Growing Pains: Part 3: Benefits of short-term rentals despite concerns about their impact
Each municipality should adopt policies based on its own character, but some economists and short-term rental advocates agree that the industry needs to be built around owner-occupied rentals and discourage rentals from non-primary residences – which do indeed work. such as commercial enterprises in residential neighborhoods. .
There is a distinction between hosted and non-hosted rentals, or a bed and breakfast where someone lives year-round versus a house that only functions as a short-term rental and has no occupant permanent.
But before considering this solution, it is essential to point out some of the important advantages of the rental industry.
The main benefit of short-term shared rentals is the ability for hosts to diversify their sources of income, writes Josh Bivens, director of research at the Economic Policy Institute.
“Landlords benefit from Airbnb’s ability to lower the transaction costs of short-term rentals,” which makes it easier to generate income on their listing, Bivens writes in his 2019 study “The Economic Costs and Benefits of Airbnb “.
Nathan Rotman, a public policy representative for Airbnb, agrees.
“Our hosts are everyday people living in communities across the country and around the world,” Rotman said in an interview.
During the pandemic, as people lost their jobs and earned reduced incomes, the value of services like Airbnb cannot be overlooked, Rotman said, adding that 14% of the platform’s new hosts 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 who own two properties, a primary residence and a non-primary residence.
A 2016 US Federal Reserve analysis featured in Bivens’ study showed that more than 90% of non-primary residence wealth belonged to the top 20% earners in the United States.
“To put it simply, any economic event that provides proportional benefits to owning property is one that will disproportionately bestow those benefits on the wealthy,” Bivens writes.
He notes the transformation that short-term rentals and Airbnb have undergone since the rise of the roommate market in the late 2000s.
“In its early days, Airbnb marketed itself as a way for landlords (or long-term tenants) to rent a room in their primary residence, or as a way for people to rent out their place for short periods of time while they were traveling themselves,” he writes.
“However, in recent years, Airbnb listings and revenue have become dominated by ‘multi-unit’ renters – absentee landlords with multiple accommodations who essentially run small lodging businesses 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 laws, leading many landlords to rent out their non-primary residence as “ghost hotels,” one of the top issues policymakers and advocates housing have raised when considering this issue, notes Bivens.
As for regulating owners of multiple properties, Rotman said the decision is up to municipalities and he did not offer a specific position on the issue on behalf of Airbnb.
Another benefit that short-term rentals bring is the amount of money tourists who stay with companies like Airbnb spend in the communities they visit, Rotman said.
“In Toronto, for example, 45% of total customer spending was made in restaurants,” he said.
Rotman argued that Airbnb also allows tourists to reach communities and more untapped areas off the typical tourist’s beaten path, such as Oro-Medonte or Haliburton.
However, Bivens argues that such claims should “be ignored by policymakers looking to get a clear picture of the scale of the costs and benefits of Airbnb’s expansion.”
He cites two studies (one by Daniel Guttentag and another by Morgan Stanley Research) showing that less than 4% of Airbnb users would not have stayed at their intended location if Airbnb was unavailable.
Another benefit of Airbnb and short-term rentals is that they reduce 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% decrease in hotel revenue.
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 increased Airbnb supply affects all hotel metrics, including room revenue, average daily rates, and occupancy rates.
But Bivens is once again cautious about what the stats mean.
“This potential benefit from the introduction and expansion of Airbnb is largely a redistribution of well-being, not an economy-wide increase in well-being,” he writes.
Analysis by the Bureau of Economic Analysis, a US government agency, shows that prices for short-term rentals have actually increased more than the cost of general goods since 2014, Bivens writes.
In Toronto, an advocacy group called Fairbnb hopes to offer an alternative to the burgeoning short-term rental model by offering rentals that strictly adhere to municipal rules and regulations.
“Airbnb has contributed to the housing crisis (in various cities) by removing housing stock that was built, zoned and approved as residential housing stock and converting it into what we call ghost hotels,” explains Thorben Weiditz. , from Fairbnb Co-op.
Fairbnb is a coalition of housing advocates, academics from institutions like York University, community groups like 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 ensure landlords actually rent their primary residences and try 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 pro-housing coalition, which means that if you or I wanted to rent our house while we are on vacation or away for a weekend, we should be able to do so, ”he said.
“But we shouldn’t be able to buy or rent residential housing stock and turn it into commercial ghost hotels. This is where we draw the line.
Fairbnb’s tactic would appear to address many of the issues explored throughout this series by The Lake Report.
One such problem, embraced by Seguin Township Mayor Ann MacDiarmid and Bivens, is that tourists staying in ghost hotels in residential neighborhoods don’t care about the area and are prone to disrespecting the community while adding undue stress on neighborhood infrastructure.
Since ghost hotels do not pay commercial tax and are cheaper than regular hotels, the municipality loses potential revenue while having to maintain its infrastructure.
“Transactions in the home-sharing market therefore involve a reallocation of resources from locals to non-locals,” write Kyle Barron, Davide Prosperio and Edward Kung in their 2017 study “The Effect of Home Sharing on Housing Prices and Rent : Evidence from Airbnb.
“A shift in well-being from locals to non-locals is important for public policy because policy is locally defined.”
In his own research, Bivens writes that this is why hotels are specifically zoned and built away from residential neighborhoods. It prevents the spillover of external costs onto long-term residents in what is supposed to be a residential area.
NEXT: To Rent or Not to Rent: The Role of Owned Rentals.
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