 49 Tim Logan, Emily Alpert Reyes & Ben Poston, Airbnb and Other Short-term Rentals Worsen Housing Shortage, Critics Say, L.A. TIMES (Mar. 11, 2015), http://www.latimes.com/ business/realestate/la-fi-airbnb-housing-market-20150311-story.html [http://perma.cc/48BR- CRFN]. 50 Morris, supra note 2. \\jciprod01\productn\H\HLP\10-1\HLP108.txt unknown Seq: 11 2-FEB-16 11:42

2016] Airbnb and L.A.’s Housing Crisis 239 per night, for a monthly profit of up to $63,000.51 When investors turn entire residential buildings into unlicensed cottage hotels, their Airbnb listings are doubly illegal. First, residential neighborhoods prohibit the rental of apart- ments for fewer than thirty days. Second, these investors do not obtain zon- ing licenses or hotel permits, do not purchase hotelier’s insurance, and do not follow the myriad city regulations that govern hotels. Landlords have joined the gold rush: one landlord in Venice converted ten of his building’s thirty units into Airbnb listings, though he says that his rentals are legal because the units are leased for more than thirty days at a time.52 Furthermore, according to local activists, Ellis Act evictions have increased the most in the very neighborhoods where Airbnb listings are con- centrated, “in a ‘Nike’ swoosh shape across Los Angeles . . . from Venice, cut through Hollywood and Koreatown, and encompass[ing] parts of Silver Lake and Echo Park.”53

C. Airbnb Likely Leads to a Citywide Reduction in Affordable Housing

Housing advocates believe that Los Angeles needs 490,340 more af- fordable homes,54 and Los Angeles mayor Eric Garcetti hopes to construct 16,000 new units annually by 2020.55 But in 2014, STRs removed 7,316 units from the city’s rental market, a number that seems poised to grow.56 It is easy to imagine a future in which Airbnb’s growth—and the correspond- ing removal of rental units from the residential market—outpaces the con- struction of affordable housing in Los Angeles. Although there is currently no data on how many of these removed units were affordable, full-time Airbnb STRs can affect the affordable hous- ing stock in two ways. First, affordable units are particularly attractive targets for conversion, directly reducing the stock of affordable housing.57 Through the Ellis Act, investors can relieve landlords from the administra- tive burdens of administering rent-controlled or voucher-subsidized housing, and convert newly-purchased, formerly affordable apartments into Airbnb listings, particularly in newly gentrifying neighborhoods. Thus, Airbnb in- centivizes the direct conversion of subsidized or rent-controlled units into lucrative Airbnb listings. Absent regulation, this incentive will continue to influence the marketplace so long as hotel rates sufficiently exceed residen- tial rents.

51 Lepore, supra note 34. 52 Id. 53 Duran, supra note 14. 54 CALIFORNIA HOUSING PARTNERSHIP COALITION REPORT, supra note 8. 55 Plan: Transforming Los Angeles, CITY OF LOS ANGELES 52 (2015), https://d3n8a8pro7v hmx.cloudfront.net/mayorofla/pages/17002/attachments/original/1428470093/pLAn.pdf?1428 470093 [https://perma.cc/RW4Q-ZT6D]. 56 Samaan, supra note 22, at 3. 57 Id. (describing how trade publications advise landlords on how to convert units to STRs). \\jciprod01\productn\H\HLP\10-1\HLP108.txt unknown Seq: 12 2-FEB-16 11:42

240 Harvard Law & Policy Review [Vol. 10

Second, Airbnb indirectly reduces the affordable housing supply by re- ducing the overall housing supply. As a result, the pressure that STRs place on rent prices pushes units out of the margins of affordability for low- and middle-income residents, an effect that cascades throughout the city. In 2014, Airbnb removed 1% of the units from Los Angeles’s rental market— and substantially more in some neighborhoods—while monthly rents in- creased by 7.3%.58 And by reducing the overall housing supply, Airbnb is partially responsible for the citywide rent increases that further reduce the supply of affordable housing.

III. AIRBNB IS CORRELATED WITH GENTRIFICATION AND MAY EXACERBATE RESIDENTIAL SEGREGATION AND INEQUALITY

Airbnb harms the goals of affordable housing advocates in ways be- yond its numerical impact on rents or the housing stock. Although these harms are difficult to measure, they extend beyond the fact that tourists do not sleep at reasonable hours and do not recycle beer cans properly. Airbnb STRs impede integration and exacerbate socioeconomic inequality.

A. Airbnb is Correlated with Gentrification in Adjacent Neighborhoods

Gentrification occurs when rising rents displace a neighborhood’s lower income households, who are replaced by wealthier residents that change the district’s “essential character.”59 Lower-income residents who are displaced can face longer commutes and lose access to essential community services and institutions.60 Airbnb STRs are concentrated in expensive neighborhoods that have long-since or have never been gentrified. But when middle-income renters are displaced from these neighborhoods, they are pushed into cheaper neigh- boring communities, which they subsequently gentrify. For example, former Venice resident Roman Barrett says he moved to Koreatown—a gentrifying, low-income Asian and Latino enclave—after being priced out of Venice by Airbnb rentals.61 Figure 2 illustrates the relationship between Airbnb-dense communities and their poorer, gentrifying neighbors. These neighborhoods tend to have high poverty rates, yet their rents have risen more rapidly than in Los Ange- les overall. This effect is particularly dramatic in Chinatown, where rents have doubled in just two years. More data is needed to determine whether,

58 See ZILLOW, supra note 1. Total number of apartments in LA estimated by dividing census population data by household size data from Mapping L.A. Neighborhoods, supra note 39. 59 Maureen Kennedy & Paul Leonard, Dealing with Neighborhood Change: a Primer on Gentrification and Policy Choices, BROOKINGS INSTIT. CTR. ON URBAN & METRO. POLICY, Apr. 2001, at 5. 60 Id. at 22, 43. 61 Logan et al., supra note 49. \\jciprod01\productn\H\HLP\10-1\HLP108.txt unknown Seq: 13 2-FEB-16 11:42

2016] Airbnb and L.A.’s Housing Crisis 241 say, residents displaced from Silver Lake actually move to Koreatown, but the prevalence of STRs seems to correlate with rent hikes and gentrification in adjacent districts. \\jciprod01\productn\H\HLP\10-1\HLP108.txt unknown Seq: 14 2-FEB-16 11:42

242 Harvard Law & Policy Review [Vol. 10 esidents are likely 62 EIGHBORHOODS note 39. Rent statistics are from Zillow.com. Jan Jan Jan 1 Year 2 Year N supra , ENSE -D IRBNB 2: A IGURE F 30,55830,558 -31,20970,774 -23,781 2166 3,127 2166 2288 2288 2482 2659 2482 8.48% 2668 8.48% 14.59% 3193 14.59% 19.68% 20.08% 22,754 -14,954 1200 2150 2400 11.63% 100.00% 33,235 18,232 1639 1750 1881 7.49% 14.77% DJACENT TO Mapping L.A. Neighborhoods A East East (AGN) ($) ($) AGN AGN AGN (%) (%) Adjacent 2013 2014 2015 Rent Rent ISTRICTS Hollywood Hollywood Chinatown Koreatown Koreatown Gentrifying Income Rent Rent Rent Increase Increase Culver City Boyle Heights D 67,647 15,003 ENTRIFYING G 63 Arbnb Dense Income Neighborhood Income Differential ($) in ($) in ($) inAGN in AGN in Neighborhood ($) Income data and adjacent districts were determined from The Downtown income figure is likely distorted by the high concentration of homeless individuals in “Skid Row.” Boyle Heights r 62 63 Downtown Echo ParkMiracle MileSilver Lake 37,708 Venice Los Angeles Average 61,767 $49,497 54,339 $2,321 $2,362 $2,534 7.28% 9.18% HollywoodHollywood Hills 33,694 69,277 29,927 29,927 -3,767 -39,350 1581 1581 1661 1661 1710 1710 2.95% 2.95% 8.16% 8.16% lower income than Downtown renters. \\jciprod01\productn\H\HLP\10-1\HLP108.txt unknown Seq: 15 2-FEB-16 11:42

2016] Airbnb and L.A.’s Housing Crisis 243

B. Airbnb Might Reduce Integration by Displacing Lower-income Tenants

Economic and racial neighborhood integration can lead to a range of positive educational, vocational, and health outcomes for low-income te- nants. But Airbnb reduces neighborhood integration by incentivizing hote- lization, encouraging Ellis Act conversions of rent-controlled units, and driving out lower-income renters.64 Furthermore, some landlords of build- ings protected by the city’s Rent Stabilization Ordinance choose to list va- cant units on Airbnb rather than deal with the eviction and rent protections that a full-time tenant would enjoy.65 Because Airbnb STRs are such a nascent phenomenon, further research is needed to measure Airbnb’s impact on annual changes in racial and eco- nomic diversity in high-demand neighborhoods. Researchers should also track the displacement of lower income residents from neighborhoods where Airbnb listings are prevalent.

C. Unequal Access to Airbnb Exacerbates Racial and Socioeconomic Inequality

Airbnb creates winners and losers; it facilitates cultural exchange and provides economic benefits to hosts and tourists, but distributes these bene- fits unequally. Hosts need an Internet connection and cultural savvy just to access the platform. And the fact that just seven of Los Angeles’s most ex- pensive neighborhoods, in which approximately 8% of the city’s residents live, generate over two thirds of the city’s Airbnb revenue suggests that there is little tourist demand for STRs in lower- and middle-income neighborhoods.66 According to Airbnb, 38% of its hosts are of low-to-moderate income, and more than half are renting out couches and spare bedrooms.67 But these hosts only make 11% of the city’s Airbnb-supported income.68 Instead, large- scale operators reap the lion’s share of the revenue; 6% of Airbnb hosts list multiple units, earning 35% of all Airbnb revenue.69 One such company, Global Homes and Condo, lists seventy-eight units on Airbnb through a pair of friendly, but fake, “front” women.70 These figures suggest that whereas individual “hosts” set their rates based on the value of their apartments, commercial Airbnb operators set their prices against prevailing hotel prices, leading to profits for operators and Airbnb alike.

64 See, e.g., Duran, supra note 14. 65 Samaan, supra note 22, at 12. 66 The population-share of Downtown, Echo Park, Hollywood, Hollywood Hills, Miracle Mile, Silver Lake, and Venice calculated from Mapping L.A. Neighborhoods, supra note 39. 67 Id. 68 Samaan, supra note 22, at 13. 69 Kudler, supra note 32. 70 Id. \\jciprod01\productn\H\HLP\10-1\HLP108.txt unknown Seq: 16 2-FEB-16 11:42

244 Harvard Law & Policy Review [Vol. 10

In addition, although most Airbnb STRs blatantly violate city laws prohibiting sub-thirty-day apartment rentals, landlords seem to enforce these laws more diligently against renters—particularly those with rent-controlled or subsidized housing—than against apartment or condo owners.71 It would probably be unfair for publicly subsidized tenants to profit from listing STRs on Airbnb. But the benefits of Airbnb overwhelmingly accrue to relatively wealthy renters and property owners, not to average Angelenos. Finally, Airbnb is based on an amorphous “trust” and “sense of com- munity” endemic to the sharing economy, a trust that extends only to some social groups. A recent study found that African American hosts earn 12% less than white hosts for equivalent rental listings.72 And minority guests are systematically denied lodging by Airbnb hosts.73 If Airbnb hosts are offering a public accommodation, minority Airbnb guests may even have a prima facie case against Airbnb hosts for discrimination in violation of the Fair Housing Act of 1968, which prohibits refusal to rent to a person on the basis of a protected class, such as racial minorities.74 Airbnb facilitates systemic discrimination and reduces racial integration.

IV. REGULATING AIRBNB TO PROMOTE EQUITABLE HOUSING

A. Criteria for Evaluating Proposals: Solutions Must Address All Problems

Because Airbnb STRs are a new and rapidly growing phenomenon, lo- cal and state lawmakers and regulators are just beginning to deal with this problem.75 The author’s view is that Los Angeles should prioritize the hous- ing needs of residents over the needs of tourists when the two aims conflict. However, there are ways to harness the benefits of Airbnb, while regulating it so that it promotes affordable housing, integration, and equity in Los An- geles. But, any policy reforms must directly address the distortive effects that conversion and hotelization have on affordable housing. Ideally, STR regulations should address as many of Airbnb’s negative effects on affordable and fair housing as possible. Ideally, they would also address the underlying causes of Los Angeles’s housing crisis, including the

71 See, e.g., Samaan, supra note 22, at 18. 72 Benjamin Edelman & Michael Luca, Digital Discrimination: The Case of Airbnb.com 2 (Harvard Bus. Sch., Working Paper No. 14-054, 2014), http://www.hbs.edu/faculty/Publica- tion%20Files/14-054_e3c04a43-c0cf-4ed8-91bf-cb0ea4ba59c6.pdf [http://perma.cc/S6EZ- ABQX]. See also Michael Todisco, Note, Share and Share Alike? Considering Racial Dis- crimination in the Nascent Room-sharing Economy, 67 STANFORD L. REV. ONLINE 121, 122 (Mar. 14, 2015) (discussing the study as proof of pervasive racial bias among Airbnb users). 73 Todisco, supra note 72, at 123. 74 Id. at 126. However, only hosts, and not Airbnb itself, could be held liable. 75 Ben Bergman & Alice Walton, Los Angeles Officials Crack Down on “Sharing Econ- omy” Rides, Rental Companies, SOUTHERN CALIFORNIA PUBLIC RADIO (Dec. 9, 2014), http:// www.scpr.org/news/2014/12/09/48569/los-angeles-officials-crack-down-on-sharing-econom/ [http://perma.cc/HA8N-TJTH]. \\jciprod01\productn\H\HLP\10-1\HLP108.txt unknown Seq: 17 2-FEB-16 11:42

2016] Airbnb and L.A.’s Housing Crisis 245 lack of funding for developing affordable housing. Before signing on to a deal, policymakers and community stakeholders should ask whether a proposal: 1. Addresses and combats neighborhood and city-wide rent increases; 2. Reduces or adds to the city’s market-rate and affordable hous- ing stock; 3. Discourages the “conversion” of existing affordable units into STR listings; 4. Eliminates incentives that encourage “hotelization” of rental units; 5. Protects residents from displacement and eviction; 6. Addresses cultural and economic gentrification; 7. Exacerbates socioeconomic disparities or increases access to Airbnb’s benefits; 8. Promotes socioeconomic integration.

