Airbnb and Apartment Scarcity

Airbnb is the de-facto archetype of the sharing economy - an easy-to-use service that lets you rent your home, or a spare bedroom, to weary travelers.  No sharing economy company has generated quite as much press or controversy over the years. Airbnb has enabled millions of travelers to find comfortable lodging for a bargain - with the interesting customization and neighborhood connections only a personal host could provide.  In fact, Airbnb claims they pump millions into local economies that would otherwise go to national chains.

However, with Airbnb's tremendous popularity have come accusations that it worsens apartment scarcity in places like San Francisco and New York because landlords may be keen to turn an apartment into a revolving hotel rather than rent it out long term. Are such claims against Airbnb merely coming from folks with chips on their shoulders who don't really understand the sharing economy?  Or is there truth to the claim that Airbnb is making a tight market worse?

It would be impossible to argue that Airbnb has zero effect on available rental properties. The question is just how much of an effect is it?  San Francisco has always been a very difficult place to find an apartment and its current economic boom is certainly keeping it that way.  The issue becomes a bit clearer when you look at some data and break Airbnb hosts into three different categories:

The data I'm using comes from surveys conducted by Airbnb and HR&A as part of their economic impact study in San Francisco.  You can download the whole PDF here. Airbnb does not publish the number of hosts in the city, but a search today showed about 3000 active listings in San Francisco of all types.

1) Type 1: The person who rents out their flat when they're out of town.

The largest group (46 percent) of Airbnb hosts are folks who rent out their entire home when they're out of town. I'd argue these people are the most classic embodiment of the sharing economy because they are putting to use a resource that would otherwise go wasted - an empty home. It's not possible to suggest that these people have any impact on apartment space in San Francisco because their homes wouldn't be available to renters anyway.

So that knocks off about half of Airbnb's potential impact on the rental market.

2) Type 2: The person with a spare room in their flat who rents it out from time to time.

A nearly equal number (44 percent) of Airbnb hosts rent only a portion of their home, typically a spare room, while they continue to live there. This type of arrangement is where things start to get interesting - see the infamous case of Nigel Warren who regularly rented a spare bedroom in his apartment until he was charged with a litany of fines and got into deep legal trouble. This group is even more complex because some are owners of the spare room and some (like Nigel) are renters themselves. Airbnb doesn't yet have the data on how this breaks down (though a new report is forthcoming).

An owner of an apartment has no obligation (legal or otherwise) to rent out her spare bedrooms to anyone, and if they do it on Airbnb, it's arguably creating space, not taking it away. So it's not likely this type of host is hurting the market much. However, a renter who choses to rent a spare room on Airbnb instead of to another full time roommate might conceivably begin to impact the market - not to mention they might be violating their lease. But even then, we have no idea whether this is something someone chooses to do once in a while or on a constant rotating basis - I'd love to see the numbers.

3) Type 3: The person who doesn't occupy the flat at all and runs it as a full-time Airbnb property. 

Accounting for about 10 percent of Airbnb hosts, this group is really the only group that gets far enough into the "gray zone" that they might impact the availability of apartments in San Francisco. These hosts, some of whom own multiple units, are also likely the hosts for whom a hotel tax might be appropriate, among other possible legal ramifications (but that's another story I'll get into later).

So where does that leave us?

San Francisco has never been an easy place to find an apartment. I remember having friends "live" on my couch for months in the late 1990s, unable to find something affordable while the dot-com boom raged on. There was no Airbnb then. Today, with San Francisco booming as much as ever, with cranes constructing new units as far as the eye can see, the apartment search is still a quagmire for would-be new residents, monied and otherwise.

Does Airbnb make it worse?  Perhaps a little.  But probably about 90 percent less than the naysayers claim.

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