We have reported recently on a number of news items affecting the sharing economy, and questioning the viability of these businesses in the corporate sector.
Airbnb has been trying to push into the business travel sector as its leisure growth has slowed, with the promise of reducing costs when compared to hotels and serviced accommodation. But is this the full story?
Recent studies have shown a reluctance for corporates to include Airbnb within their travel programmes, due to concerns around the duty of care to travelling employees, and an underlying fear of reputational risk should an incident occur in a shared property.
With Airbnb facing tighter controls in cities worldwide including Berlin, New York, Paris and San Francisco, due to their impact on the local rental markets, we feel it’s time to ask the question – is Airbnb actually increasing the costs of global mobility programmes?
Sharing? Or business?
Airbnb was founded based on the sharing principle, people sharing a room in their home. But, as it has grown, it has morphed into something very different. Frequently “Hosts” now rent out whole apartments and houses, and in cities worldwide hosts with multiple properties have become the norm as businesses have sprung up, using Airbnb as a route to sub-let long-term rental accommodation.
This subletting – sometimes without the ultimate knowledge of the property owner – circumvents all the normal legal controls and duty of care considerations in place for hotels and serviced apartment providers. However, it is also negatively impacting the supply of rental properties in key cities, hence the legislation being introduced in New York and other cities to counter this (and the belated changes to host guidelines being introduced by Airbnb in response).
Increasing rents in New York and London
In New York alone (Airbnb’s second biggest market), at 1st June there were 41,373 total active listings in New York's five boroughs and 22,253 of those were entire homes, which are therefore not available to tenants for long-term leases. A recent report “Short Changing New York City” stated that rental rates in New York are rising most quickly in neighbourhoods where Airbnb is popular, increasing rents for locals and corporate tenants alike.
The picture is mirrored in London. Approximately half of the 110,000 Airbnb listings in the UK are located in London, with an estimated 41% of London rentals belonging to hosts listing more than one rental according to Inside Airbnb. This can only be properties being rented for commercial use, not people letting short term while they are away on holiday, removing rental units from the market that might otherwise be let as a long-term rental.
In the four months to September this year, the number of Airbnb listings in London increased by 27pc, according to the report by the Residential Landlords Association. During that same period, rents were reported to have risen 6pc, with the report warning this could be a direct consequence of landlords reducing the supply of long-term rental properties by moving their properties to Airbnb.
Councils in areas including Islington, Camden and Westminster have all raised concerns about the impact on the rental market, and the reduction in available housing stock.
Changes to laws in Europe
In Europe, as well as the United States, city authorities are taking action to try to limit the number of short-term rental properties being offered, and the unlicensed commercialisation of this sector.
In Amsterdam, law changes mean vacation apartments have been banned from being rented out for more than 60 days per year, or to more than four people at a time. In addition, the city has been reviewing digital records to try and identify which apartments offered for short-term rent are being offered by absentee landlords: other Dutch cities including Rotterdam and The Hague are considering following this approach.
Barcelona has also adopted tough new rules to vacation rentals. Landlords require a permit from the city to rent their property out legally, and last December fined Airbnb for listing apartments without this permit.
Germany’s three largest cities, Berlin, Hamburg, and Munich introduced a ban on unlicensed rentals from 1st May this year; while landlords are officially allowed to apply for a permit, the authorities will grant a purposefully small number of licences, particularly in areas of high demand.
This ban, seen as essential to increase the supply of rental housing for permanent residents, has already had a significant effect with approximately 40% of the Airbnb listings in Berlin disappearing prior to the introduction of the new law.
Can Airbnb listings affect the rental market in key cities? Evidence from a variety of sources suggest that it does, by moving supply from the rental market to the short-term sector and thereby reducing supply available to long-term tenants.
Even in locations where Airbnb has only a few hundred commercially operated units, these are still sufficient to restrict supply and therefore contribute towards rental levels rising.
Given the locations of Airbnb hosts are typically in areas popular with expats, the increased rental costs are ultimately being passed back to corporates as increased bottom-line accommodation costs for assignees. I’m pretty sure this wasn’t the definition of sharing most corporates had in mind.