B. Evaluating Mayor Garcetti’s Plan to Tax STRs in Order to Fund Affordable Housing

On April 16, 2015, Mayor Garcetti announced a deal he had proposed to Airbnb. Under his proposal, Los Angeles would levy a 14% occupancy tax on all Airbnb facilitated rentals.76 This is expected to generate at least $5 million annually, although this static projection does not take into account expected increases or tax-induced decreases in Airbnb activity.77 These funds would be allocated each year to Los Angeles’s Affordable Housing Trust Fund, which has been reduced from $100 million in 2008 to just $19 million in 2015.78 Without taking matching funds into account, $5 million could fund the development of sixteen affordable units at an average cost of $315,000 per unit.79 However, Airbnb rentals remove 7,316 units—which does not include units that are listed only intermittently on Airbnb—year-round from Los An- geles’s rental market. Even if Airbnb stops expanding, it would take 457 years for occupancy taxes to fund the full replacement of the units that Airbnb removes from the city’s rental market. To use another rough calcula- tion, a single studio apartment in Silver Lake that is booked on Airbnb for an average of $132 per night at a remarkable 60% rate—219 days a year—

76 Bergman, Garcetti Wants Airbnb to Help Solve L.A.’s Affordability Crisis, supra note 17. 77 Garcetti’s Airbnb Tax Plan Does Little to Increase Affordable Housing, S. CAL. PUB. RADIO (Apr. 16, 2015), http://www.scpr.org/programs/take-two/2015/04/16/42416/garcetti-s- airbnb-tax-plan-does-little-to-increase/ [http://perma.cc/Y8CW-435Z]. 78 Bergman, supra note 17. 79 Average cost per Los Angeles County publicly built affordable housing unit from Cali- fornia Department of Community Development, see Affordable Hosuing Cost Study, supra note 44, at 31. \\jciprod01\productn\H\HLP\10-1\HLP108.txt unknown Seq: 18 2-FEB-16 11:42

246 Harvard Law & Policy Review [Vol. 10 yields $28,908 for its host, generating $4,047 in occupancy tax revenue for Los Angeles each year.80 Such a unit would take seventy-eight years to fund the construction of its own replacement. This may not be an apples-to-apples comparison because Airbnb should not shoulder the entire burden of replacing a converted unit of affordable housing when, presumably, an affordable housing developer would recoup its costs through tenants’ rent payments. Take, then, the hypothetical Silver Lake apartment in the paragraph above and assume that it was an affordable unit of housing for a median-income city resident. Perhaps it would be rea- sonable at least to expect STR taxes to cover the costs of construction during the period that Airbnb leaves Silver Lake with one fewer unit of housing. Assume that a developer spends four years building (three years of per- mitting, one year of construction) a unit of affordable housing in Silver Lake, and that the unit will be habitable for fifty years. At a cost of $315,000, the unit will cost the developer $6,300 per year in construction costs alone over the 50-year period. If Airbnb was responsible for covering the costs of four years of construction, it would still have to generate $25,200 in taxes over four years, requiring a daily tax rate of 21.8%. The back-of-the-envelope calculations in this hypothetical demonstrate the com- plications involved in trying to fund the replacement of converted or hotelized units of housing through an occupancy tax on STRs. An occupancy tax of 14% might be insufficient to meet Mayor Garcetti’s stated policy goals. Furthermore, Garcetti’s plan would not address gentrification or rent increases in neighborhoods where Airbnb listings are prevalent. And de- pending on where new units are built, it is unclear whether the neighbor- hoods most affected by Airbnb would benefit from new housing construction. After all, the city may build in lower-income neighborhoods that offer taxpayers a better “bang for your buck” than Venice or Silver Lake. This could concentrate poverty, and decrease economic integration in affluent neighborhoods, unless the funds were used to fund mixed-use or affordable developments in higher income neighborhoods at higher cost to the Trust Fund. Garcetti’s plan may spread demand and help lower income and minority hosts. But this could backfire by contributing to gentrification in those neighborhoods, especially if taxes push STR demand into the already gentri- fying districts adjacent to the neighborhoods that are popular on Airbnb. One final concern is that such a deal would formally excuse Airbnb from a wide range of liability, from safety-related issues to STR regulation. Legalization may also spur STR growth. And Garcetti should specify how his plan would address evictions, illegal conversions, and discrimination by Airbnb hosts and renters during the time period when replacement housing is being constructed.

80 See Airbnb, https://www.airbnb.com/s/Los-Angeles?neighborhoods%5B%5D=Silver+ Lake (last visited Dec. 2, 2015). Occupancy rate figure from Martin, supra note 23. \\jciprod01\productn\H\HLP\10-1\HLP108.txt unknown Seq: 19 2-FEB-16 11:42

2016] Airbnb and L.A.’s Housing Crisis 247

C. Evaluating Alternative Tax and Redistribution Schemes

Mayor Garcetti’s plan directly addresses Los Angeles’s affordable hous- ing shortage, but might not replace the units that Airbnb removes from the rental market. Allocating STR taxes to construct affordable housing also does not address segregation and gentrification. There may be more effective ways to tax and redistribute the revenue that STRs generate. The city can be ambitious about tax rates and tax Airbnb at a rate higher than the 14% occupancy fee levied on licensed hotels. As a matter of policy, it is desirable that the brunt of any taxes levied on Airbnb would be borne by two relatively wealthy populations: tourists and property owners. Further- more, whereas hotel guests are ostensibly paying for city services with their taxes, Airbnb guests could also be paying to replenish the housing stock. If Airbnb tourists are looking to avoid paying a premium to stay in hotels, Los Angeles could tax hosts to any extent such that the price of an Airbnb is less than the price of an equivalent hotel room without de facto banning STRs. Although there are political limits to tax levels, officials need not set a 14% pre-negotiation upper tax limit on Airbnb listings. Los Angeles could promote economic diversity and integration by di- recting tax revenue towards a municipal housing voucher program, which would increase economic integration. And if these vouchers were given to low-income residents of Airbnb-dense buildings or neighborhoods, it would allow them to stay in their homes. However, like Mayor Garcetti’s plan, such taxation and redistribution schemes may not be able to replace all of the units that Airbnb removes from the residential market. Other measures are necessary to complement these tax schemes and promote integrated, afforda- ble neighborhoods throughout Los Angeles.

D. Evaluating a Ban or Targeted Restrictions on Airbnb STRs

STRs increase rents for residents and reduce the supply of affordable housing by removing units from the housing market through conversion and hotelization. Given Los Angeles’s low vacancy rate, it is likely that thousands of residents have been displaced due to the 7,316 year-round list- ings on Airbnb. On the other hand, Airbnb’s economists claim that in 2014, Airbnb helped add $314 million in economic activity and 2,600 jobs to Los Angeles’s economy.81 Although this does not take into account losses to rent- ers and other community stakeholders, it is plausible that Airbnb simultane- ously produces economic benefits while exacerbating the city’s affordability crisis. This article approaches the issue of Airbnb from the lens of weighing its effect on Los Angeles’s affordable housing crisis, and is not an attempt to quantitatively measure the net economic gains or losses produced by Airbnb. Policymakers seeking to regulate Airbnb must make both economic and

81 Owens, supra note 24. \\jciprod01\productn\H\HLP\10-1\HLP108.txt unknown Seq: 20 2-FEB-16 11:42

248 Harvard Law & Policy Review [Vol. 10 value-driven decisions in order to weigh the importance of promoting af- fordable housing. A blanket ban on STRs would end Airbnb’s role in exacerbating Los Angeles’s affordability crisis. For residents displaced by Airbnb, a blanket ban would likely be preferable to any solution that insufficiently addresses the corrosive effects of STRs. Enforcing anti-STR laws could also halt the evictions, displacement, and gentrification that follow when Airbnb saturates a neighborhood. That said, a ban would not add to Los Angeles’s affordable housing stock itself, and would deprive the city of Airbnb’s benefits. Fur- thermore, bans that deprive property owners of Airbnb’s benefits implicate Constitutional protections for property owners under the three-pronged Penn Central takings test, which assesses: (1) the economic impact of a regulation on affected parties, (2) the extent to which a regulation frustrates investor expectations, and (3) the extent to which a regulation is tailored to promote general welfare or is arbitrary.82 Property law scholar Jamila Jefferson-Jones suggests that New York’s anti-STR regulations may violate legitimate investor-backed expectations, and are not “roughly proportional,” meaning that the severity of existing laws banning STRs are not commensurate to the value of the regulations: protecting public safety, hotels, and neighborhood property values.83 How- ever, Professor Jefferson-Jones’s analysis underestimates the public’s legiti- mate interest in protecting affordable housing.84 These arguments demonstrate how outright bans may become increasingly untenable given Airbnb’s prevalence. At the moment, however, most of the STRs listed on Airbnb in Los Angeles’s residential and mixed-use (business and residential) zones are illegal. Alternatively, city officials could legalize STRs but place targeted re- strictions on them rather than enforce the existing blanket ban. Such an ap- proach could reasonably prevent Airbnb from distorting the housing market while allowing tourists and residents to benefit from it. However, such a strategy would have to address conversion and hotelization, or otherwise ameliorate Airbnb-induced reductions in affordable housing supply. For example, enforcement agencies could choose to target unlicensed hotels and prevent hotelization. Perhaps purchasers of property could be banned from using Airbnb for a one-year “cool-down” period. This would put a check on price hikes and discourage hotelization. Such a ban would protect the existing affordable housing stock. However, such a requirement may invite scrutiny under the investor expectations prong of the Penn Cen- tral test where investors, prior to enactment of the rule, bought a building for the purpose of hotelization. But the city can assert that the restriction is

82 See Penn Cent. Transp. Co. v. City of New York, 438 U.S. 104, 152–53 (1978). 83 Jefferson-Jones, Airbnb and the Housing Segment of the Modern “Sharing Economy”: Are Short-Term Rental Restrictions an Unconstitutional Taking?, 42 HASTINGS CONST. L.Q. 557, 566–68 (Spring 2015). 84 Pennell v. San Jose, 485 U.S. 1, 13 (1988) (affirming public’s right to preserve af- fordability through measures such as rent control). \\jciprod01\productn\H\HLP\10-1\HLP108.txt unknown Seq: 21 2-FEB-16 11:42

2016] Airbnb and L.A.’s Housing Crisis 249 necessary to prevent public nuisances and protect the affordable housing stock. And because it would not constitute rent control, a cool-down require- ment would not trigger the intervention of the Ellis Act if a purchased prop- erty was previously rent-controlled. Similarly, policymakers could discourage “conversion” by prohibiting landlords who have evicted a tenant without fault—meaning that the tenant is not evicted for violating his or her lease—from listing the unit in question on Airbnb for a one-year cool-down period. This cool-down period can be imposed on all landlords, or just landlords of subsidized units. Either ap- proach would discourage wanton conversion of rental stock into tourist accommodations. Another approach would be to assign STR permits and restrict the num- ber of permits per square mile or neighborhood. However, geographically targeted restrictions on STRs would be difficult to enforce, and it would be difficult to administer a permit system that is equitable to all prospective hosts. Furthermore, this might encourage the spread of STRs into newly gen- trifying neighborhoods. For example, such a policy could restrict the culling of Echo Park’s affordable housing supply while exacerbating the af- fordability crisis in neighboring Chinatown. Another solution would be to mandate that Airbnb STRs be allowed only in buildings that meet a target affordability threshold. For example, the city could promote inclusionary housing by only allowing STRs in neighbor- hoods or buildings where 30% of the units are affordable, which would in- centivize property owners to subsidize apartments that are currently priced at the market rate in order to “free up” units for Airbnb listings. This would directly address STRs’ effects on neighborhood socioeconomic integration. But such solutions would be cumbersome to calculate and difficult to en- force. Furthermore, such a benchmark may be considered exactions that are not roughly proportional to the actual affordability and public safety problems that STRs create.85 Finally, such an approach would increase the stock of affordable housing, but simultaneously reduce Los Angeles’s overall stock of residential housing. Lastly, city officials could prevent hotelization by legalizing STRs, but limiting the number of days per year that a host can list a unit without going through the hotel permitting process. This would disincentivize the conver- sion and removal of units from the housing market, protect the housing stock, and tamp down speculation and rent inflation. Such an approach would be subject to an investor-backed expectations takings challenge, but the city could argue that the limitation is necessary to protect the residential housing stock. Should Los Angeles decide to adopt some sort of enforcement strategy towards Airbnb, policymakers should empower regulators to enforce zoning and hotel licensing laws. Regulations on Airbnb STRs are municipal in na- ture, concerning issues such as zoning and hotel licensing. California coun-

85 Jamila Jefferson-Jones, supra note 83, at 568. \\jciprod01\productn\H\HLP\10-1\HLP108.txt unknown Seq: 22 2-FEB-16 11:42

250 Harvard Law & Policy Review [Vol. 10 ties have not coordinated to regulate STRs on a county or statewide basis. Although Los Angeles has not committed resources to enforcing STR laws, the City Attorney’s office has asked hosts to pay occupancy taxes.86 But it is unclear whether these warnings were symbolic or whether the City Attorney has the resources to enforce these laws.87 Policymakers should empower regulators to enforce zoning and hotel licensing laws. Although resources are limited, this should be a priority given the havoc that STRs wreak on the residential housing market. And rather than targeting single-unit hosts, regulators can target the cottage in- dustry of “Airbnb leasing companies” that are rapidly removing units from the rental housing market, thereby discouraging hotelization.88 Perhaps taxes can fund enforcement officers or a regulatory body within the city planning department. In the absence of a new regulatory agency, Airbnb should at least make it possible for the city to track STRs and crack down on the most egregious activities. Perhaps hosts who post listings more than once a month—which indicates that a host has converted a unit—should have to register with the city. Los Angeles should also crack down on large-scale operators who manage “virtual hotels” with multiple rooms across the city. And investors should be prevented from converting entire buildings into cottage hotels. Airbnb’s cooperation is critical to any effective enforcement scheme that prevents conversion and hotelization. Per- haps city officials can negotiate with Airbnb and exchange greater coopera- tion with targeted enforcement efforts for a general legalization of non- commercial-scale STRs.

E. Promote Affordable and Fair Housing Through Community Benefits Agreements

In addition to regulating and taxing Airbnb, Los Angeles should adopt the community benefits agreement (CBA) model that local industries have negotiated with unions and affordable housing advocates.89 Under a typical CBA, developers of large projects are given tax credits and the permission to build lucrative developments such as luxury apartments, malls, or sports sta- diums in exchange for a commitment to hire local residents, set aside afford- able housing, or donate to public projects.90 So too here, policymakers, advocates, unions, and developers would come together and bring Airbnb in as a partner, helping Los Angeles’s low-income and minority communities share in Airbnb’s benefits.91,92

86 Bergman & Walton, supra note 75. 87 Id. 88 See, e.g., Kudler, supra note 32. 89 See, e.g., Harold Meyerson, L.A. Story, AMERICAN PROSPECT (Aug. 6, 2013), http:// prospect.org/article/la-story-0 [http://perma.cc/2J9H-NLB4]. 90 Id. 91 Id. 92 If Airbnb signs a CBA with community stakeholders, rather than the city, a CBA would likely not violate the Penn Central exactions test. \\jciprod01\productn\H\HLP\10-1\HLP108.txt unknown Seq: 23 2-FEB-16 11:42

2016] Airbnb and L.A.’s Housing Crisis 251

First, Airbnb should ban racially discriminatory hosts and users and make the approval process race-blind. Airbnb could also use its platform, market penetration, and technology to connect hosts with cleaning services that pay living wages. Additionally, Airbnb could apply its proprietary tech- nology to help low-income renters find low-cost or public housing. Airbnb and developers could also be given incentives to concurrently expand the supply of housing and the supply of tourist accommodations, removing tourists from the residential housing market. Developers could be given permits to construct sanctioned “Airbnb hotel” apartments in neigh- borhoods with a high density of Airbnb listings. Qualifying newly con- structed buildings could be exempt from the bans, taxes, or restrictions on STRs that would govern existing residential housing. These permits could be contingent upon Airbnb or the developer signing a CBA that ensures work- ers are fairly paid, and require that at least 15% of a hotel’s units be rent- controlled or subsidized for low-income residents.93 The remaining units could be rented at market-price, or listed on Airbnb. An even better ratio of “hotel” units to affordable residential units would be one that directs hotel developers to reserve as many affordable units as possible while earning market-rate returns. In any combination, an “Airbnb hotel” would directly expand the affordable housing stock, expand the aggregate housing stock, increase Los Angeles’s supply of hotel rooms, and promote integration.

