Is Airbnb Ameliorating – or Exacerbating – Inequality in?Cities?

The short-term rental company professes noble aims, but experts argue it displaces tenants and puts pressure on tight housing?markets.

By Trevor Bach ContributorMay 2, 2019, at 3:27 p.m.
U.S. News & World Report

Does Airbnb Hurt or Help Cities?

A bedroom is seen in an AirBnB in Washington, D.C.(T.J. Kirkpatrick/The Washington Post/Getty Images)

Harper Richards spent most of her childhood in New Orleans. By the time she was in her early 20s, she identified with the city's famous cultural openness and artistic bent, performing as a burlesque dancer and selling handicrafts, like earrings made from recycled guitar strings and coasters fashioned from salvaged Hurricane Katrina wood, at the Frenchmen Art Market.

But even working multiple jobs ? at a jewelry store, serving pizza, driving for Uber ? her income was relatively low; in early 2015, after learning she was pregnant, she began searching for a long-term home. "I was looking at what I could survive off," she says, "with my income and situation ? about to be a single mother."

She signed a lease on one half of a double shotgun house on Josephine Street in Central City, a working class neighborhood separated from downtown and the French Quarter by a freeway. She quickly made it home, repainting walls with a gold molding and turning one room into a nursery. "It was a really good scenario," she says. "Cheap rent and a good little neighborhood. My daughter made a bunch of friends across the street." Then her landlord put the house on the market; in March 2017 a property management company representing an out-of-town buyer gave her a 45-day notice. Richards and her daughter moved into a different place down the street, but the rent was hundreds of dollars more. Soon they left New Orleans. After renovations, the Josephine Street house was promptly listed on Airbnb.

"This Airbnb Displaced 5 People," Richards' neighbor spray-painted in big red letters on the home's sidewalk.

In just over a decade, Airbnb has transformed hospitality around the world. Its platform now counts some 500 million guest stays in 81,000 cities; in December it announced it had collected and dispersed $1 billion in tax revenue. But the company's rapid growth has also fueled a caustic debate about urban inequality. Airbnb, whose mission is "to democratize travel by allowing anyone to belong anywhere," argues that it provides an economic equalizer, helping even hosts of few means to boost incomes and manage otherwise unaffordable housing costs. Yet a growing army of critics allege that, in dozens of cities around the world, the proxy hotel service more often does the opposite, hyper-accelerating affordable housing crises and gentrification patterns that force out residents.

"It's really the rich who are getting richer off of this situation," says Richards. "Airbnb has run so rampant across the entire city that there's barely any rentals left for locals, and the rentals that are available are skyrocketing in price."

How Airbnb Changed Housing

Like its closest Silicon Valley industry-disrupting cousins, the ride-sharing apps Uber and Lyft, Airbnb, with a simple, decentralized concept, virtually redefined a decades-old industry overnight: Through the magic of the internet, suddenly anyone with a spare room could become a hotelier, and travelers had an easy gateway to a new kind of experience. A few years after the company started in San Francisco in 2008, tourists could choose from hundreds or thousands of nontraditional hotel options in nearly every city in the world, including a carefully decorated room in a 1930s London flat ($64 a night), a tiny house made from reclaimed wood in West Seattle ($110 a night), and a shared traditional yurt in Ulaanbaatar, Mongolia ($10 a night).

"First and foremost it's our community," says Christopher Nulty, the company's head of public affairs for the Americas, explaining the company's success. "There's something really special about going and staying in someone else's home ? staying outside the central hotel district and being able to see a new place through the eyes of a local."

But as the platform has expanded beyond homeowners with a spare room to profit-minded investors who buy and then rent entire homes, it's also put a new squeeze on housing markets. Particularly for renters in high-demand cities, Airbnb can increasingly feel like a kind of digital grim reaper: In Toronto the platform has eliminated some 6,500 homes from the city's badly pinched housing market, according to a recent report from the coalition group Fairbnb. In Boston long-time residents of Chinatown ? a dense neighborhood that's become the epicenter of that city's gentrification battle ? are being displaced by overseas speculators, who buy property at inflated prices only to turn around and list on the site.

"If you just walk around Chinatown you see the demographic change," says Karen Chen, executive director of the Chinese Progressive Association, which advocates for residents in the neighborhood. "It's taking housing from the market, but as it's doing that it's actually creating a chain of rising rent."

A Chain of Rising Rents

Independent research confirms that Airbnb listings do in fact cause higher rents. "What's happening is that some landlords are switching from the long-term market to the short-term market," says Davide Proserpio, an assistant professor of marketing at the University of Southern California who co-authored a broad study on the issue. "Why? Because Airbnb reduces a lot of friction and makes renting in the short-term market quite easy for everyone."

