The sharing economy and housing affordability: what impact, what solutions?
Are home-sharing services taking housing off the long-term rental market and therefore playing a significant role in driving up rents to unaffordable levels? Is rent rising faster in neighbourhoods where sharing economy platforms are most popular? What is the role for cities and rental-platforms in addressing the housing crisis?
These are the key takeaways from the HSP Debate, which took place on 22nd, January 2018. The gallery includes all the presentations, which were presented during the event. The event is still available to watch on FEANTSA's Facebook page.
Not enough data, but evidence of a decisive impact in some urban areas
There is little empirical evidence about the impact of sharing economy platforms on housing prices.
Despite methodological challenges, first results from two research projects about the impact of the presence of Airbnb on prices and rents in the USA and in Barcelona indicate a decisive contribution of short-term rentals in rents and housing prices.
In the USA, Kyle Barron (National Bureau of Economic Research), Edward Kung (UCLA) and Davide Proserpio (University of Southern California) conducted a study of the impact of AirBnB on housing prices, based on an analysis of Airbnb dataset listings in the US over a six-year period (2011-2016). The results of their study show that Airbnb increases both rental rates and housing prices. It would explain 0.59% of the annual increase in US rental rates and 0.82% of the annual increase in US housing prices (1).
Initial results of one of the first studies on this theme in Europe concluded similar effects, namely that a 1-point increase in Airbnb density would lead to increases in rents of 0.5 to 1% and increases in prices of 1 to 1.8% in Barcelona (2).
The US study suggests the impact can be explained by the fact that a percentage of property owners remove their flats from the long-term rental market, expecting higher revenues from the short-term rentals market. They thereby contribute to a decrease in available housing and a subsequent rise in rent. There is a need for more research on this topic to allow for empirical based policy-making.
The way forward: evidence-based regulation adapted to fast changing technological developments
Several cities have started to introduce regulation of short-term rental activity.
It appears there is a need to differentiate between professional and occasional use. In order to do so, regulations usually distinguish between primary and secondary homes. In some countries, like France or Germany, large cities have introduced limitations on the number of days a home can be subjected to short-term rental. Dublin City Council is introducing legislation that will require property owners to seek planning permission before letting properties out short-term from June 2019. In Barcelona, the tourism strategy of the city implies differentiating regulation of tourist accommodation in different neighbourhoods, including a ban on new tourist accommodation in the city centre. In Amsterdam, the city has created a team to work on illegal short-term renting. In some places, short-term rental providers have started to collaborate with local authorities on regulation enforcement. Airbnb has made over 400 agreements with local and national governments across the globe. This work needs to be continued, focusing on interests of the general population rather than on the interest of some individuals.
The regulation of short-term rentals should be handled cautiously because of its complex effects. A recent study by the London School of Economics shows that regulation of secondary homes can lead to negative effects on local economies (3).
Private actors are also inventing new solutions: Fairbnb, the cooperative vacation rental platform operates on principles of “one host, one home”, transparency and 50% of profits being invested into community projects. According to Fairbnb, the collective goal should be to decrease the negative impacts and increase the positive impacts of the sharing economy.
At European level, the European Commission representative seeks to promote sustainable development of the sharing economy. According to the E-commerce directive and Service directive, the principle is that any restriction to an economic activity must be justified, must have a direct link to the desired impact of the regulation and must be proportional. The recommendations of a workshop on how to deal with collaborative short-term accommodation services are available on the website of the Commission (4).
To conclude, short-term rentals cannot be solely blamed for rises in house prices and rent, but they do appear to have a clear impact on these figures. It is becoming increasingly difficult to claim that there is little or no evidence of this. Policy makers are facing a real challenge in dealing with this growing phenomenon, which requires tailor-made solutions for each local situation. Despite the conceptual challenge, the dramatic human impact of housing financialisation remains a reality. The sharing economy platforms seem to be participating in this broader phenomenon. Therefore, the challenge is to accompany the development of peer to peer platforms, which seem to have become an unavoidable consequence of technological development, disrupting the housing market.
(3) Hilber, Christian A.L. and Olivier Schöni, The Economic Impacts of Constraining Second Home Investments, Centre for Economic Performance, London School of Economics and Political Science (July 2018)