V. CONCLUSION: REFORMING STRSTO ADDRESS THE HOUSING CRISIS

As gentrification transforms Los Angeles’s urban core, policymakers must adapt to better regulate new technologies such as Airbnb. The best regulation comes from precise data, so additional research is needed on how STRs affect evictions and rents. To an extent, Airbnb is a response to, not a cause of, gentrification and Los Angeles’s affordable housing crisis. But policymakers must understand that Airbnb profits from illegal rentals that cause rent increases, reduces the housing supply, and exacerbates segrega- tion. Even an outright ban on STRs would be better for low-income residents than the unregulated status quo. Airbnb must become a responsible partner and facilitate, not hinder, the goals of affordable housing advocates. In preparing to negotiate with Airbnb, Los Angeles can learn from the approaches that other cities have taken to regulate Airbnb. San Francisco, Chicago, and Washington, D.C. negotiated with Airbnb lobbyists to legalize STRs and apply hotel occupancy taxes to STRs.94 Aside from New York,

93 This is the same percentage that is required for other developments that seek density bonuses from the city. LA Affordable Housing Incentives Guidelines 2014, http://cityplanning. lacity.org/Code_Studies/Housing/DRAFTUPDATEDAffordHousingGuide.pdf [http://per ma.cc/ZKJ4-7JUH]. 94 Bergman, Garcetti Wants Airbnb to Help Solve L.A.’s Affordability Crisis, supra note 17. \\jciprod01\productn\H\HLP\10-1\HLP108.txt unknown Seq: 24 2-FEB-16 11:42

252 Harvard Law & Policy Review [Vol. 10 policymakers have avoided suggesting outright bans, perhaps because Airbnb has mobilized grassroots support and formed sophisticated lobbying and advocacy organizations.95 Airbnb spent $100,000 in 2014 alone to lobby Los Angeles officials.96 After proposing and evaluating various reforms, my recommendation is that Los Angeles adopt a three-pronged strategy. First, the city should pre- vent the hotelization and conversion of existing residential buildings and units of housing. Airbnb provides a tremendous benefit to tourists and re- sidents alike when it allows tourists to travel off the tourist-beaten path. Such adventures are a win-win for hosts who are merely using Airbnb for a month per year to subsidize their own travels, or who are using Airbnb to earn enough money to keep their home after losing a job. But given the inelasticity of the housing supply, it is inappropriate for investors to permanently remove units from the residential housing stock in order to cater to tourists. Fundamentally, I would argue that the raison d’ˆetre of Los Angeles’s housing stock is to serve its residents. Thus, Los Angeles should ban year-round listings of apartments on Airbnb and similar websites, perhaps by emulating San Francisco’s proposed “Ballot Measure F” and set- ting a seventy-five-day limit on the number of days that a unit can be listed.97 Bona fide homeowners or leaseholders who occasionally host guests through Airbnb can be exempted from any taxes that would otherwise be levied on STR transactions. Furthermore, Los Angeles should institute a one-year cool-down period before any formerly subsidized or rent-controlled home can be listed on Airbnb. To prevent hotelization and professional Airbnb management, Los Angeles should set a hard cap on the number of units that any individual or business can list on Airbnb in a given year. Finally, Los Angeles should set a hard cap on the number of units in a building that property owners and man- agers can list on Airbnb. In order to incentivize developers and Airbnb itself to build additional affordable and market-rent housing, Los Angeles should apply these restric- tions to existing residential buildings and units, but allow newly-developed building managers and owners to set aside a greater number of units for STRs. The city can also grant additional exemptions for developers who set aside newly-constructed units for low-income residents, thereby directly in- creasing the affordable housing stock and promoting economic integration. Along this line, the city can bring developers, unions, advocates, and Airbnb—the parent company—together to sign Community Benefits Agree- ments. The parties can agree to build “Airbnb hotels” in tourist destinations

95 Logan et al., supra note 49. 96 See, e.g., Short Term Rental Advocacy Center, http://www.stradvocacy.org/ [http://per ma.cc/A996-EWRB]. 97 S.F., Cal., Admin. Code § 41.A.4, 41.A.5 (2015), http://sfgov2.org/ftp/uploadedfiles/ elections/candidates/Nov2015/ShortTermRentals_Text.pdf [http://perma.cc/LTS4-4RP6]. \\jciprod01\productn\H\HLP\10-1\HLP108.txt unknown Seq: 25 2-FEB-16 11:42

2016] Airbnb and L.A.’s Housing Crisis 253 that set units aside for low-income residents, provide good jobs, and ban discrimination. Finally, Los Angeles should implement a 14% occupancy tax on any unit that is listed on Airbnb for greater than the seventy-five-day cap men- tioned above. This would prevent Airbnb hosts from gaining an unfair com- petitive advantage over hotels. The city can allocate this revenue towards code enforcement, and for funding mixed-income housing in Airbnb-dense neighborhoods, thereby promoting integration and preventing displacement. Airbnb is organizing constituents and mobilizing political support.98 This is why political stakeholders must regulate Airbnb STRs now, before the industry calcifies into Los Angeles’s political and economic structure. At the moment, local politics are favorable to increased regulations. Unions and neighborhood associations have united with their political adversaries—ho- tels and developers—to speak out against Airbnb.99 By framing the public narrative around the displacement that STRs cause, regulators can also win the support of influential faith leaders, as well as of the public. If the city brings Airbnb together with community stakeholders, the city can eliminate Airbnb’s corrosive effects on fair and affordable housing, and help all com- munities benefit from safe, integrated, and affordable neighborhoods.

98 Logan et al., supra note 49. 99 See, e.g., Keep Neighborhoods First, http://www.keepneighborhoodsfirst.com/ [http:// perma.cc/6YHE-A7HJ] (coalition of labor and neighborhood councils). Copyright of Harvard Law & Policy Review is the property of Harvard Law School Journals and its content may not be copied or emailed to multiple sites or posted to a listserv without the copyright holder's express written permission. However, users may print, download, or email articles for individual use. Do Airbnbs push up rents and house prices? Last Updated: Feb. 2, 2021 at 7:03 p.m. ET First Published: Feb. 2, 2021 at 11:40 a.m. ET

By Jacob Passy

‘Countless families depend on Airbnb to pay their rent and stay in their homes, which has become even more important amidst the current crisis,’ according to Airbnb

As Airbnb has become more popular across the country, rents and home prices have risen in tandem. GETTY IMAGES

ABNB -2.39% !

For renters and home buyers alike, Airbnb ABNB, -2.39% is contributing to the affordability crunch seen in many housing markets across the country.

Short-term rentals via apps such as Airbnb contribute to housing shortages and rent increases, according to research published last week by Felix Mindl and Dr. Oliver Arentz, researchers at University of Cologne in Germany. They attributed 14.2% of overall rent increases to short-term rentals or 320 euros ($385) per year for new tenants.

“While a large proportion of hosts can be considered home sharers, we find an increasing proportion of providers who have developed a professional business model from short-term rentals,” Mindl said in a statement. “Professional short-term rentals are available to tourists throughout the year, and thus compete directly with long-term tenants, for whom the rooms are then no longer available.”

However, a spokesman for Airbnb took issue with such findings, and said the COVID-19 pandemic BULLETIN Barron's on MarketWatch: Where are mortgage rates headed next? ! " has created an untenable position for many households struggling to make ends meet, and renting out a room is one way to deal with that. “Countless families depend on Airbnb to pay their rent and stay in their homes, which has become even more important amidst the current crisis,” he said.

Still, the Economic Policy Institute, a progressive think tank, echoed the sentiments of the Cologne researchers last year . “Evidence suggests that the presence of Airbnb raises local housing costs. The largest and best-documented potential cost of Airbnb expansion is the reduced supply of housing as properties shift from serving local residents to serving Airbnb travelers, which hurts local residents by raising housing costs,” it said.

Sophie Calder-Wang, assistant professor of the real-estate department at The Wharton School in the University of Pennsylvania, published a study last August that found the “increased rent burden falls most heavily on high-income, educated, and white renters because they prefer housing and location amenities that are most desirable to tourists.”

Other studies, have attempted to put a more specific figure on rent and house-price increases that some analysts say are related to short-term rental sites.

A 2017 study published in the latest edition of the journal Marketing Science found that the number of Airbnb listings in a zip code was associated with increases in property prices and rental rates. “The increased ability to home-share has led to increases in both rental rates and house prices,” the researchers wrote in the study.

Researchers used data on all U.S. properties listed on Airbnb between 2012 and 2016, and analyzed the effects of these listings using data on rents and home values from Zillow. Based on the median growth in Airbnb listings nationally, the short-term rentals contributed to an annual increase of $9 in monthly rent and $1,800 in home prices for median zip code, the study’s authors found.

All told, Airbnb accounted for one-fifth of the actual rent growth and one-seventh of the actual home-price appreciated experienced nationwide. But housing markets with fewer renters and more homeowners saw a smaller Airbnb-related effect. The popularity of a destination was from a tourist’s perspective also appears to have played a role.

What Biden’s First 100 Days Mean For You and Your Money

How will the new administration’s approach on policy, business and taxes impact you? At MarketWatch, our insights are focused on helping you understand what the news means for you and your money — no matter your investing experience. Become a MarketWatch subscriber today.

SUBSCRIBE NOW: 50% OFF 1 YEAR

The researchers did acknowledge that more research is needed, “to achieve a complete welfare analysis of home-sharing. For example, home-sharing may have positive spillover effects on local businesses if it drives a net increase in tourism demand.”

The growing popularity of short-term rentals through platforms like Airbnb does show that the higher rates landlords can fetch on the vacation rental market has led some to convert their properties from long-term to short-term rentals, and that has shrunk the rental market, pushing prices higher, they added.

A spokesman for Airbnb said the financial aid that hosts receive should not be discounted from such studies. “The authors of this study, which is now outdated, agree that home sharing can provide important economic benefits for families and support smart rules that allow home sharing to continue,” he said.

The researchers from that Journal of Marketing study said that local lawmakers might be able to counteract the effects of Airbnb through targeted regulations.

“Regulations on home-sharing should (at most) seek to limit the reallocation of housing stock from long-term rentals to short-term rentals without discouraging the use of home-sharing by owner- occupiers,” they wrote.

One regulatory approach they suggested: Levy an occupancy tax solely on property owners who rent out an entire property for an extended period of time and requiring proof that property owners live in the homes they own to avoid the tax.

‘It feels predatory’: 6 million people are not eligible for a COVID-19 pause on student- debt payments — even if they work in public service One student-loan borrower is slated to pay off her debt when she’s 87, despite a career in public service.

Jacob Passy Jacob Passy is a personal-finance reporter for MarketWatch and is based in New York.

Get the Best Mortgage Rate for You ! Target Home Price LENDER APR/RATE ! # MO. PAYMENT ! $ 250,000 Always On. Always Open. 100% Sponsored Digital. Purchase or Re!nance Learn More " Purchase Lock Your Mortgage Rates On Re!nance Your Schedule.

Location Veterans - Buy or Re!nance Sponsored With Your Bene!ts Denver, CO Learn More Quick & Easy Veri!cation: Your Down Payment $0 Down VA Loan Starts Here

20.00 % $50,000 Direct Home Lending Sponsored 20.00 % $50,000 Direct Home Lending Sponsored 2.875%/ Credit Score 2.875% $830 View Details Excellent (760+) 30 yr Fixed Conforming • 3/4/2021 • Fees: $0 • Points: 0.00 NMLS# 274058 Loan Type $ 30 yr Fixed Chase Home Lending Sponsored 15 yr Fixed 7/1 ARM 3.171%/ 3.125% $857 View Details 5/1 ARM 3/1 ARM 30 yr Fixed Conforming • 3/4/2021 • Fees: $1,150 • Points: 0.00 Source: Mortech® & Brown Bag Marketing, Inc. Disclosure See Full Rates Filter Results

SMARTASSET.COM Buy Rent Sell Home Loans (/home- Agent Manage Rentals (/rental-manager/? Advertise Help

(/)

Zillow Research Data (https://www.zillow.com/research/data/) Visuals (https://www.zillow.com/research/graphics/) Buyers/Sellers (https://www.zillow.com/research/buying-selling/) (/homes/) (/homes/for_rent/) (/sell/) loans/#source=Z_Mortgagestopnav) "nder source=topnav&itc=postbutton_sitenav) (/marketing/advertise/) (https://zillow.zendesk.com/hc/en- (https://www.zillow.com/research/ )

(/agent- Most Popular us/)

Home Value Growth "nder/real- Breaks Records as Rents Stabilize (November 2020 estate- Market Report & Weekly Data Through Dec. 12) agent- (https://www.zillow.com/research/zillow- weekly-market- report-27151/) reviews/)

Zillow Market Pulse: February 26, 2021 (https://www.zillow.com/research/daily- market-pulse-26666/)

10 Already-A!ordable woman putting a sight "Room for rent on a wall" Markets That Have Only Gotten More Experts: Short-Term Home Rentals Have Little to No Impact on A!ordable the Past 2 Housing A!ordability Years (https://www.zillow.com/research/10- By Cory Hopkins (https://www.zillow.com/research/about-us/cory-hopkins/) on Dec. 6, 2016 a!ordable-markets- 2020-28736/) Just 5.1 percent of housing experts with an opinion said the ability to rent entire homes for short periods would have a meaningful, large impact on the supply and a!ordability of more traditional, longer-term rentals. On average, panelists said they expected home values to end 2016 up 4.75 percent year-over-year, a bump in Pandemic Year expectationsfrom 4.5 percent annual growth for this year the last time the survey was conducted. Brought Incredible Median U.S. home values peaked at $196,600 in April 2007. On average, panelists said they expected the median U.S. Surge in 'Million- home value to surpass this peak by November 2017. Dollar Cities' (https://www.zillow.com/research/2021- million-dollar-cities- The growing presence of short-term room and home rental services like Airbnb and HomeAway are not impacting the overall supply or a!ordability of rental housing in a meaningful and large way, according to experts, though some smaller e!ects may 28568/) be felt in certain markets or segments. (https://wp.zillowstatic.com/3/Fig-1-short- term-rentals-766a50.png)Just 5.1 percent of housing experts with an opinion said the ability to rent entire homes for short periods would have a meaningful, large impact on the supply and a!ordability of more traditional, longer-term rentals, according to the Q4 Zillow Home Price Expectations Survey (ZHPE). [1] An even smaller share, just 3.9 percent, said the ability to rent smaller rooms within a larger home would have a meaningful and large impact on the overall rental market ("gure 1).

Cities nationwide are debating the role short- term home and room rentals play in housing a!ordability (http://www.zillow.com/research/q3-2016-housing-a!ordability-13815/). One view suggests short-term rentals subtract from the supply of standard, long-term rental homes and contribute to rising rents. Others argue short-term rental units give homeowners an additional source of income, allowing them to more easily pay their monthly mortgage payment, contribute to savings or a!ord other necessities.

But while a sizable majority of experts surveyed said they did not think short-term rentals were likely to have a large impact on a given market, half of those with an opinion indicated the ability to rent an entire home for a short period is having smaller impacts on the market. And 32.9 percent said the ability to rent a single room for a short period is impacting the market in a small way.

When asked to o!er commentary and context on their opinions, several experts gave di!ering reasons for the more limited e!ect they expected short-term rentals to have. One noted that the hotel industry was likely to be more impacted than the larger market overall. A di!erent expert noted that the short-term and long-term rental markets were di!erent and not e!ective substitutes. Another said the impact may be felt more acutely in very tight, supply-constrained markets like those in California and other booming coastal states, but that those e!ects likely wouldn’t spill over into the larger market. The same panelist also said growth in the short-term rental market was likely cyclical, closely tied to the discretionary income Americans have available for travel.

Whether or not short-term rentals play a large role, cities across the country are grappling with housing a!ordability issues, especially in places with rapidly rising rents and home values. In some hot West Coast markets, it’s not uncommon for renters to spend 40 percent or more of their income on a monthly rental payment, when historically that number was much lower. Inventory shortages play a large role in this a!ordability crisis; there simply aren’t enough rentals on the market to keep prices low.

But clearly, experts aren’t convinced that short-term rentals are causing the problem.

Home Value Growth: The Peak is in Sight

On average, panelists said they expected home values to end 2016 up 4.75 percent year-over-year, up from 4.5 percent annual growth for this year the last time the survey was conducted (http://www.zillow.com/research/job-growth-middle-america- 12977/) and in line with recent acceleration in home values as measured by the Zillow Home Value Index (http://www.zillow.com/research/october-2016-market-report-13872/). Looking farther ahead, panelists on average said they expected the annual pace of home value appreciation to slow to 3.6 percent in 2017, 2.97 percent in 2018, to 2.7 percent in 2019 and to 2.6 percent in 2020, before accelerating slightly to a 2.84 percent annual pace in 2021. Cumulatively, experts said they expected home values to grow a total of 21.36 percent, on average, through 2021.

Panelists’ views were divided when separated into more optimistic and more pessimistic camps, especially when looking over the longer term. The most optimistic quartile of panelists said they expected U.S. home values to rise 5.2 percent through the end of this year. The most pessimistic 25 percent of panelists said they expected home values to rise 4.3 percent year-over-year through 2016. Looking farther out, the most optimistic panelists said they expected home values to grow by a total of 30.8 percent from now through the end of 2021. Pessimists predicted total, cumulative home value growth of just 10.2 percent over the same time ("gure 2). Median U.S. home values peaked at $196,600 in April 2007. On average, panelists said they expected the median U.S. home value to surpass this peak by November 2017 – more than a decade after pre-recession peaks. The most optimistic panelists said they expected home values to surpass pre-recession peaks by July of next year, on average, while the most pessimistic said they didn’t expect a full recovery in home values until January of 2020.

