Airbnb’s effects on the city’s housing market have been dramatic, a report suggests. And other cities could soon see the same pattern.
There are two kinds of horror stories about Airbnb. When the home-sharing platform first appeared, the initial cautionary tales tended to emphasize extreme guest (and occasionally host) misbehavior. But as the now decade-old service matured and the number of rental properties proliferated dramatically, a second genre emerged, one that focused on what the service was doing to the larger community: Airbnb was raising rents and taking housing off the rental market. It was supercharging gentrification while discriminating against guests and hosts of color. And as commercial operators took over, it was transforming from a way to help homeowners occasionally rent out an extra room into a purveyor of creepy, makeshift hotels.
Several studies have looked into these claims; some focused on just one issue at a time, or measured Airbnb-linked trends across wide swaths of the country. But a recent report by David Wachsmuth, a professor of Urban Planning at McGill University, zeroes in on New York City in an effort to answer the question of exactly what home sharing is doing to the city.
“There’s been a kind of increasing outcry from communities, from housing organizations, from activists, and from elected officials that short-term rentals are having a negative impact on housing,” Wachsmuth said. New York City is the third-largest Airbnb market in the world, and it’s also one of the oldest, so it could serve as a useful model for what smaller, newer markets might expect to see when home sharing takes off. “[New York] has been a big center of activity for a long time. When we look at cities that have much smaller markets, we’re seeing them grow in a way that already happened in New York before we started gaining the data. And we’re seeing the exact same process repeat, kind of in real time.”
To map this process, Wachsmuth and his team used estimates of Airbnb activity from AirDNA, a California-based firm that scrapes and analyzes Airbnb data. They studied Airbnb activity from September 2014 to August 2017, including more than 80 million data points, for the whole 20 million population of the New York City metro region. They also used a number of new spatial big-data methodologies developed specifically to analyze short-term rentals.
Their conclusion: Most of those rumors are true. Wachsmuth found reason to believe that Airbnb has indeed raised rents, removed housing from the rental market, and fueled gentrification—at least in New York City. To figure out how, the researchers mapped out four key categories of Airbnb’s impact in New York: where Airbnb is concentrated and how that’s changing; which hosts make the most money; whether it’s driving gentrification in the city; and how much housing it has removed from the rental market.
Is it really still “home sharing”?
The phrase “home sharing” evokes an image of an individual who opens their home and rents out their extra space to wanderlust-y strangers. This is, after all, how Airbnb got its start: Struggling to make rent in San Francisco, founders Joe Gebbia and Brian Chesky started renting out floorspace in their living room and cooking breakfast for their guests in 2007. Today, the company is worth some $30 billion.
While many people still use the platform this way, Wachsmuth found that 12 percent of Airbnb hosts in New York City, or 6,200 of the city’s 50,500 total hosts, are commercial operators—that is, they have multiple entire-home listings, or control many private rooms. And these commercial operators earned 28 percent of New York’s Airbnb revenue (that’s $184 million out of $657 million).
Like hotel managers, these hosts tend to be market-savvy: They often charge less per night than other hosts do and adjust their rates to attract a high number of rentals overall. Unlike hotels, they don’t pay commercial property taxes or hotel taxes. And that’s a problem, both for the city itself and for other hosts.
“If we didn’t have this dominance of commercial operators, the home sharers would do better,” Wachsmuth said. “Currently what’s happening is that the price the actual part-time home sharers need to charge in order to get a booking is getting pushed way down.”
If this sound illegal, that’s because it is. It contradicts Airbnb’s “one host, one home” policy, which was introduced in New York City in 2016. That policy limits New York-area hosts from listing rentals at more than one address. It also violates New York State’s Multiple Dwelling Law (MDL), which forbids short-term rentals of fewer than 30 days in buildings with three or more units, unless the owner is present. While it is certainly possible for a host to have multiple legal listings that all refer to the same property, using American Community Survey data from 2011 to 2015, the researchers calculated that anywhere between between 42 percent and 46 percent of all active listings have had illegal reservations.
New York’s MDL, which has been in effect in some iteration since 1929, is difficult to enforce. In a situation where the law tries to go after someone, Wachsmuth said “the landlord can say, ‘Oh, I was there—I was just in a different room.’ They can’t prove that they weren’t.”
But what about the people who actually are sharing their homes?
There’s no denying that Airbnb remains a useful tool for many New Yorkers, who struggle to keep up with the city’s ever-increasing cost of living. That’s how Charlotte Harris uses the platform, out of her four-bedroom apartment in Williamsburg, Brooklyn. Harris and her housemates started using Airbnb last summer, to earn money during periods when they were traveling. Between them, they made about $5,000—enough to cover September’s rent without finding a short-term sublet.
“It’s not very much, but it’s just so [we] can feel OK about not being home and paying rent,” Harris said. This wouldn’t matter as much, she continued, “if you didn’t feel like each day of your rent, or each day that you lived in your apartment mattered, and was a substantial amount of your income.”
