Growing Pains: Part 3: Benefits of Short-Term Rental Despite Concerns About Their Impact
Each municipality needs to adopt policies based on its own character, but some economists and short-term rental advocates agree the industry needs to be built around owner-occupied rentals and discourage rentals of non-primary residences – which do work. like commercial enterprises in residential areas. .
There is a distinction between hosted and non-hosted rentals, or a bed and breakfast where one person lives all year round versus a house that only functions as a short-term rental and does not have a permanent occupant. .
But before looking at this solution, it is essential to highlight some of the important advantages of the rental industry.
The number one benefit of short-term shared rentals is the ability for hosts to diversify their sources of income, writes Josh Bivens, research director at the Economic Policy Institute.
“Homeowners benefit from Airbnb’s ability to reduce the transaction costs of operating short-term rentals,” which makes it easier to generate income from their home, writes Bivens in his 2019 study “The Costs and economic benefits of Airbnb “.
Nathan Rotman, a public policy representative for Airbnb, agrees.
“Our hosts are ordinary people living in communities across the country and around the world,” Rotman said in an interview.
During the pandemic, when people lose their jobs and earn reduced incomes, the value of services like Airbnb cannot be overlooked, Rotman said, adding that 14% of new hosts to the platform said they lost their jobs to cause of COVID-19.
And the average new host in Quebec since the start of the pandemic has earned $ 8,000 in additional income, he said.
Bivens notes that short-term rental operators tend to be better off financially, especially those with two properties, a primary residence and a non-primary residence.
A 2016 US Federal Reserve analysis presented in the Bivens study found that over 90% of non-primary residence wealth belonged to the top 20% in the United States.
“To put it simply, any economic event that offers benefits commensurate with owning a property is one that will disproportionately grant those benefits to the rich,” Bivens writes.
He notes the transformation short-term rentals and Airbnb have undergone since the roommate market boom in the late 2000s.
“When it was founded, Airbnb marketed itself as a way for homeowners (or long-term renters) to rent a room in their primary residence, or as a way for people to rent their homes for short periods while they were away. ‘they travel themselves, “he writes.
“However, in recent years Airbnb listings and revenue have become dominated by ‘multi-unit’ tenants – absentee landlords with multiple units who essentially run small hosting companies on an ongoing basis.”
Bivens writes that this development raises several key questions, such as why can companies like Airbnb operate mini-hotels in residential neighborhoods?
Platforms like Airbnb allow people to ignore zoning regulations, leading many homeowners to rent out their non-primary residences as ‘ghost hotels’, one of the main issues that policymakers and advocates have. housing raised during the discussion of this issue, notes Bivens.
As for regulating the owners of several properties, Rotman said the decision rests with municipalities and he did not offer a specific position on the issue on behalf of Airbnb.
The amount of money tourists who stay at companies like Airbnb spend in the communities they visit is another benefit that short-term rentals bring, Rotman said.
“In Toronto, for example, 45 percent of total customer spending was at restaurants,” he said.
Rotman argued that Airbnb also allows tourists to reach more untapped communities and areas off the beaten path of the typical tourist, like Oro-Medonte or Haliburton.
However, Bivens argues that such claims should “be ignored by policymakers seeking a clear idea of the scale of the costs and benefits of expanding Airbnb.”
He cites two studies (one by Daniel Guttentag and another from Morgan Stanley Research) that found that less than four percent of Airbnb users would not have stayed where they planned if Airbnb was not available.
Another benefit of Airbnb and short-term rentals is that they lower short-term accommodation costs for travelers, Bivens writes.
A study by economists Georgios Zervas, Davide Prosperio and John Byers claims that a 10% increase in Airbnb rentals results in a 0.4% drop in hotel revenues.
Another study by economists Tarik Dogru, Makarand Mody and Courtney Seuss found a direct negative correlation between hotel room prices and Airbnb expansion.
The study found that the increase in Airbnb supply affects all metrics of hotels, including room revenue, average daily rates, and occupancy rates.
But Bivens is once again cautious about the significance of the statistics.
“This potential benefit of the introduction and expansion of Airbnb is essentially a redistribution of well-being, not an increase in economy-wide well-being,” he writes.
Analysis by the Bureau of Economic Analysis, a U.S. government agency, shows that short-term rental prices have actually increased more than the cost of general goods since 2014, Bivens writes.
In Toronto, an advocacy group called Fairbnb hopes to provide an alternative to the booming short-term rental model by offering rentals that strictly adhere to city rules and regulations.
“Airbnb has contributed to the housing crisis (in various cities) by removing the housing stock that was built, zoned and approved as a residential housing stock and converting it to what we call ghost hotels,” says Thorben Weiditz , from Fairbnb Co-op.
Fairbnb is a coalition of housing advocates, academics from institutions like York University, community groups like the Friends of Kensington Market and many more.
The best solution to the problems caused by the explosive growth of short-term rentals and Airbnb is to make sure owners are actually renting out their primary residences and trying to curb the proliferation of ghost hotels in residential neighborhoods, Weiditz said in an interview. .
“We are not against short term rentals or Airbnb. We are a house-sharing coalition, which means that if you or I wanted to rent our house while we are on vacation or going away for a weekend, we should be able to do it, ”he said. he declares.
“But we shouldn’t be able to buy or lease a residential housing stock and turn it into commercial ghost hotels. This is where we draw the line.
Fairbnb’s tactics appear to resolve many of the issues explored throughout this series by The Lake Report.
One of these problems, espoused by the mayoress of the township of Seguin, Ann MacDiarmid and Bivens, is that tourists staying in ghost hotels in residential areas do not care about the area and are prone to disrespect the community while adding excessive pressure on neighborhood infrastructure.
Since ghost hotels pay no commercial tax and are cheaper than regular hotels, the municipality is losing potential revenue while having to maintain its infrastructure.
“Transactions in the colocation market therefore involve a reallocation of resources from premises to non-locals”, write Kyle Barron, Davide Prosperio and Edward Kung in their 2017 study “The effect of house sharing on prices and housing rents: proof from Airbnb.
“A transfer of well-being from the locals to the non-locals is important for public policy, because the policy is defined locally. ”
In his own research, Bivens writes that this is the reason why hotels are specifically zoned and built away from residential areas. It avoids the spillover of external costs on long-term residents in what is supposed to be a residential area.
NEXT: To Rent or Not to Rent: The Role of Ownership Rentals.