(https://wp.zillowstatic.com/3/Fig-2-ZHPE-Chart-90a3a0.png)

[1] ZHPE, sponsored by Zillow and administered by Pulsenomics LLC, is a quarterly survey of more than 100 real estate professionals, academics and economists nationwide that asks experts to o!er their opinion on relevant housing issues and predict the path of home values over the next several years. This edition of the Zillow® Home Price Expectations Survey surveyed 111 experts between October 28 and November 15, 2016.

" # ! (https://twitter.com/share?(https://www.linkedin.com/shareArticle? (https://www.facebook.com/sharer/sharer.php?url=https%3A%2F%2Fwww.zillow.com%2Fresearch%2Fshort-url=https%3A%2F%2Fwww.zillow.com%2Fresearch%2Fshort- u=https%3A%2F%2Fwww.zillow.com%2Fresearch%2Fshort-term-term- Share: term-home-home- home-rentals-rentals- rentals-zhpe-zhpe- zhpe-13927%2F&text=Experts%3A+Short-13927%2F&title=Experts%3A+Short- 13927%2F) Term+Home+Rentals+Have+Little+to+No+Impact+on+Housing+A Term+Home+Rentals+Have+Little+to+No+Impact+on+Housing+A!ordability)!ordability)

Related Tags

A!ordability (https://www.zillow.com/research/tag/a!ordability/)

Zillow Home Price Expectations Survey (https://www.zillow.com/research/tag/zillow-home-price-expectations-survey/)

Related

(https://www.zillow.com/research/zillow-market-report- (https://www.zillow.com/research/2020-urban-suburban- january-2021-28947/) report-28802/) AFFORDABILITY BUYING/SELLING (HTTPS://WWW.ZILLOW.COM/RESEARCH/AFFORDABILITY/) - (HTTPS://WWW.ZILLOW.COM/RESEARCH/BUYING-SELLING/) - BUYING/SELLING MARKET REPORTS (HTTPS://WWW.ZILLOW.COM/RESEARCH/BUYING-SELLING/) - (HTTPS://WWW.ZILLOW.COM/RESEARCH/MARKET-REPORTS/) - MARKET REPORTS (HTTPS://WWW.ZILLOW.COM/RESEARCH/MARKET-REPORTS/) - RENTING RENTING (HTTPS://WWW.ZILLOW.COM/RESEARCH/RENTING/) / STORY (HTTPS://WWW.ZILLOW.COM/RESEARCH/RENTING/) / STORY 2020 Urban/Suburban Report: How Housing in Cities and Winter Hasn’t Cooled the Red-Hot Housing Market (January Suburbs Both Thrived in an Extraordinary Year… 2021 Market Report)… (https://www.zillow.com/research/2020-urban-suburban-BY ALEXANDER CASEY (HTTPS://WWW.ZILLOW.COM/RESEARCH/ABOUT-US/ALEXANDER- (https://www.zillow.com/research/zillow-market-report-BY JEFF TUCKER (HTTPS://WWW.ZILLOW.COM/RESEARCH/ABOUT-US/JEFF-TUCKER/) ON FEB. report-28802/)CASEY/) ON FEB. 4, 2021 january-2021-28947/)19, 2021 Despite some early pandemic-era narratives,... Annual growth in home values was faster in...

(https://www.zillow.com/research/mortgage-rates-feb-3- 2021-28926/) AFFORDABILITY (HTTPS://WWW.ZILLOW.COM/RESEARCH/AFFORDABILITY/) - BUYING/SELLING (HTTPS://WWW.ZILLOW.COM/RESEARCH/BUYING-SELLING/) - NEWS (HTTPS://WWW.ZILLOW.COM/RESEARCH/NEWS/) / STORY Mortgage Rates Up, Continuing Stretch of Modest Weekly Oscillations (https://www.zillow.com/research/mortgage-… rates-feb-3-2021-28926/)BY MATTHEW SPEAKMAN (HTTPS://WWW.ZILLOW.COM/RESEARCH/ABOUT-US/MATTHEW- SPEAKMAN/) ON FEB. 3, 2021 Mortgage rates trended higher this week as...

(https://www.zillow.com/research/10-a!ordable-markets- 2020-28736/) AFFORDABILITY (HTTPS://WWW.ZILLOW.COM/RESEARCH/AFFORDABILITY/) - BUYING/SELLING (HTTPS://WWW.ZILLOW.COM/RESEARCH/BUYING-SELLING/) / STORY 10 Already-A!ordable Markets That Have Only Gotten More A!ordable the Past 2 Years… (https://www.zillow.com/research/10-aBY ZILLOW RESEARCH ON JAN. 29, 2021 !ordable-markets- 2020-28736/)If you’re looking for an a!ordable place...

About Us (https://www.zillow.com/research/about-us/)

Contact Us (https://www.zillow.com/research/contact-us/)

Join our conversation

Sign up for our mailing list and receive the latest reports

Email Address Sign Up

About (/corp/About.htm) Zestimates (/zestimate/) Research (/research/) Careers (/careers/) Help (https://zillow.zendesk.com/hc/en-us) Advertise (/marketing/advertise/)

Fair Housing Guide (https://www.zillow.com/rental-manager/resources/fair-housing-guide/) Terms of use (/corp/Terms.htm) Privacy Portal (https://privacy.zillowgroup.com)

Cookie Preference Blog (/blog/) AI (/tech/) Mobile Apps (/mobile/)

Trulia (https://www.trulia.com/) StreetEasy (https://streeteasy.com/) HotPads (https://hotpads.com/) Out East (https://outeast.com/)

Do Not Sell My Personal Information → (https://privacy.zillowgroup.com/cookie) Zillow Group is committed to ensuring digital accessibility for individuals with disabilities. We are continuously working to improve the accessibility of our web experience for everyone, and we welcome feedback and accommodation requests. If you wish to report an issue or seek an accommodation, please let us know (https://zillow.zendesk.com/hc/en-us/requests/new?ticket_form_id=39140).

Zillow, Inc. holds real estate brokerage licenses in multiple states. Zillow (Canada), Inc. holds real estate brokerage licenses in multiple provinces. A list of our real estate licenses is available here (https://www.zillow.com/info/real-estate-licenses/). TREC: Information about brokerage services (https://s.zillow.net/pfs/static/TREC_ZINC_1-25-21.pdf), Consumer protection notice (https://www.trec.texas.gov/sites/default/"les/pdf-forms/CN%201-2.pdf) California DRE #1522444

Contact Zillow, Inc. Brokerage (https://www.zillow.com/z/info/contact-us/)

By searching Northstar MLS listings you agree to the Northstar MLS End User License Agreement (https://static1.squarespace.com/static/56c4eea9d51cd483819dae7b/t/56cbe7e32fe13151e10e6b3d/1456203748061/EULA.pdf)

For listings in Canada, the trademarks REALTOR®, REALTORS®, and the REALTOR® logo are controlled by The Canadian Real Estate Association (CREA) and identify real estate professionals who are members of CREA. The trademarks MLS®, Multiple Listing Service® and the associated logos are owned by CREA and identify the quality of services provided by real estate professionals who are members of CREA. Used under license.

(http://zillow.com/z/buying/app-download?itc=zw_zw_zw_zillow- (http://zillow.com/z/buying/app-download?itc=zw_zw_zw_zillow- footer_btn_ios-download) footer_btn_android-download)

Follow us: (http://www.facebook.com/Zillow) (http://twitter.com/zillow) © 2006-2021 Zillow (/)

(https://www.hud.gov/program_o#ces/fair_housing_equal_opp) Create account | Login | Subscribe

Research-based policy analysis and commentary from leading economists Search

Columns Covid-19 Vox Multimedia Publications Blogs&Reviews People Debates Events About

By Topic By Date By Reads By Tag

Short-term rentals and the housing market: Quasi- experimental evidence from Airbnb in Los Angeles

Hans Koster, Jos van Ommeren, Nicolas Volhausen 20 December 2018

Short-term rental platforms such as Airbnb have grown spectacularly in recent years, and local governments Hans Koster Professor of Urban Economics around the globe have responded differently in regulating such rentals. This column analyses the effects of a and Real Estate, Vrije Universiteit policy change in several cities of Los Angeles County that restricted short-term rentals of entire homes and Amsterdam apartments. Airbnb has led to an increase in house prices that is particularly pronounced in popular tourist areas, and homeowners in these areas lose out from the regulation. Renters, on the other hand, benefit from the regulation.

0 A A

Short-term rental platforms such as Airbnb have Related grown spectacularly in recent years. Since its launch Housing expenditures and income inequality Jos van Ommeren in 2007, Airbnb has grown into a multibillion-dollar Christian Dustmann, Bernd Fitzenberger, Markus Professor of Urban Economics, Zimmermann business, now offering more than 4.5 million listings in Vrije Universiteit Amsterdam over 190 countries worldwide. Airbnb allows Safeguarding public interests in the platform economy individuals to list their spare room or entire apartment Koen Frenken, Arnoud van Waes, Magda Smink, for a self-established price to potential guests from all Rinie van Est over the world. Particularly in heated housing markets, Regulation to blame for England’s surging the new business model developed into an attractive house prices opportunity for generating alternative income streams. Christian Hilber, Wouter Vermeulen However, the surge in popularity of these platforms On the causes and consequences of land use has also led to substantial opposition because of regulations Nicolas Volhausen Frédéric Robert-Nicoud, Christian Hilber decreasing housing affordability (Samaan 2015, Research Analyst, McKinsey; PhD Sheppard and Udell 2016), illegal ‘hotelisation’ and student, Vrije Universiteit Amsterdam unfair competition (CBRE 2017), and other negative effects such as noise disturbance or overcrowding within and around buildings (Newling 2016). Don't Miss Local governments around the globe have responded differently towards regulating short-term Shaping Africa’s post-Covid recovery: A new eBook rentals. Most cities have not significantly regulated these platforms, but a limited number have put Arezki, Djankov, Panizza severe restrictions in place. Berlin, for instance, requires short-term-rental hosts to occupy the property for at least 50% of the time (O’Sullivan 2016). San Francisco imposes a cap of a maximum Stronger together? The policy mix strikes back 90 rental days per year and a 14% hotel tax (i.e. Transient Occupancy Tax) (Fishman 2015), while Bartsch, Bénassy-Quéré, Amsterdam will impose a 30-rental-days cap from 2019 onwards. Corsetti, Debrun

The effect of such regulations appears straightforward: basic economic theory tells us that in the Taxing the superrich absence of negative externalities, such regulation induces a reduction in housing prices (and rents) Scheuer by restricting the most efficient use of housing. This reduction will be particularly pronounced in locations that are attractive to tourists. However, the presence of substantial negative externalities Events may lead to the exact opposite: regulation may induce prices (and rents) to increase because the Economic Resilience Is the reduction in negative external costs due to regulation will increase residential demand. Hence, the New Normal? net effects of short-term rentals on the housing market are still unknown. 4 - 4 March 2021 / Zoom webinar / World Trade The case of Los Angeles Organization International Macro History There are numerous reports indicating a strong positive relationship between property values and Online Seminar Series - 16 10 - 10 March 2021 / Online / the intensity of short-term rentals. However, calling out Airbnb as the culprit of rising housing prices and rents is problematic, since many cities have become increasingly popular among both locals STEG Virtual Course - Supplemental lecture: and tourists in recent years, leading to higher housing prices and a higher number of Airbnb listings. Labour market frictions and In our paper (Koster et al. 2018), we overcome this challenge by relying on a quasi-experimental development - Mark Rosenzweig (Yale) research design for Los Angeles County. 11 - 11 March 2021 / Online / Similar to other cities, Airbnb rapidly grew in a decade from just a handful of listings to close to STEG Virtual Course - Lecture 5: Firm-level 40,000 properties in Los Angeles County (Inside Airbnb 2018). While many municipalities still misallocation: benchmark struggle with putting up regulatory measures to curb the surge of short-term rentals, 18 out of 88 model and early results - Richard Rogerson incorporated cities in Los Angeles County have severely restricted short-term rentals of entire (Princeton) homes and apartments by adopting home sharing ordinances (HSOs). These HSOs essentially 12 - 12 March 2021 / Online / banned informal short-term rentals: hosts renting out entire properties became subject to the same Geneva Trade and formal regulations as hotels and bed and breakfasts. Home-sharing through Airbnb (as well as long- Development Workshop 15 March - 31 May 2021 / term renting) is not prohibited but restricted. Online / Figure 1 Airbnb in Los Angeles County CEPR Policy Research

Discussion Papers Insights

Homeownership of immigrants in France: selection effects related to international migration flows Gobillon, Solignac Climate Change and Long- Run Discount Rates: Evidence from Real Estate Giglio, Maggiori, Stroebel, Weber The Permanent Effects of Fiscal Consolidations Summers, Fatás Demographics and the Secular Stagnation Hypothesis in Europe Favero, Galasso QE and the Bank Lending Channel in the United Kingdom Butt, Churm, McMahon, Morotz, Schanz

Subscribe

@VoxEU

RSS Feeds

Weekly Digest

There are several reasons why we focus on Los Angeles County. First, it is the most populous county in the US and its main locality, the City of Los Angeles, has not yet formally regulated short- term rentals or enforced a comprehensive regulation (see Figure 1). This enables us to focus on changes in the number of Airbnb listings as well as housing prices close to the HSO-regulated places. We use micro-data on Airbnb listings and housing prices between 2014 and 2018.

Our data allow us to distinguish between effects on different types of listings (home-sharing, entire properties), as well as on the prices of different types of housing (apartments, single-family homes). We also extend the results to include effects on rents.

Our empirical approach relies on a panel regression discontinuity design, where we compare listings that were affected by HSOs (treatment group) with nearby listings that remained unaffected by the legislation (comparison group). The borders of the HSO-affected cities serve as a geographic cut-off point, which assigns listings into either the treatment or comparison group. This quasi- experimental research design enables us to measure the causal effect of the HSO on Airbnb listings and housing prices.

Measuring the causal effect of Airbnb on the housing market

First, we estimate the effect of HSOs on a property’s probability of being listed on Airbnb. In Figure 2A, we plot this probability. We observe a sizable drop in listings in HSO-affected areas. Given an average probability of being listed of about 30%, the ordinance strongly reduces the number of Airbnb listings by around 30%. We plot the effect over time in Figure 3A and show that the reduction in listings is about 50–60% in the long run. Hence, in line with anecdotal evidence, this suggests that HSOs are very effective in reducing short-term rentals.

Figure 2 Airbnb listings and housing prices: Variation near the HSO borders

Note: Negative distances indicate areas outside HSO areas, and areas inside HSO areas before treatment. The dots are conditional averages at every 200-metre interval. The dotted lines denote 95% confidence intervals.

Figure 3 The effect of the HSO on listings and housing prices over time

Note: The dotted lines denote 95% confidence intervals.

One expects a negative effect of the HSO on housing prices (except when negative externalities are substantial). We now compare changes in housing prices near the HSO borders. Figure 2B suggests that housing prices have been reduced by about 3%. The effect turns out to be highly significant statistically and although we examine effects at a very local level (within one kilometre of the border), we show with more elaborate statistical techniques that the estimated effect is very robust to the choice of the geographic focus. This effect becomes more pronounced over time (see Figure 3B). We also analyse the impact of HSOs on rents and show that the effects are essentially the same. Using these estimates, we estimate the overall impact of Airbnb on property values and show that the effect can be large. For example, in areas within five kilometres of Los Angeles’s central business district, the price increase is 14%. Within 2.5 kilometres of beaches, the price increase due to Airbnb is almost 10%. Hence, in areas that are attractive to tourists, prices are substantially higher, while in areas without much tourist demand (e.g. Pasadena), effects are small.

Policy implications

What can we say about the distributional and welfare effects of Airbnb regulation? Using a back-of- the-envelope calculation, we show that regulating Airbnb has stark distributional implications. A regulation implies losses for homeowners, which are substantial for individuals who live in areas popular with tourists. The opposite holds for households who typically rent, who can only gain from such a regulation. Given the average housing price in HSO cities and given our assumptions, this therefore implies an annual welfare loss due to HSOs of about $680 per property. The intuition for such a substantial loss is that the investors’ willingness to pay is much higher than the willingness of the incumbent households being priced out of the market.

There are clear distributional implications of the HSO. We show that rents will decrease due to the HSO, so the average renter will gain. Because of the HSOs, homeowners lose, while renters tend to gain. This offers a plausible explanation as to why cities around the world that have heavily restricted short-term rentals typically have a high share of renters.