Airbnb disputes Wachsmuth’s figures on how many commercial operators are in the New York City market: According to the company, 92 percent of hosts in New York shared their primary residence between 2017 and 2018, and 79 percent of hosts use the money they earn to stay in their homes. Airbnb also has voiced concerns about AirDNA’s data-scraping method, which can over-count the number of nights per year people actually rent out their homes, since it accounts for periods of time that hosts block off their space as unavailable (which can simply mean that they are home and do not want to host any guests).
It’s also worth noting that Wachsmuth’s research was funded in part by some avowed foes of home sharing—the New York City Hotel Trades Council—and was cosponsored by housing and tenant advocacy organizations.
To Wachsmuth, the more important figure is the amount of money the smaller number of commercial operators are bringing in. Overall, his data suggests that half of all Airbnb rentals that are conducted by only 10 percent of hosts, who earned a full 48 percent of all the revenue earned in the city last year. That’s some 5,000-people earning a combined $318 million. In contrast, the bottom 80 percent of New York’s hosts—the city’s 40,400 true home sharers—earned just 32 percent of all revenue, or $209 million, in 2017.
The economic power that this fraction of commercial operators wield forces smaller sharers to trim their rates to compete. And they are getting less profit relative to their rent, since the platform contributes to a general increase in rental prices. Using Zillow’s Rent Index, Wachsmuth and his team estimate that over the last three years, Airbnb has increased long-term rents in the city by 1.4 percent. The median household looking for a new apartment will pay $384 more per year than they would have three years ago, due to the growth of short-term rentals.
In other words, using Airbnb to help pay your bills in a space-strapped city is a bit like using an air conditioner to combat global warming: It might help keep your apartment bearable, but overall it’s just making the environment worse.
The gentrification factor
Airbnb listings tend to be most concentrated in the city’s most desirable quarters, where rent is already high. Overall, Wachsmuth found that the Manhattan neighborhoods of Midtown, Midtown West, and the Lower East Side consistently saw the greatest amount of Airbnb activity. Williamsburg, where Harris lives, is the only neighborhood off the island with a comparable concentration.
But in the last two years, new Airbnb hotspots have emerged in increasingly gentrified Brooklyn neighborhoods such as Bushwick and Bed-Stuy. The same is true in the Upper West Side and Harlem in Manhattan, and even Jersey City, New Jersey. As housing prices go up, Airbnb penetration deepens.
The racial equity dimension of this process, and the impact of Airbnb growth in non-white communities in general, has been the subject of much discussion. The company adopted a set of anti-discrimination guidelines in 2016 to mitigate racial biases among hosts after public outcry that the platform facilitated racism by allowing hosts to discriminate against non-white guests.
Overall, Wachsmuth says, white neighborhoods make more money on Airbnb than non-white neighborhoods do—and not only because many popular neighborhoods are majority white. (For example, across New York City, only 39 percent of households are white, compared 68 percent of households in Midtown Manhattan.) He cites a 2017 study by Murray Cox, a “data activist” who runs the watchdog site InsideAirbnb, which concludes that 74 percent of Airbnb listings within majority black neighborhoods are run by white hosts.
Cox’s study, however, has been vigorously disputed by Harvard Kennedy School professor Robert Livingston, former Philadelphia mayor Michael Nutter, and others. And the black homeownership gap, not just Airbnb, is at least partly to blame for the phenomenon, since that makes it virtually impossible for black New Yorkers to host as often as others.
But one way or another, white hosts are driving the growth of short-term rentals in non-white neighborhoods, which in turn have led to rent increases. Between 2014 and 2017, Wachsmuth and his team estimate that the platform raised rents by 1.42 percent in north-central Brooklyn neighborhoods such as Bed-Stuy and Crown Heights. This is high for a neighborhood that has only recently acquired a large Airbnb concentration—indeed, it’s the same 1.42 percent rent increase seen in longtime high-revenue areas like Chelsea, Clinton, and the Upper West side.
Furthermore, there are incentives to being an Airbnb host in a non-white neighborhood. According to Wachsmuth, there are large swaths of the city where entire-home Airbnb listings can earn 200 percent or more than the median long-term rent—and these areas are 72 percent non-white. This creates an incentive for landlords to convert whole homes into Airbnb units within communities of color.
Busting “ghost hotels”
According to the Cox report, black New Yorkers are also the most likely to face housing loss due to Airbnb: Across all of New York’s 72 predominantly black neighborhoods, black residents are six times more likely to be affected by Airbnb-induced housing loss than white residents.
But this threat is present for other New Yorkers, too. Long-term housing is lost all around the city when entire homes are placed on short-term rental market for the majority of the year, during which time they could have been made available to long-term renters.
Wachsmuth counts whole-home listings as anything that would be listed as an “entire place” on Airbnb. They can run the gamut from actual houses to whole apartment units. But it is difficult to discern just how many of these listings would be placed on the long-term rental market in an Airbnb-free world. For example, some hosts in New York travel many days out of the year, and would otherwise leave their homes empty. Others rent out space that would never be placed onto the long-term market anyway—like a pied-a-terre (or, say, this decommissioned taxicab).