The impact, unsurprisingly, varies wildly by city. One 2016 analysis predicted that if Boston's rapid rate of Airbnb expansion in 2015 continued for three more years the service would cause an average rent increase of as much as $2,136 annually. A 2018 study found that in New York the service has increased annual rent for the median tenant by $380, and over $700 in some neighborhoods.

"We're really looking at short-term rentals as like a housing justice issue," says Breonne DeDecker, a program manager at Jane Place, a housing rights nonprofit in New Orleans. In that city, where rents have exploded in areas with the highest concentrations of listings, DeDecker says Airbnb rentals have displaced so many locals that many traditionally residential districts ? including in working-class black neighborhoods like the Seventh Ward and Treme ? now resemble weekday ghost towns. "Thursday, Friday and Saturday it's just awash in young white tourists."

Airbnb vehemently rejects conclusions that suggest the platform exacerbates inequality. Much of the underlying research, Nulty charges, was funded by the hotel industry and relies on "scraped, inaccurate data" on listings. (The industry has in fact waged an aggressive campaign against Airbnb, including funding research. Many studies rely on scraped web data as a proxy ? Airbnb has repeatedly fought data collection attempts by regulators.) He points out that the company didn't invent the concept of vacation rentals ? indeed, many whole home listings simply migrated onto Airbnb from other platforms ? and that the majority of hosts are using the platform to rent a spare room to generate extra income, like an average $6,400 annually for hosts in New York.

An Economic Stimulus?

The platform, Nulty argues, can also serve as an important economic stimulus in underserved areas: the portion of Washington, D.C. east of the Anacostia River, a predominantly poor and black neighborhood, has virtually no traditional hotels but hundreds of Airbnb listings. The company does remove listings that violate local rental laws, including some 5,000 in New York, and has long been outspoken against evictions.

"We've been so clear about this," Nulty says. "We do not want bad actors on our platform who are purposefully evicting tenants with the intention of Airbnbing their space."

But analysts say that, on the whole, underlying home ownership patterns mean that the gains from Airbnb are disproportionately spread among a demographic that already skews both white and wealthy.

"We can say the winners from Airbnb ? generally they're pretty concentrated at the top," says Josh Bivens, director of research at the Washington, D.C.-based, left-leaning Economic Policy Institute. In a report published in January Bivens concluded Airbnb's net economic costs outweigh its benefits: Even if the platform's impact on aggregate housing prices has been relatively small, he argues, it has accelerated an affordable housing crisis that, for millions of Americans, was already dire. "It's another straw on the camel's back."

Municipalities have struggled to keep up. Regulation of listings has been patchwork, with cities around the world taking different approaches aimed especially at curbing whole-home rentals. In 2016 Berlin implemented a near-total ban, later amended, on rentals of more than half an apartment. San Francisco passed laws that restrict listings to primary residences and cap stays where no host is present to 90 days annually. In December, Massachusetts passed a sweeping new law that opens up listings to hotel taxes and public disclosure. Governor Charlie Baker praised the measures as a "leveling of the playing field."

Yet even with rules in place, regulatory agencies are often overwhelmed, and savvy listers find ways to evade requirements: In Miami Beach one property manager was associated with more than $1.2 million in dozens of illegal listing fines; in February investigators in New York exposed a vast, city-wide scheme, orchestrated by an Israeli former real estate broker, that generated $20 million in revenue by using multiple identities, manipulated addresses and proxy corporations to flout city rental laws and the company's "one host, one home" rule – specific to New York and a handful of other cities. While in many cases the company has struck voluntary agreements with cities, it also regularly fights regulation and taxation attempts, including with lawsuits against Palm Beach County, Florida, New York and Boston.

"They want to be a company that operates in the space of the really large hotel chains, and yet claim to not be a hotel chain," says Bivens. "I don't think you can have it both ways."

A heated regulatory battle is also underway in New Orleans, where some new City Council members campaigned on the issue of tightening the city's lax regulation of short-term rentals. In March the city's planning commission endorsed a proposal to ban whole-home rentals in residential areas, representing a dramatic change of course ? if the measures eventually pass a full council vote ? for a mid-size city with some 11 million annual tourists. At stake, advocates say, is the identity of New Orleans itself.

"One of the big questions that we have is, 'How much of an outsize role do we want tourism to have in our city ? do we really want just to turn the entire city over to like basically being a simulacrum of New Orleans?'" says DeDecker. "How much are we asking of our residents to give up in order to make space for these tourists?"

Trevor Bach, Contributor

Trevor Bach is a journalist based in Detroit. Follow him on Twitter.

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