References

Branson-Potts, H (2016), “Santa Monica convicts its first Airbnb host under tough home-sharing laws”, Los Angeles Times, 14 July.

CBRE (2017), “Hosts with multiple units — A key driver of Airbnb growth”, technical report.

Fishman, S (2015), “Overview of Airbnb law in San Francisco”, www.nolo.com.

Inside Airbnb (2018), “Los Angeles”.

Koster, HRA, J van Ommeren and N Volkhausen (2018), “Short-term rentals and the housing market: Quasi-experimental evidence from Airbnb in Los Angeles”, CEPR Discussion Paper 13094.

Newling, D (2016), “Increase in Airbnb rentals leads to huge rise in noise complaints”, Evening Standard, 1 November.

O’Sullivan, F (2016), “The city with the world’s toughest anti-Airbnb laws”, CityLab, 1 December.

Samaan, R (2015), “Airbnb, rising rent, and the housing crisis in Los Angeles”, Los Angeles Alliance for a New Economy.

Sheppard, S, and A Udell (2016), “Do AirBnB properties affect house prices?”, Williams College, Department of Economics Working Papers 2016-03.

0 A A

Topics: Competition policy Microeconomic regulation

Tags: housing prices, rental prices, US, Los Angeles, online platforms, Airbnb, property values, short-term rental regulation, home sharing ordinances, real estate

Related

Housing expenditures and income inequality Christian Dustmann, Bernd Fitzenberger, Markus Zimmermann Safeguarding public interests in the platform economy Koen Frenken, Arnoud van Waes, Magda Smink, Rinie van Est Regulation to blame for England’s surging house prices Christian Hilber, Wouter Vermeulen On the causes and consequences of land use regulations Frédéric Robert-Nicoud, Christian Hilber

Printer-friendly version Feb 21, 2020, 06:54am EST | 29,308 views The Airbnb Effect On Housing And Rent

Gary Barker Senior Contributor Real Estate I write about sales and rental property trends in the UK.

Airbnb currently hosts over 7 million listings and is active in more than 100,000 cities across 220 ...

[+] SHUTTERSTOCK

The Wall Street Journal reported earlier this month that Airbnb had recorded a $322 million (£248.65 million) net loss in the first nine months to September in 2019. That’s a considerable drop from the $200- million profit reported by the world’s largest online marketplace for lodgings in 2018.

For a company with a valuation of $31 billion, according to Pitchbook in 2017, it’s a sign that the horn of this start-up unicorn might just be a carrot ahead of its hotly anticipated public IPO later this year.

However, although this is disappointing news for Airbnb stakeholders and investors, cities and countries around the world suffering from extended housing crises may celebrate its diminishing market influence.

The influence of the so-called ‘Airbnb effect’ on local housing markets has grown into a significant cause for concern, particularly when looking at its impacts on housing stock, prices and communities.

But even if Airbnb really is damaging local housing markets, can anything be done to stop the hugely popular, multi-billion-dollar juggernaut?

The cost of the world’s largest holiday platform

MORE FOR YOU

Has The U.K. Property Market Hit Its Ceiling?

Airbnb currently hosts over 7 million listings and is active in more than 100,000 cities across 220 countries and regions. It’s not lacking in vision either – Airbnb aims for 1 billion guests annually by 2028.

The platform is widely enjoyed for its access to holiday lets ranging from single rooms to entire properties, varying in quality and affordability, and offering a markedly different experience to that found in a hotel.

Then there are the clear economic benefits for local economies that stand to gain from the increase in tourists supported with a wider variety of affordable and available holiday listings. Homeowners and landlords also benefit, as turning their rooms and properties into short-term lets can offer an alternative and lucrative source of revenue.

But in recent years the impact of Airbnb’s service on local economics and rental markets has come under the spotlight. And analysis conducted by the Economic Policy Institute, a non-profit, non-partisan American think tank, found that the economic costs of Airbnb likely outweigh the benefits:

‘While the introduction and expansion of Airbnb into cities around the world carries large potential economic benefits and costs, the costs to renters and local jurisdictions likely exceed the benefits to travellers and property owners.’

The ‘Airbnb effect’ is to some extent remarkably similar to gentrification in that it slowly increases the value of an area to the detriment of the indigenous residents, many of whom are pushed out due to financial constraints.

Cities, popular ones especially, seem to fare the worst. In major cities such as Amsterdam, Barcelona, Edinburgh, and Los Angeles, studies on the ‘Airbnb effect’ have found that over-tourism facilitated by platforms such as Airbnb negatively impacts on house prices and communities.

The short-term rental sector is just as affected. Research conduced by the Harvard Business Review across the US found that Airbnb is having a detrimental impact on housing stock as it encourages landlords to move their properties out from out of the long-term rental and for-sale markets and into the short-term rental market.

A separate U.S. study found that a 1% increase in Airbnb listings leads to a 0.018% increase in rents and a 0.026% increase in house prices. It might not seem like much on the surface but there’s a cost creep for those looking to rent long-term or buy.

It would be a mistake to say all markets are equal, but housing markets in the U.S. have a socioeconomic cousin across the pond, and for the city with the world’s highest number of Airbnb listings, it should indicate a warning.

A case study: What’s happening in the U.K?

Airbnb’s U.K. growth has been rapid and extensive. If you were wondering which global city has the greatest number of Airbnb listings, it’s London, with over 80,000 listings – and 55% plus of these listings are for entire properties.

Some see this as an opportunity for agents, that 2020 could be the ‘year of Airbnb’. That certainly could be true for short-term landlords, and agents looking to take a bite of that market. But of this I would be wary, as short- term gain can undermine long-term sustainability.

A recently published report from the London-based economic research consultancy Capital Economics, commissioned by ARLA, analysed the scale of U.K.’s short-term lets sector and the wider implications for the private rented sector. The research found that active listings on Airbnb in the U.K. increased from 168,000 in 2017 to 223,000 in 2018 – that’s a 33% leap, and a significant market share of the growing U.K. lettings market. It’s also not the whole picture though, as data for similar short- term lettings services like Booking.com and Homeaway are unavailable.

The report further showed that 2.7% of the U.K.’s 1.5-million strong landlord population have already made the switch from long-term rental properties in the private rented sector to short-term lets, equating to 50,000 homes made unavailable to long-term tenants. And worryingly, around 10% of U.K. landlords surveyed responded that they are considering moving their private rented properties to the short- term market.

The factors behind this are myriad, but over one-third of landlords surveyed acknowledged that it was because of changes to mortgage interest relief, which from April this year will be reduced to a 0% deductible.

Other forms of long-term regulation including higher stamp duty, the Tenant Fees Act, and the abolishment of Section 21 legislation currently under consideration are also cited as factors persuading landlords in the buy-to-let sector that the grass is greener on the other side.

Here’s the kicker. If every landlord in that 10% does move their properties to the short-term market, up to an estimated 470,000 properties would be removed from the private rented housing supply – around 8.7% of the entire U.K. rented sector stock. And that would significantly stretch already strained housing supply.

I’ve said previously that supply and demand in the lettings market is a leaking ship that threatens to capsize landlords and tenants if not navigated correctly through rough waters. If more stock is moved into the short-term lettings market through platforms like Airbnb it could have collateral impacts on the wider market.

Airbnb claims that between July 2017 and July 2018, the U.K. economy gained £3.5 billion from hosts and guests using the platform, with an estimated 8.4-million inbound guests using the platform over this period.

Great for the economy, you might think? But a healthy housing market is the real bedrock of a healthy economy, and the U.K. housing market is not in great straits at the moment.

Restrained confidence and uncertainty due to the earlier election and Brexit are only now loosening up. But whilst market confidence is returning, low stock in both the sales and rental markets is pushing up prices.

The latest Home Asking Price Index reports that total sales stock is down 10.1% year-on-year in February; and it’s worse for the rental sector, with the supply of available rental properties in the U.K. down 18% over the same period.

Low supply and increasing rents in the U.K. are a major concern. The latest official government statistics on U.K. rental housing show that private rents have increased 1.5% year-on-year in the 12 months to January 2020. But an extended trend outlook reveals that between January 2015 and December 2019, private rents increase by 8.6%. That’s a significant increase.

It’s even worse for the London, Airbnb’s bread and butter. According to Rightmove, asking rents in the capital have increased almost twice as quickly compared with the rest of the U.K.

Many Londoners are now paying more than half their income on rent each month. And with more than 1 in 50 London homes listed as short-term lets, it’s questionable whether Airbnb can continue its free reign throughout the capital and the U.K. when the country is in such dire need for affordable housing stock.

Pushing back against the short-let industry

With spiralling costs fuelling a chronic housing crisis, the voices calling for regulation of Airbnb-style short-term lets are getting louder. The U.K. lags behind other countries when it comes to regulation for short-term letting sites like Airbnb, and it might be time to reconsider that. Research unveiled by The Guardian on February 20 reveals that in some parts of the U.K. one in four homes is an Airbnb listing.

Simultaneously produced research from the publication highlights that Airbnb’s presence in certain barrios (neighbourhoods) in Spain has pushed rent increases by as much as 50%, forcing locals to move to more affordable areas. It’s a warning sign the U.K. would do well to take note of.

Several countries and cities have started to push back against Airbnb and other short-term lettings platform because of the impacts felt on local communities and housing costs:

Berlin has enforced restrictions against short-term lets on platforms like Airbnb since 2016, requiring landlords to acquire a permit if they want to rent 50% or more of their main residence as a short let.

New York City is currently embroiled in a legal battle with Airbnb regarding the turn-over of host data. In fact, since launching in 2008, Airbnb has been involved in at least 11 lawsuits against an American city or state, with the majority of cases taking place within the last two years.

Edinburgh will soon bring in a licensing scheme from 2021 empowering councils to regulate ‘holiday-style’ lets if they feel it’s better for local communities. And in ‘control areas’, landlords will require planning permission before they can convert a whole property for short-term lets.

Perhaps to pre-empt any future legislation in London, Airbnb introduced in January 2017 the ’90-Day Airbnb Rule’, whereby short-term rentals for entire homes are capped at 90 days per year. But this has had mixed results, and research commissioned by City Hall has suggested that as many as 23% of London’s approximately 80,000 listings at the time of study were in breach of the 90-day limit.

Airbnb has disputed the figures, claiming the data is wrong as it comes from third-party scrapers which it considers inaccurate.

There have been calls to introduce a licencing scheme for the rest of the U.K., similar to what’s being introduced in Edinburgh. But this scheme is not being introduced by the government of city councils, it’s an Airbnb initiative.

Who really has the lead on legislation?

Back in January, Airbnb won a significant victory in a top E.U. court to be ruled as an ‘information society service’, or an online platform rather than an estate agency, if you will. It means that they get to avoid stringent regulations in place across Europe affecting how the company operates, and for the time being (whilst the U.K. remains part of the E.U.) gives them stronger freedoms against regulation in cities such as London.

Airbnb is certainly happy with the result, but does it match with the platform’s recent corporate pledge to make a ‘positive contribution to society’? That could be the intended impression.

The platform this month kicked off a series of registration roadshows in cities across the U.K. The aim of which is to ‘consult on proposals for a clear, modern and simple registration system for short-term rentals in collaboration with policymakers, communities and local hosts.’ In a recent ITV interview, they stated that: “We are good partners to cities and we have worked with more than 500 governments and organisations around the world to help hosts share their homes and follow the rules. We were the first platform to work with London to limit how often hosts can share their homes and we have led calls for a national registration system in the UK.”

It should be taken as a positive that Airbnb is trying to lead the way on responsible legislation. But forgive the cynic in me if I’m a little less optimistic. What’s more likely is that Airbnb is well aware of the impacts of their service in many cities and is trying to control the narrative and build a favourable impression ahead of their expected IPO later this year, whilst safeguarding against any threats towards their future revenues.

In summary

Whilst it’s easy to slay Airbnb as the cause of rising prices and lack of rental stock in popular cities, one can’t help but wonder if they aren’t merely the backdoor escape for landlords that have been cornered into an impossible scenario, with everything from scrapped tenant fee bans to zero mortgage relief, to a list of compliancy legislation so lengthy that it’s near impossible to self-manage a property, counting against them. Perhaps Airbnb is just the tip of the iceberg, where an unforgiving approach to landlords and a lack of government capacity to deliver on their house-building promises are the bulk of the problem that’s propping up Airbnb as the visible, easily targeted problem.

12 Daily Success Stories

Follow the world's top entrepreneurs with career tips and success secrets in our Daily Dozen newsletter.

Title

Enter e-mail address Sign up

You may opt out any time. Terms and Conditions and Privacy Policy Follow me on Twitter or LinkedIn.

Gary Barker

I am a Non-Exec with the Guild of Professional Agents and the Fine and Country Network. I was previously the CEO of Reapit and was responsible for driving its vision,… Read More

Print Reprints & Permissions ADVERTISEMENT

The Effect of Short Term Rentals on The Supply of Housing in Santa Barbara City and County

What is the effect of the short-term rental (STR) market on the supply of long-term housing?

A report prepared by the

California Economic Forecast 5385 Hollister Avenue Box 207 Santa Barbara, CA 93111 (805) 692-2498 www.californiaforecast.com

May 12, 2016

FINAL REPORT

Executive Summary

The purpose of this report is to present data-supported analysis and conclusions regarding the impact of Short-Term Rentals (STRs) on the supply of long-term housing in Santa Barbara City and County.

Short-Term Rentals (STRs) have grown to represent an important economic engine for the local economy. A recent STR Economic Impact Report for the Santa Barbara area concluded that the operation of STRs creates approximately $471 million in overall economic activity per year, and approximately 5,000 jobs. STRs also provide significant annual Transient Occupancy Tax revenues to Santa Barbara City and Santa Barbara County.

However, community members and decision makers are concerned about the impact of STRs on the supply of long-term housing.

Is there a valid concern that the long-term rental housing supply in the City and County of Santa Barbara is negatively impacted by the operation of STRs? Yes. However the degree to which the supply is impacted is negligible, far less than presumed.

As a principal part of the study methodology, survey requests were sent to STR property owners in Santa Barbara City and County. The survey was conducted during the month of March 2016.

Key Results of the Survey

• If STRs were prohibited in the City and/or County of Santa Barbara, 71% of STR owners would continue to rent their properties as short- term rentals. 49% would be rented legally (30+ night stays), and 22% illegally (less than 30-night stays). • Less than 15 percent of STR property owners rent their properties full time throughout the year. The remaining owners only rent their properties part time. Most owners rent their homes out as vacation rentals for less than half of the calendar year. • 51 percent of all STR properties in Santa Barbara County are located in the City of Santa Barbara. • In 86 percent of all cases, the entire dwelling is rented out short term. • Less than 13 percent of STR owners use the vacation rental business as their livelihood.

2

Using the survey responses as representative of all STRs in Santa Barbara County, extrapolations to the entire population of STRs show that the prohibition of STRs would create an estimated 67 additional long-term rental units in the City of Santa Barbara, and an estimated 77 additional long-term rental units in rest of the County of Santa Barbara. 144 total additional units out of 147,368 long-term housing units in the entire County of Santa Barbara represents 0.10% of total housing stock being added to the supply of rentals.

An increase of 1/10th of 1% in the long-term rental supply is created by prohibition of STRs, and does not represent a significant number of housing units that would be converted from STR use to a longer term supply of housing for purchase or rent.

This study also shows that if STR prohibition is enacted, 22% of STR operators may operate in a “grey market” in which rentals of less than 30-nights will continue in spite of the prohibition. This grey market will add additional regulatory costs, and will not produce transient occupancy revenues to Santa Barbara City and County.

In conclusion, the empirical evidence does not justify the perception that the operation of STRs in Santa Barbara County or City materially impacts the supply of housing for residents. Only a negligible increase in the long-term housing supply would be created by the prohibition of STRs, and approximately half of that negligible increase would not be considered “affordable” housing.

Consequently, this study does not support the perception that STRs have a significant negative impact on the supply of long-term housing.

3

What is the effect of the short-term rental (STR) market on the supply of long-term housing?

In Santa Barbara City and County, and in other coastal areas of California, home prices are between 2 and 6 times higher than the median home price for all homes nationwide. Average rents for apartments are twice as high as the national average. Housing is simply more expensive in the Bay Area, Santa Barbara, and along Coastal California in general than in most other areas of the country. Why? Because demand for homes in California remains strong and the growth of housing supply is dwarfed by the growth of housing demand.