However, though there is no legal definition of a “full-time rental,” Wachsmuth and his team distinguish these spaces through two measures for entire-home listings: How many days out of a year it is both rented, and available to rent. Wachsmuth counted a home as full-time if it was both rented for 120 days or more, and available to rent for 240 days or more. Using these parameters, his team found that 5,600 entire-home listings were available to rent full-time over the last year. (Other researchers have used higher thresholds for full-time rentals, such as 216 days in New York, and 176 days in Cambridge, Massachusetts.)
Wachsmuth reasons that these 5,600 very frequently rented homes have almost certainly been removed from the rental market, as they are either occupied or available to rent for at least eight months out of the year. The majority of the listings that fall into this category are clustered around Midtown and Downtown Manhattan, but they are growing rapidly in Brooklyn, too.
People renting out individual rooms can also contribute to Airbnb-inspired housing loss. This can happen when a primary tenant permanently lists a spare bedroom in their apartment, or a landlord opts to rent to Airbnb guests rather than finding long-term tenants. The most egregious example of this are “ghost hotels”: entire units or buildings where individual bedrooms are listed individually on Airbnb as private rooms.
“Plenty of private operators don’t look like commercial operators, but they are,” Wachsmuth said. “I don’t want to draw a big distinction between that kind of activity and somebody who’s renting entire homes out full time. They’re two versions of the same thing.”
Wachsmuth compares Airbnb ghost hotels to flophouses—single-room occupancy hotels popular in American cities like New York and San Francisco in the early 20th century. (Here’s an amazing visual history of SROs from CityLab visual storyteller Ariel Aberg-Riger.) However, while flophouses often provided housing for all manner of city folk—such as immigrants, factory workers, and minority groups—ghost hotels largely cater to tourists. And because the hosts that run them are renting out individual rooms rather than whole homes, it can be easier for them to avoid municipal regulation, too.
“What’s interesting is that this kind of activity has a long history in New York,” he said. “I’m not aware of other jurisdictions where there’s almost 100 years of grappling with short-term rentals.”
Using spatial analysis, Wachsmuth’s team identified 4,700 private listings across New York City that make up ghost hotels. Together, these comprise 1,200 discrete ghost hotels, and constitute 16 percent of all private-room listings in the city. They earn an average of $6,400 per room annually—27 percent higher than other kinds of private-room listings.
The number of ghost hotels has increased by 79 percent since 2015, when there were only 670 ghost hotels in the city. In all, New York’s ghost hoteliers earned $30.4 million on Airbnb last year, while contributing greatly to housing loss in the city. Between ghost hotels and frequently rented, entire-home listings, the number of lost housing units in New York City is at least 7,000.
To bust the ghost hotels and mitigate the negative housing-removal impacts of home sharing, Wachsmuth recommends three steps. The first is already underway—implementing and enforcing a “one host, one home” policy. Since adopting the policy in 2016, Airbnb has banned 4,800 illegal listings in New York City. And since November 2016, Airbnb has barred hosts from listing more than one active entire home listing in the city (with certain exceptions).
To this end, Wachsmuth also suggests that home sharing might do better in New York if the state relaxed its restrictive Multiple Dwelling Law. “I can imagine that for New York, part of a kind of grand settlement on this would boil down to legalizing short term rentals for fewer than 30 days, which are currently basically always illegal,” Wachsmuth said. “Ultimately [the current law is] not compatible with the kind of part-time, entire-home short-term rentals” that are so prevalent in the city.
Airbnb is currently supporting legislation that would do just this, by amending the state’s Multiple Dwelling Law—which hasn’t been modified since 2010. Sponsored by New York State Senator John Bonacic, the bill would update the law so that residents could rent out a single home for fewer than 30 days. Additionally, it would codify the one host, one home policy into state law, and implement “pass-through registration” in New York. This registration system, which is already active in cities like New Orleans, Chicago, and San Francisco, requires hosts to register with the platform, which then turns their data over to a city registry. Together, these things would help cities could target illegal listings.
“Airbnb supports legislation that would restrict home sharing to one single home, which would finally allow enforcement to focus on illegal hotel operators while protecting regular New Yorkers who are trying to make some extra money to live in a city that gets more expensive by the year,” said Airbnb’s head of northeast policy, Josh Meltzer.
Wachsmuth’s third step is for cities to eliminate full-time rentals altogether. “There should be a limit to the number of nights per year that you can list an entire home,” he said. Cities in other parts of the world have implemented limits like this: In Amsterdam, for example, you can only host Airbnb guests for 60 days (and the city plans to shorten this period, to just 30 days). In London, the limit is 90 days, while Paris has a 120 day maximum. Once a host has booked their space for the permitted number of days, they are automatically banned from hosting again until the following year.
Between these sorts of limits, and one host, one home policies, Wachsmuth says, “you're basically guaranteed that commercial operators are going to have a hard time.” Without such caps, he believes, large-scale commercial operators will continue dominating the market—and driving up rents for everyone.
“If you just have this neutral platform which says you can share your home and there’s no regulation…over time what you're going to see is an increasing dominance of that platform by the biggest savviest players,” he said. “And that's what we’ve got.”