Housing supply growth is constrained by many factors, but the most prominent are growth controls and the regulation of new housing supply. Growth controls come in many forms, including zoning policies, urban growth boundaries, affordable housing policies, development fees, new unit limitations per year, and other land use policies.1

While there are many reasons for a constrained housing supply, a recent allegation has been aimed at short-term rentals as having a meaningful effect on restricting the supply of rental units.

1 See for example, the March 2016 edition of the California Economic Forecast’s monthly newsletter on Urban Growth Controls: http://californiaforecast.com/march-2016/

4

If the owner of a condo, home, studio, or multi-family apartment structure (who does not use the property during a portion of the year) decides to dedicate an entire unit exclusively to STR use, there is the potential to remove housing from the stock available to local residents.

In the majority of cases, removing the housing unit from the housing stock would likely mean removing the unit from the rental housing stock, though it’s also possible that a unit dedicated to STR use might otherwise be available for sale, too.

It is not accurate to say that all units that are dedicated to STR use are being removed from the rental stock because some of them have never been part of it, and/or the property owner is unwilling to have a non-relative tenant. Consequently, they would leave the unit vacant or exclusively available for relatives, friends or other uses if they were unable to rent it out short-term.

A full listing of STRs from short-term rental websites such as AirBnB.com, HomeAway.com, VRBO.com , and Flipkey.com would include the following types of listings:

Housing types that impact the supply of long-term housing:

• Units that are being short-term rented full time without a resident in the home, and there is no personal use of the property by the owner

Housing types that do not impact the supply of long-term housing:

• Second homes that are used a portion of the year by the owner • Extra bedrooms that someone is renting out some of the time • Full units that someone is renting out when they happen to be out of town • Other listings by property owners who took the time to make a listing, but don’t actually follow through with renting because they don’t need the money at this moment.

5

For the purposes of determining the impact that STRs have on the supply of housing available to tenants or new purchasers, we need to know:

(1) The total number of housing units in Santa Barbara City and County

(2) The total number of STRs in Santa Barbara City and County

(3) Whether the STRs are “whole house” or “whole units”, and if they are made available throughout the year.

(4) What alternatives would current owners of STR properties choose if their current use of the property as a short-term rental was prohibited.

The current total supply of housing is presented here:

Housing Supply today / Santa Barbara County

Total Single Total Total Family Apartments Supply*

------units ------

Santa Barbara City: 21,457 16,609 38,066

Other Incorporated Cities in SB County**: 41,472 20,726 62,198

Unincorporated Areas of SB County: 38,505 8,599 47,104

Total Santa Barbara County 101,434 45,934 147,368

------* Does not include mobile homes **Cities include: Santa Maria, Lompoc, Goleta, Carpinteria, Solvang, Guadalupe, Buellton

Source: Department of Finance, report E-5, May 2015

The table is the most recent inventory of housing stock in Santa Barbara County, and is updated annually every May by the Department of Finance. Currently, there are 38,066 housing units in the City of Santa Barbara, 62,198 housing units in

6

Other Incorporated Cities in SB County, and 47,104 housing units in the Unincorporated Areas of SB County. This results in a total of 147,368 housing units in Santa Barbara County.

Estimated STR Inventory / Santa Barbara City and County

The total supply of STRs was determined in a recent report prepared by TXP, Inc.2 “Approximately 2,550 unique STR properties were listed in 2014 throughout Santa Barbara County across a variety of major online vacation rental platforms.”3

TXP determined that the total output impact of STRs in Santa Barbara County is $472 million per year and that the City of Santa Barbara’s contribution to that impact is 46.8 percent of the county total. Applying the ratio of the City to County output impact to the number of STR properties in the County, it is estimated that at most, there are 1,193 properties located within the Santa Barbara City limits.4

STR Inventory / Santa Barbara County

number of properties

Santa Barbara City: 1,193* Rest of Santa Barbara County: 1,357 TOTAL: 2,550

* represents 46.8 of total STR supply in the County of Santa Barbara

2 TXP, Inc., “The Local Economic Impact of Short Term Rentals in Santa Barbara, CA,” Fall 2015 3 ibid., page 4 4 We say “at most” because STR properties in the City of Santa Barbara would, like housing prices, typically have a higher average rental price than the collective average of the properties outside of the City (including Carpinteria, Montecito, Goleta, Lompoc Santa Ynez and Santa Maria). A higher price would lead to a larger impact per property. A larger impact per property means that to contribute 46.8 percent of the total output in the county, the number of STR properties in the City would be less than 46.8 percent of the total STR properties in the County

7

Survey of STR properties / County of Santa Barbara

A recent survey of STR property owners was conducted to obtain information that is pertinent in the determination of the STR impact on housing supply.

Two principal vacation rental websites (AirBnB.com and HomeAway.com) were contacted for the purpose of disseminating a survey to all STR property owners in Santa Barbara County. Surveys were also sent to owners of properties managed by professional STR management companies.

1,660 survey requests were sent to the following recipients:

Surveys sent to owners by email from HomeAway corporate office*: 575 Surveys sent to owners through the HomeAway inquiry system: 476 Surveys sent to owners through the AirBnB inquiry system: 336 Surveys sent to owners by local STR management companies: 273 TOTAL: 1,660

*Approximately 425 STR property owners were not sent the survey from HomeAway.com corporate office because those property owners had “opted out” of receiving ancillary email correspondence from HomeAway.com.

The survey was conducted during the month of March 2016. A total of 319 responses were received. This represents a 19 percent response rate.

Responses to six principal questions were requested for the analysis. An additional 4 responses were requested from STR owners if they selected the 4th or 5th answer in question 6).

The Survey Questions and the responses are presented below.

1) Where is your property located?

Answer percent number Santa Barbara 51.10% 163 Montecito 14.42% 46 Goleta 1.25% 4 Carpinteria 10.66% 34 Santa Ynez Valley 14.73% 47 Lompoc Valley 0.63% 2 Santa Maria Valley 0.94% 3

8

Other (please specify) 6.27% 20 Total 100% 319

The proportion of 51 percent of respondents having their properties located in Santa Barbara is statistically comparable to the 47 percent of total properties in Santa Barbara County estimated (above) to be located in Santa Barbara.

Most STRs are located along the South Coast of Santa Barbara County (83%) with only a small representation of properties in the North County.5 2) What type of property is your short-term rental?

Answer percent number Single Family Home 76.18% 243 Condo or Townhouse 9.09% 29 Apartment 2.51% 8 Other (please specify) 12.23% 39 Total 100% 319

The dominant response is that the typical STR is a detached single-family home. Apartments really do not comprise a meaningful portion of the short-term rental stock. The “other” category of 39 properties was mostly guest homes or cottages, separate mother-in-law or grannie units, or artist or studios, or single- family ranch homes on a ranch.

3) What do you offer for rent?

Answer percent number Entire dwelling 86.52% 276 Individual room(s) in the dwelling 13.48% 43

Total 100% 319

Clearly, most STRs comprise the entire property. Consequently, it would appear that the potential to augment the housing stock would be quite high if all of these homes were precluded from STR activity.

5 The “other “ category included 5 homes in Summerland, 4 homes in “Noleta” (commonly interpreted as the unincorporated area between Goleta and Santa Barbara), 1 in Montecito, and 6 in the unspecified unincorporated South Coast region of the county. There were only 4 in the North County including the Santa Ynez Valley. Consequently, 16 of the 20 “other “ responses can be allocated into the South Coast.

9

4) Please provide the best answer as to why you use your property as a short-term rental

Answer percent number I need to rent the property (or rooms) to help 28.84% 92 finance the mortgage I need the additional income to make ends meet 32.92% 105 I don’t use the home full time, so I might as well 25.71% 82 rent it out when I’m not here This is my business 12.54% 40 ------Total 100% 319

Less than 13 percent of STR owners claim that the vacation rental business is their livelihood. The remainder engages in STR activity to augment their incomes to finance their properties or the general cost of living.

5) How many nights during the year do YOU personally use your short-term rental property?

Answer percent number None. My property is available for rent 100 14.42% 46 percent of the year 1 to 90 nights 45.77% 146 91 to 180 nights 19.75% 63 181 to 364 nights 20.06% 64 Total 100% 319

Less than 15 percent rent their properties full time throughout the year. The remaining STR owners only rent their properties part time. And most rent their homes out as vacation rentals for less than half of the calendar year.

This is consistent with the previous question that property owners who rent their homes out as vacation rentals are doing so to augment their income. It is not their primary business. Furthermore, the home is used for their personal occupation (or their family’s), and would not be available to augment the long-term supply of housing if STR activity was banned.

10

6) If rentals of less than 30-nights were prohibited, what would you do?

Answer percent number I would personally live in the property full time 5.96% 19 I or my extended family (or friends) would use 5.96% 19 the property more I would continue to rent my property short-term, 49.22% 157 but with a 30-night minimum per rental I would convert the property to a long-term 5.64% 18 rental (1 year lease or longer) I would sell the property 10.97% 35 I would continue to rent my property for less 22.26% 71 than 30-nights, and accept the risk of enforcement action Total 100% 319

The responses above demonstrate that most STR owners would choose an option for their property other than one that would augment the housing supply in Santa Barbara County, including the City of Santa Barbara. Only 16.6 percent of respondents indicated they would either long-term rent or sell their property.

Consequently, while some additional properties would be added to the housing stock, mostly as new for-sale inventory, the vast majority (72 percent) would continue to be used as short term rentals, legally or illegally.

The following 3 questions pertained only to the 18 (5.6%) of respondents (above responders in blue) who indicated they would convert their rental to long-term rental property. The purpose of the 3 questions was to determine the potential rental rates of the homes (and, for shared homes, the “per-room” rental rates) that were added to the long-term housing supply.

7) As a long-term rental (1-year leases or longer), what do you think you would rent the property for:

Answer percent number $1,500 per month or less 11.11% 2 $1,501 - $3,000 per month 16.67% 3 $3,001 - $5,000 per month 22.22% 4 $5,001 - $7,500 per month 33.33% 6 $7,501 - $9,000 per month 11.11% 2

11

Greater than $9,000 per month 5.56% 1 Total 100% 18

Half of respondents indicated they would rent their home for $5,000+ per month. This tends to be the higher end of rental properties in Santa Barbara, Goleta, Montecito and Carpinteria, and very high elsewhere. A review of houses for rent on Craig’s List clearly demonstrates this. Consequently, only 9 homes out of 319 STR properties surveyed (2.8 percent) would be added to the rental supply of homes in an affordable range for professionally working families. The other half (2.8 percent) would be added to the rental supply in the luxury home category.

8) As a long-term rental, how many bedrooms would be available in your property?

Answer percent number 1 16.67% 3 2 22.22% 4 3 44.44% 8 4 5.56% 1 5 5.56% 1 6 or more 5.56% 1 Total 100% 18

9) What would the “per room” rate be for your long-term rental (calculated as the total monthly rent divided by the total number of bedrooms)?

Answer percent number $500 or less 0.00% 0 $501 - $1000 5.56% 1 $1001 - $1,500 50.00% 9 $1,501 - $2,000 33.33% 6 Greater than $2,000 11.11% 2 Total 100% 18

The following question pertained only to the 35 (10.97%) of respondents (question 6 responders in green) who indicated that they would sell their property. The purpose of the question was to determine a potential for-sale price or “value” of the type of homes that would be added to the long-term housing supply.

12

10) What is the market value of your property?

Answer percent number $500,000 or less 0.00% 0 $500,001 - $1,000,000 18.92% 7 $1,000,001 - $1,500,000 13.51% 5 $1,500,001 - $3,000,000 32.43% 12 $3,000,001 - $5,000,000 21.62% 8 Greater than $5,000,000 13.51% 5 Total 100% 35

25 of the 35 of the above responders indicated the market value of their home was $1.5 million and up. 10 of the 35 indicated the market value of their home was $3.0 million and up. The median value of the 35 STR homes is $2,581,081.

13

Conclusion

The tables below quantify the effect of STRs on the supply of long-term rental and for- sale housing units in the:

1) City of Santa Barbara 2) County of Santa Barbara (excluding the City of Santa Barbara), and 3) Combined Total: City & County of Santa Barbara.

City of Santa Barbara (only) Units percent

Total Housing units: 38,066 100.00% Total Short-Term Rental units: 1,193 3.13%

Long-Term Rental Housing Inventory lost due to STR activity: 67 0.18%

Long-Term For-Sale Housing Inventory lost due to STR activity: 131 0.34%

Total Long-Term Housing Inventory lost due to STR activity: 198 0.52%

County of Santa Barbara (excluding the City of Santa Barbara) Units percent

Total Housing units: 109,302 100.00% Total Short-Term Rental units: 1,357 1.24%

Long-Term Rental Housing Inventory lost due to STR activity: 77 0.07%

Long-Term For-Sale Housing Inventory lost due to STR activity: 149 0.13%

Total Long-Term Housing Inventory lost due to STR activity: 226 0.20%

Combined Total: City & County of Santa Barbara Units percent

Total Housing units: 147,368 100.00% Total Short-Term Rental units: 2,550 1.73%

Long-Term Rental Inventory lost due to STR activity: 144 0.10%

14

Long-Term For-Sale Housing Inventory lost due to STR activity: 280 0.19%

Total Long-Term Housing Inventory lost due to STR activity: 424 0.29%

Is the allegation true that the long-term housing supply in the City of Santa Barbara is impacted by the operation of STRs? Yes. But the degree to which the supply is impacted is statistically negligible.

Only 16.6 percent of current STR properties would be converted to long-term rental or for-sale housing stock in the event that STR activity was prohibited in Santa Barbara County. This represents only 0.29% of the entire housing stock in Santa Barbara County.

In conclusion, prohibition of STRs will create an estimated 67 additional long-term rental units in the City of Santa Barbara, and 77 additional long-term rental units in rest of the County of Santa Barbara. 144 total additional units out of 147,368 long-term housing units in the entire County of Santa Barbara represents only 0.10% of the total housing supply. This is a negligible increase in the supply of long-term rental units, and is unlikely a large enough increase in supply to have any long-term impact on rental rates.

Similarly, prohibition of STRs will create an estimated 131 additional for-sale housing units in the City of Santa Barbara, and 149 additional for-sale housing units in rest of the County of Santa Barbara. 280 total additional housing units out of 147,368 long-term housing units in the entire County of Santa Barbara represents only 0.19% of the total housing supply, and is unlikely a large enough increase in supply to reduce housing purchase prices.

Finally, for half of the estimated increase in the supply of long-term housing created by the prohibition of STRs, it is likely that rental rates for these properties would exceed $5,000 per month (and, in a shared home, over $1,500 per room per month). This level of monthly rent is generally not considered an “affordable housing” rate. Therefore, a significant amount of any increase in rental properties caused by prohibition of STRs would unlikely have any impact on the “affordable housing” problem in the region.

The empirical evidence does not justify the perception that the operation of STRs in Santa Barbara County or City materially impact the supply of housing for residents. Only a negligible increase in the long-term housing supply would be created by the prohibition of STRs, and approximately half of that negligible increase would not be considered “affordable” housing. Consequently, this study does not support the allegation that STRs have a significant negative impact on the supply of long-term housing.

15

References

The AirBnB Impact: http://www.sfchronicle.com/airbnb-impact-san-francisco-2015/#1

LAANE report: http://www.laane.org/wp-content/uploads/2015/03/AirBnB-Final.pdf

Response by AirBnB to LAANE study http://www.latimes.com/business/hiltzik/la-fi-mh-airbnb-study-of-rentals-20150930- column.html

Airbnb listings in Vancouver: How many? What type? Where? https://shorttermconsequences.wordpress.com/2015/06/20/airbnb-listings-in-vancouver- how-many-what-type-where/

Effect of STRs on Home Values (see last page for conclusions, page 19) Can Short-Term Rental Arrangements Increase Home Values? A Case for AirBNB and Other Home Sharing Arrangements http://scholarship.sha.cornell.edu/cgi/viewcontent.cgi?article=1133&context=crer

AirBnB impact in SF on the housing crisis https://medium.com/@magicchef/how-much-of-an-impact-are-short-term-rentals-on-the- sf-housing-crisis-21c65c8dacc1#.n68h4xuhg

STRs worsen housing crisis, LA Times, March 11, 2015 http://www.latimes.com/business/realestate/la-fi-airbnb-housing-market-20150311- story.html

16 INVESTIGATIONS Short-term rentals have little impact on Denver housing market, city report says

A report by a city analyst said short-term rentals like Airbnbs are such a small part of housing in Denver, the industry has little impact on the cost of homes

Author: Jeremy Jojola Published: 2:48 PM MDT September 12, 2019 Updated: 6:56 PM MDT September 12, 2019

DENVER — An analysis that compared the number of short-term rentals in the city to the housing supply concludes short-term rentals have very little impact on the cost of housing.

The report was generated in April and was recently obtained by 9Wants to Know as it looked into how the city has been trying to regulate the short-term rental industry.

Book early Has Denver Star Nikola Jokic Been Underrated This Season?

FEATURED BY

A 9Wants to Know investigation found entities that appear to be businesses were issued short- term rental permits when they should go to actual people in their primary residence. The city said the compliance system now requires names on permits to match names on driver’s licenses. In some situations, a business may own a property but give someone living there permission to legally run a short-term rental, the city said.

RELATED: Owner of property management company accused of skirting short-term rental rules

RELATED: Attorney accused of gaming Denver's short term rental rules

The report by the Economic Development department said short-term rentals make up only 1% of the housing supply in the city, which is 306,714 home units.

“Short term rentals in Denver do not appear to have an impact on housing costs at the citywide level. A geographic concentration of short-term rentals is moderately positively correlated with increased home values, but not increased rents,” Analyst Katherine O’Connor wrote in the report.

Denver’s Department of Excise and Licenses, which issues short-term rental permits, said the “primary residence” rule has helped reduce the impact of short-term rentals on the housing market.

“It does not allow people to buy up additional units, a bungalow next door or a condo across town. It doesn’t allow companies to come in and buy multiple units and start short-term renting them,” Ashley Kilroy, executive director of the Excise and Licenses department, said of the rule. Page 1 of 9

Sho! Term Rentals & Housing Costs in Denver

Prepared by Katherine O’Connor, Analyst – Denver Economic Development Apriland Oppo!unity 2019 Abstract This analysis examines whether sho! terms rentals increase housing costs in Denver. Shocould! termincrease rentals housing costs in Denver in two ways. First, by decreasing the overall supplyunits used of housing for normal residential purposes, thereby increasing rents and home prices.increasing Second, the value by of housing units, which would raise rents and home prices. This repowhether! evaluates either of these two mechanisms of increasing housing costs are occurring in Denver. Since sho! term rentals are 1% of Denver’s entire housing supply and are required by city ordinancebe the host’s to primary residence, it is reasonable to assume that they do not decrease the housingenough tosupply impact housing prices. Examining housing price changes by Census Tract alongsidepropo!ion the of sho! term rentals by tract indicates that a geographic concentration of shois moderately! term rentals positively correlated with localized increases in owner-occupied home valueshas a weak (.329), positive and correlation with local rent increases (.033). However, this correlationindication that is likely increased an home values and rents re"ect an area’s perceived desirability, whichsho! term makes rentals more economically viable – rather than evidence that sho! term rentalslocalized have impact a on housing costs.

Background The de#nition of sho! term rental varies across the country and throughout the world.rental hosts Sho! adveterm!ise o$erings as entire homes, accessory dwelling units, or rooms withinHosts oa$ home.ering these rentals may be owner occupants, renter occupants, or owners who dothe not residential occupy unit. Regulations on sho! term rentals vary as well – some jurisdictions haveregarding no policies these units, while others have strict governance and compliance enforcement. There are several ways sho! term rentals are hypothesized to impact neighborhoods, RELATED: Denver couple accused of illegally running short-term rental business through Airbnb

RELATED: These are the most popular Airbnb rentals in Colorado ski towns

FIND FAMILY GETAWAYS NEARBY

Book early

The city began enforcing its primary residence rule in 2017, prompting 267 people to either withdraw their permit applications or surrender their licenses as of Sept. 5.

The city claims 75% of the short-term rental ads online are in compliance with the law, the highest compliance rate in the country, city officials said.

The economic development report also credits the primary residence rule for helping reduce impact.

“This prevents investors from purchasing housing that would otherwise be used for normal, long term residential purposes, thereby decreasing the housing supply and inflating prices,” O’Connor wrote in her report.

9Wants to Know also compared a list of properties from 2015 that were used for Section 8 housing to properties currently used for short-term rentals. No properties from the 2015 list are being used for licensed short-term rentals.

Lisa Calderon, chief of staff for Councilwoman Candi CdeBaca, believes short term rentals still impact neighborhoods on a deeper level and can accelerate gentrification in neighborhoods.

“We have an affordable housing crisis in Denver and the fact that they’re used to be working class families living here, I would love to see a return to that,” Calderon said of the home next to her house.

A home at 3420 Marion St. was featured in 9Wants to Know’s report on Sunday, which revealed it was owned by a real estate agent who ran it as a full-time short-term rental. The agent gave up his short-term rental license after Calderon complained, prompting city investigators to see if the agent lived at the property, as required by law.

9Wants to Know found the home is owned by "Marion House, LLC."

“We know that there are students who need housing, and this would be a great student living place. But ultimately, we need more housing options. I’d love to see this landlord be in tune to that and it reverts back to an affordable housing property,” Calderon said.

“This report confirms what we’ve long maintained: short-term rentals are not impacting housing prices in Denver. Meanwhile, Airbnb helps Denver families earn extra money to offset rising housing costs and infuses visitor spending to neighborhoods that haven't typically benefited from tourism,” an Airbnb spokesperson said. We remain committed to working with the City to ensure Denver receives the full economic benefits of short-term rentals."

FIND FAMILY GETAWAYS NEARBY

Book early

SUGGESTED VIDEOS | Investigations from 9Wants to Know

After 18 deaths, state human services dept. reviewing pro… Sponsored Links by Taboola You May Like

Little-Known Facts Of The Legendary Doc Holliday Post Fun

Little-Known Facts About Working At Disney Factable

Plastic Surgeon Explains: “Doing This Every Morning Can Snap Back Sagging Skin" (No Creams Needed)

Beverly Hills MD Learn More

End Nighttime Shoulder Pain with Patented Arm Pocket

MedCline Shop Now

20 Places Where $150K Is More Than Enough To Retire MoneyWise.com

LOADING NEXT ARTICLE... Sign In

COVID-19 Local updates Watch live COVID-19 tracker Vaccine tracker

Toronto Stricter bylaws for short-term rentals come into effect this week

'They could eliminate all the ghost hotel operators,' advocate says

Natalie Nanowski · CBC News · Posted: Sep 08, 2020 6:00 AM ET | Last Updated: September 8, 2020 Anyone wanting to rent their primary residence out on a short-term rental site will now have to register with the City of Toronto and pay a yearly fee. (Daniel Krason/Shutterstock)

comments

After years of court battles, the city is enacting a new set of regulations this week that will only allow people to rent out their primary residence on short-term rental sites.

It's a move to ensure that homes, condos and apartments aren't funnelled off into the short- term rental market as investment properties, instead of being available for Torontonians to rent long-term.

The rules, which come into effect Thursday, bring hope to some in Toronto's challenging rental market.

"We've been waiting for this since December 2017," said Thorben Wieditz, with FairBnb Canada, a coalition of hotel workers and housing advocates.

"This could eliminate all the ghost hotel operators that have stockpiled investment properties and run them as exclusive Airbnb units."

Toronto residents fed up with short-term rentals used as party houses

Toronto to enforce new Airbnb regulations after tribunal rules in favour of stricter bylaws

Starting Thursday, anyone wanting to rent out their entire primary residence, or up to three rooms in their primary residence, must register their short-term rental with the city.

From there, they'll be issued a unique number, which is now mandatory for advertising your home on any short-term rental site, from Airbnb to Hotels.com. A short-term rental is defined as a property listed for less than 28 consecutive days.

Without that number, Airbnb policy director Alex Dagg says people won't be able to place their property on the site. "Part of the requirement for us as a platform is to provide data to the City of Toronto," Dagg said.

Fines range from $300 to $1,000

Exactly what format that data will take hasn't been figured out yet. People have until December 31 to register their home with the city. There's a yearly fee of $50 and it's up to the city, not the individual rental platforms, to enforce the new regulations.

In theory, someone could list two properties under the same registration ID, but because of the data that the city will be getting from these rental platforms, Carleton Grant, Toronto's executive director of municipal licensing and standards, says they will eventually be caught and fined.

More downtown condos have popped up on the long-term rental market since the COVID-19 pandemic hit. (Andrew Lupton/CBC) "It's going to give us a number of tools to allow us to enforce and know who is participating within the rules and who isn't — and it's going to allow us to go after them" said Grant.

"There are five different fine amounts, they range for $300 to $1,000," said Grant, adding that offenders could also be removed from the rental sites.

'We need to hold the company accountable'

Although Wieditz believes Toronto's new short-term rental rules are some of the strictest out there he thinks companies like Airbnb should do more to enforce them.

But even though Toronto is responsible for catching offenders based on the data city officials are provided from hosting sites, he said it shouldn't solely be left up to the city.

"We know that in many cities across North America and Europe, Airbnb has done very little to help municipalities enforce local bylaws and rule," said Wieditz.

"We need to hold the company accountable."

'We fear for our safety': Resident says short-term rentals operating in Toronto condo during COVID-19

When the COVID-19 pandemic hit back in March, it exposed another layer of Toronto's extensive and problematic short-term rental market.

With travel halted, many of the condos that were listed as short-term rentals weren't making a profit so they became available as long-term properties.

"The Ice Condos for example, there's an unusually high number of furnished rentals now available to long-term tenants and this is definitely something that is a result of the pandemic," said Wieditz.

Airbnb to ban local guests under the age of 25 from booking entire homes

Wieditz says that by December, when the grace period is over and registration numbers are mandatory on short-term rental sites, more properties will either hit the long-term market or go up for sale.

"Looking at the data, there are over 7,000 homes that are currently advertised that are not going to be legal under the city's bylaws and regulations," said Wieditz.

When San Francisco implemented similar rules, Wieditz says, Airbnb lost over half of its inventory overnight.

In addition to the $50 yearly registration fee, short-term rental operators will have to start collecting and remitting a four per cent Municipal Accommodation Tax on a quarterly basis starting in the new year.

More information on exactly how that will work is expected this fall.

©2021 CBC/Radio-Canada. All rights reserved.

Visitez Radio-Canada.ca ADVERTISEMENT

THE LONG-TERM EFFECTS OF SHORT-TERM RENTALS: AN EXAMINATION OF THE MOUNTAIN TOWN HOUSING CRISIS January 25, 2019 By TransWorld SNOWboarding

VIDEO HOW TO SHOP THE SNOWBOARDER MOVIES GEAR FEATURES EVENTS MAGAZINE

Has the rise of Airbnb impacted the existing housing crisis in mountain communities such as Winter Park, Colorado? | PHOTO: Carl Frey

This feature originally appeared in the October issue of TransWorld SNOWboarding. Subscribe here.

Words: Tyler Macleod In August of 2011, I made the spontaneous decision to move from my hometown outside Baltimore, Maryland, to Winter Park, Colorado. It was a small resort town I had no prior knowledge of, making the choice to move there all the more odd to my parents, family, and friends. I had graduated college three months prior and was fortunate to lock down a reputable internship, transitioning into a lucrative, full-time gig, so its easy to imagine the degree to which eyebrows were raised. Still, the depression that came with ironing a collared shirt every morning for my ensuing ten SNOWBOARDER NEWSLETTER hours behind a desk was eating at my soul. I could see my passion for snowboarding Subscribe to SNOWBOARDER’s fading in the rear view mirror during my hour-long commute each morning, just as it Newsletter to receive stories like this already had for many of my old on-hill companions. It was the recipe for a spur-of-the- straight to your inbox. moment, life-altering decision at the ripe old age of 23. A quarter-life crisis some might call it. Email Address SUBSCRIBE

I didnt know a soul in Winter Park, but its down-to-earth atmosphere made for an easy transition. After a short period of time, I locked down a two-bedroom apartment with my girlfriend for a mere $575 a month. There was no waitlist, no bidding war, no struggle. I put in an application, and within a few days we were moving in. I was living the local lifestyle without a care in the world, paying my bills with an $11 an hour wage from tuning skis, and of course, snowboarding every single day.

ADVERTISEMENT

FOLLOW US

For mountain communities, lack of housing has translated to workforce scarcity. The days of tuning boards to pay the rent are getting tougher. | PHOTO: Andrew Miller

In 2018, that same unit is going for three times as much, and youll have to take a number and wait in line for a chance at it. A portion of the apartments in the complex have even been scooped up by Winter Park Resort to be used as their own employee housing. As is the case in many other mountain towns across North America, the ADVERTISEMENT amount of housing wanted ads now far exceeds the amount of for rent listings. When I moved here, there were plenty of rental options but a scarcity of jobs. In 2018, every business has a help wanted sign on its door. TOP SHELF

But for those who come to vacation throughout the year, !nding a place to stay couldnt THE SNOWBOARDER MOVIE: TANGL… be more painless. With the dawn of Airbnb and similar platforms, !nding a home away from home is easier than ever. It just means a local may no longer have a place to live. THE SNOWBOARDER MOVIE: TANGL…

Instead, they might be living out of their car, with multiple jobs, questioning whether THE SNOWBOARDER MOVIE: TANGL… the choice to leave a desk job was the right decision after all. Theyre lucky if they !nd time to snowboard, and the quarter-life crisis has resurfaced. HOW TO SET UP YOUR SNOWBOAR…

Like them, Ive resorted to picking up additional work to make ends meet. Ironically, my HOW TO: SET UP YOUR STANCE second job is cleaning short-term rental units. And business is booming. As often as I walk into these units thinking a local could be living here, its hard not to consider the owners position as well. Theres money to be made, and its easier to point the !nger when youre not in their shoes.

ADVERTISEMENT

IS THE BLAME ON AIRBNB WARRANTED?

If youve lived in a mountain townor any destination area for that matteryoure familiar with the kneejerk reactions of crusty locals. Its always easy to place the blame on everything from tourists to corporate resort entities for any issue that arises in the community, and while sometimes warranted, other times these are excuses for lack of e"ort. Which led me to consider whether Airbnb, VRBO, and similar short-term rental services in general, are to blame for the lack of housing options, let alone a"ordable ones. Are these platforms actually destroying the very essence of my own mountain community of Winter Park, alongside most other major ski towns?

Robin Van Gyn, who rents her Whistler home out via Airbnb when shes traveling, seems to agree. But she also realizes that, like all issues, there are two sides.

It does contribute to the problem, she says. There is no housing for the workforce, and people cant a"ord to live. Its insane.

But its also another source of income, so [as a homeowner] its hard not to, she admits. Were all just trying to get ahead. Robin Van Gyn, who rents out her Whistler home via Airbnb, realizes there are two sides to the short-term rental issue. | PHOTO: Robin Van Gyn

Its a sentiment thats echoed by Winter Park local turned part-time Tahoe resident Jackson Fowler, who, like Van Gyn, has a property hes rented out via Airbnb for the past three years.

ADVERTISEMENT

Ive seen both sides of it, being a snowboard bum and having experienced the struggle to rent a room in Tahoe where a similar crisis is going on, Fowler explains. Everybody is turning to the Airbnb thing. That kind of leaves the locals in the dust, and I feel for that for sure. But, at the same time, the money I make from renting my house helps me get by.

While its easy to blame homeowners who opt to rent a unit out short-term rather than long-term, assuming its a decision based solely on pro!t potential, for some, the latter is hardly an option. Van Gyn and Fowler both spend time each winter traveling to snowboard but still need a home base to come back to. Why not make a few bucks rather than leave it vacant?

While traveling for turns like this, Robin Van Gyn has rented her unit on Airbnb to turn its otherwise vacant days into extra income. | PHOTO: Tim Zimmerman

I might as well do something with it, Fowler says. And then I still have it open when I need it. I can always just block o" dates on Airbnb, but I cant kick out a full-time renter. I cant just say Hey, Im coming up. Can you leave?

But that consistent inconsistency is something Van Gyn admits to struggling with.

Its hard to move your personal things all the time, she says. Sometimes you just want your space to be there and not have to screw with it. Its work.

As enticing as the extra income can be, its not always worth it.

Short-term is a pain in the butt, she readily admits. Long-term is the way to go if you can make it work.

THE RISE OF SHORT-TERM RENTALS

With short-term rentals rising in popularity for both homeowners and vacationers, there had to be some quanti!able proof out there. Are STRs, as theyre acronymized, actually taking long-term opportunities o" the market, or are they simply !lling otherwise vacant properties?

In my search for answers, I immediately took to the !rst source that came to mind: the ever-reputable . At the least, I wanted to know how many long-term housing options were available, beginning in my own community of Winter Park.

How many did I !nd? Just four. The cheapest was a dated, single-bedroom unit for $1,400 a month with no utilities included. A two-bedroom was also available up the road in neighboring Fraser for $1,500, which included a disclaimer stating that long- term lease agreements would increase, at an undisclosed amount, during ski season. I also found a two-bedroom unit in downtown Winter Park for $3,000 per month. The fourth was presumably a scam, as it was listed multiple times for $950 and wouldnt be available for another two months anyhow.

What about the local newspaper listings? Surely there had to be something listed there.

Nope. Absolutely nothing.

After talking to Fowler, who is actually switching his Airbnb unit back to a long-term rental because of a recent knee injury, that shortage became even more apparent.

Its been insane since Ive put the house up as a full-time rental, he said. Ive gotten 50- plus phone calls in the past two days, and a ton of emails. I listed it at $1,600 for a two- bedroom, not including utilities, which, for Winter Park, is actually pretty low right now.

From renting out his home in Winter Park, Colorado, to living out of his truck, Jackson Fowler knows a thing or two about the mountain town housing landscape. | PHOTO Danny Kern

Perhaps the pool of Winter Park rentals is relatively small to begin withmaybe the lack of available housing is due to a lack of housing, period. Not the case. l conducted a search of the Winter Park area on Airbnb, which resulted in a surplus of 300 short-term rentals.

I performed a similar search in a number of other mountain communities, from the nearby Colorado ski mecca of Breckenridge to the housing crisis capital that is Jackson, Wyoming. The results, unsurprisingly, werent much di"erent. While long-term listings in local papers and online were both expensive and hard to come by, Airbnb was over#owing with potential short-term rental opportunities.

Still, when it comes to workforce housing shortages, not everyone is ready to point the !nger at STRs.

A lot of blame is placed on short-term rentals, admits Town of Winter Park Housing Manager, John Crone. But Im not really sure there is that much blame that can go there. It has certainly taken some long-term rentals o" the market, but I think most of those short-term rentals are the types that sit empty most of the time anyways.

As more homeowners favor Airbnb, locals will continue to struggle to make the Whistler backcountry their personal backyard. Jody Wachniak takes advantage of some prime real estate. | PHOTO: Andy Wright

According to AirDNA.com, which provides a market overview on rentals for a submitted zip code, these STRs arent always proving to be as lucrative as one might expectat least not in Winter Park. Despite an average daily rate of $209, STRs in Winter Park are only yielding a 16% occupancy rate, which results in an average monthly revenue of only $1,003. That revenue doesnt include taxes or service fees that the town charges either, ultimately providing an average monthly revenue that sits well below the current $1,400-$2,000 monthly range I saw for long-term two-bedroom units.

Revenue aside, Winter Park has witnessed incredible growth in the quantity of STRs available. After starting with only six total cumulative rentals in 2011, that amount has now increased to a whopping 2,410 in 2018, according to AirDNA.com. Whether these rentals were sitting vacant before Airbnb or not, they arent sitting vacant anymore, and the rate at which theyre increasing is signi!cant.

And what does AirDNA say for Breckenridge and Jackson? Breckenridge has more than twice the occupancy rate of Winter Park at 33%, while Jackson has an even higher rate of 60%. Breckenridge yields an average monthly revenue of $2,627 and has increased from 12 total rentals in 2011 to 6,744 in 2018. Jackson, with an average monthly revenue of an impressive $6,254, showed an increase from only one unit in 2010 to its current 545 total units.

Looking at the South Lake Tahoe area, the results are similar to that of Breckenridge. AirDNA shows an average monthly revenue of $3,604 by way of a 43% occupancy rate. Since 2010, the total cumulative rentals here have increased from just 15 to a whopping 4,610.

In Tahoe, Fowler has seen these e"ects !rsthand.

I had a group of friends in a four or !ve bedroom house. Their lease was up, and they were planning to renew, but the homeowners decided to switch to the Airbnb thing. They were left in the dust, thinking they had a house for another year.

While the magnitude of these numbers undoubtedly requires context of each towns population to appropriately put into perspectiveWinter Park has a population of just over 1,000, while South Lake Tahoe exceeds 20,000the fact of the matter is that the number of STRs is rising, and rising dramatically. Surely, it has some sort of e"ect on the existing workforce housing shortages.

IS THERE AN EFFECT ON THE WORKFORCE HOUSING SHORTAGE?

In Summit County, Colorado, home to the aforementioned town of Breckenridge, thats what o$cials are bent on !nding out.

In general, we get a sense that they are having a large impact, says Jason Dietz, executive director for the Summit Combined Housing Authority. One of the things we want to try to do is quantify what that is [through] working with the towns that make up the Summit Combined Housing Authority. We dont really have a quanti!able number that we can point to with hard data right now.

Currently, Summit County, which is comprised of various communities including the towns of Breckenridge, Frisco, Silverthorne, and Dillon, while also encompassing popular ski destinations such as Copper, Keystone, Arapahoe Basin, and of course, the resort Breckenridge, is in the process of putting together a study for a new housing needs assessment that hopes to zero in on exactly how STRs are impacting local housing across the county.

We want to understand, Are we making any headway in getting more workforce housing, or are we staying the same, or going backwards? explains Dietz. While Summit County has long been ahead of the curve in developing workforce housing projectsthey have a surplus of 500 units across the county currently in the works to be developedthere is concern as to whether the projects are keeping up with the simultaneous growth in STRs. We dont really know the answer to that, admits Dietz. Were looking to try forming an RFP (request for proposal) that will quantify that to see what the real numbers are.

To make the situation more di$cult, Summit Countys !ve jurisdictions each regulate their own communities when it comes to STRs. While Breckenridge has been regulating STRs for some time now, which includes remitting a 3.4% tax on short-term lodging back to the town, the area de!ned as Summit County Unincorporated currently has no regulations.

There is zero regulation, says Dietz. Literally none in regards to it. But that is soon to end because they have been working on putting together regulation since last year, and they are in the process of !nalizing that. The goal is to have some in place before winter.

Planned developments in Summit County, Colorado aim to ease increasing difficulty in finding a place down the street from the region’s world-class parks. Brett Moody enjoying bluebird park laps at Keystone’s popular A51 park. | PHOTO: Chip Proulx

For communities like Jackson, Wyoming, where STRs are just another hurdle on a long path toward workforce housing solutions, regulations are essential. And strict.

They certainly have [a"ected the housing shortage], says April Norton, Director of the Jackson/Teton County A"ordable Housing Department when asked whether STRs have had an impact on the communitys current housing dilemma. Theyve taken housing stock out of the rental market. Theyve also in#ated the values of the land here. But according to Norton, STRs are just additional fuel to an already burning !re.

In Teton County, 97% of the land is publicly owned. Were already working with such a !nite amount of land, that yes, the short-term rentals have certainly helped to in#ate the prices, she says. But the bottom line is our land values are in no way tied to local wages either, so youre just fundamentally going to have issues with housing local workers.

This explains tough regulations on STRsincluding a lodging overlay and a minimum rental period of 31 days.

Pursuant to the Land Development Regulations Section 6.1.4.A Residential Uses, no private or residential unit may be rented for less than 31 days unless its included on an approved list of short-term rental units. While this should make it more di$cult for STRs to have a substantial impression on the existing housing shortage, Norton admits that not everyone is a law-abiding citizen.

What theyll do is write a lease for 31 days, but theyll only rent it for a weekend, she says. So people who are trying to legally do it will do just that; they will rent to one person per 31 days. But a lot of other people will just blatantly disregard the rules, and if they get caught, they will be !ned. But if they dont get caught, then theyre rolling in money because its certainly a lucrative thing to do.

In Whistler, its not uncommon for Airbnb owners to be less than honest in their handling of business either.

You have to be zoned for nightly rentals to rent [short-term], Van Gyn points out. I bought my place knowing that, but a lot of people do it illegally which is a bit shitty for properties like mine. Whistler – like Jackson, Summit County, and so many other mountain towns – is no stranger to workforce housing woes, and short-term rentals don’t appear to be helping. | PHOTO: Scott Serfas

EFFECT ON THE COMMUNITY

As mountain town work to regulate the impact of short-term rentals, or strive to !nd out whether they have a quanti!able impact, those who live and work in these communities deal with not only the potential that STRs are stripping them from potential housing opportunities, a"ordable or not, but also the impact they have on the character and atmosphere of a place they work hard to call home.

Karen Fisher, who lived in Jackson, Wyoming, from December 2009 to May 2016, experienced this !rsthand.

When I lived in Jackson, I lived in the Village for a little while. Almost every apartment in our complexa 16-plex I thinkwas a short-term rental spot, she re#ects. And the two buildings next to us, the same sort of deal. Everyone knew their actual neighborsthe people who lived therebecause there were only maybe six permanent residents in what? 48 apartments? The rest were all rentals and Airbnbs. Our next door neighbors were these Texans who came once a year but rented the unit all year long.

At one point, with the workforce housing market as bad as it was, Fisher had no other choice than to live in a garage. For Fisher, it was more than acceptable compared to other options, or lack thereof, the city had available.

The garage wasnt bad, she admits. It had running water, a washer, dryer, sink, wood burning stove, and even a bathtub. It wasnt very energy e$cient though. Cold as hell in there.

For Fisher, STRs meant trading a once supportive community for a revolving door of vacation-minded visitors. While it can be argued that mountain towns only exist because of the tourists they host, in a place like Jackson, where the majority of the workforce makes 80% less than the median income, that idea becomes a hard pill to swallow.

A sense of community didnt exist for me in the Village, she says. Theres something to be said about having neighbors to help each other out, which we didnt really have.

And that lost sense of community was magni!ed depending on the season.

During summer, it was much busier because the renters were on their way to Yellowstone, she adds. So typically they were older and respectful, at least. The winters had fewer renters, but most were man-cation lets party a bunch and make loud noises types. That was tough while working early morning shifts. I wore earplugs.

Due to the increasingly impossible task of !nding housing and slipping sense of community, Fisher left Jackson in the spring of 2016.

The only people I know that still live there are folks who bought houses more than ten years ago. Things dont add up. Its almost mandatory you have a trust or other source of income to live there, or just own a condo and have it as a rental and come out periodically on vacation. Where once was “For Rent” signs, now are “Help Wanted” signs in their place. | PHOTO: Tyler Macleod

WHERE DO WE GO FROM HERE?

When I travel to snowboard, the inevitable question of where to stay arises. Would I choose to book a room at a hotel or, often for less money, avoid interaction with a front desk agent and enjoy the comforts of home while I was away?

As easy as it is to harness a crusty local attitude and point the !ngers at short-term rentals, one thing is certain: they arent going anywhere. And for those of us in the snowboard community, wed be lying if we didnt acknowledge the bene!ts they can providewhether its earning some extra income while out !lming, or having a comfortable and a"ordable place to stay during the course of our winter travels.

But even without directly quantifying the impact short-term rentals are having on long- term mountain town housing, its safe to say they arent helping. Housing shortages are increasing at exponential rates, and unless communities and individuals take initiatives to !nd solutions, the e"ects will be dramatic.

In my home of Winter Park, the town has already constructed a 38-unit workforce housing complexone of those units fortunately belonging to myself. Theyve also broken ground on a 27-unit, 104-bedroom complex through a long-term lease with Winter Park Resort. This new relationship between the resort and the town will prove vital in providing adequate housing for local employees, both at the resort and throughout the rest of the community.

In nearby Summit County, numerous projects are either completed or underway, according to Dietz. The town of Silverthorne has broken ground on 200 workforce housing units, with 60 of them set to be available before this upcoming winter. Neighboring Keystone has 66 single family homes in the works, and Breckenridge, in addition to having recently wrapped up a project that provided 52 townhomes and 30 apartments, will also have another 18 units becoming available in the coming months. The Town of Winter Park has taken strides in addressing the growing shortage of workforce housing options with a number of projects currently underway. | PHOTO: Tyler Macleod

Jackson is even making signi!cant strides. According to Norton, the community approved a comprehensive plan in 2012 with the goal to house 65% of the workforce in town. Currently, they are at 59% and trending in the right direction. In addition to 28 units recently available in August, another 90 are expected to open up within the next year and a half. Jackson is also in the process of constructing 125 additional rental units, and while not all of them will be restricted, they will hopefully assist in driving rent down.

On an individual level, it could mean picking up another job for the time beingmaybe even cleaning some short-term rentals on the sideor !nding a less-than-preferable place to call home for a bit. It might not be as cheap and easy as it once was to live in these places, but If youre committed to snowboarding, youll !nd a way to make it a reality.

All the people I know will make it work somehow or another, says Fowler. If they really want to snowboard, theyll either live in their car or stay on peoples couches. Airbnb is de!nitely making it harder to live in these places, but no matter what, Ive realized were all going to make it work one way or another.

And no matter how frustrating the housing climate becomes, I promise you that ironing wax will always beat ironing a shirt.

See More Stories Like This Here

#airbnb #exclusives #jackson fowler #magazine features

#mountain town housing crisis #robin van gyn

SIGN UP FOR OUR NEWSLETTER

Subscribe to SNOWBOARDER’s Newsletter to receive stories like this straight to your inbox.

Enter Your Email Address SUBSCRIBE

By signing up you agree to our Terms and Conditions and Privacy Policy.

Popular in the Community

AdChoices Sponsored

SOUND OFF IN THE COMMENTS BELOW!

JOIN THE CONVERSATION

Conversation Commenting as Guest Log In

Be the !rst to comment...

Powered by Terms | Privacy | Feedback

Top Articles

READ MORE

Boardslide Worldwide: Powder Surfer

LATEST NEWS WATCH NOW: KINGS & QUEENS OF CORBET NATURAL SELECTION TOUR—JACKSON ´S—RED BULL SNOW X JACKSON HOLE… HOLE: DAY 2 LIVESTREAM FULL STREAM NATURAL SELECTION TOUR—JACKSON EVERY WINNING SNOWBOARD RUN FROM X HOLE: DAY 1 LIVESTREAM GAMES ASPEN 2021

THE SNOWBOARDER MOVIE: TANGLE—PHIL THE SNOWBOARDER MOVIE: TANGLE—JILL HANSEN PERKINS' FULL PART

THE SNOWBOARDER MOVIE: TANGLE— TRAVIS RICE LAUNCHES THE NATURAL BODE MERRILL SELECTION TOUR!

HOW TO SET UP YOUR SNOWBOARD HOW DID LIFT TICKETS BECOME SO BINDINGS WITH DANNY KASS EXPENSIVE?

HOW TO: FIND YOUR STANCE HOW TO: FIX A CORE SHOT

HOW TO: FIX A BLOWN OUT EDGE HOW TO: SET UP YOUR STANCE

HOW TO: FIX A CRACKED AND DENTED BURTON STEP ON: A CRITICAL REVIEW OF EDGE A NEW STEP-IN SNOWBOARD BINDING… SYSTEM THE DISAPPEARANCE OF MARCO SIFFREDI

HOW TO: WAX OFF

WHAT THE PROS ARE ROCKIN' - SHAUN EDGE BEVELING: WHATS YOUR ANGLE? WHITE

ADVERTISEMENT

FOLLOW US NEWSLETTER

Subscribe to our free newsletter and stay up-to-date with the latest from SNOWBOARDER

Sign Up ABOUT CONTACT MEDIA KIT ARCHIVES SHOP SHOP SPECIAL ISSUES

PRIVACY POLICY TERMS OF USE ACCESSIBILITY STATEMENT COOKIE POLICY ADCHOICES Visit Our Other Sites

Adventure Sports Network SNOWBOARDER has a$liate partnerships so we may receive compensation for some links to products and services. Copyright © A360 Media LLC 2021. All rights reserved.