I see it everywhere. From blog articles to traditional media to academic sources to endless Reddit comments. Airbnb is blamed for increasing rents. The logic is straightforward. For many landlords, renting out a housing unit to short-term renters, whether it be a studio apartment or six-bedroom house, will be more profitable than traditional tenants. Traditional tenants may provide security, in that most will pay a constant amount month after month, but vacationers offer so much more. Units that might rent for $2,000 a month can rent for $2,000 in a single weekend if there is a notable event happening nearby. Therefore, the argument goes, landlords will choose to rent their property on Airbnb rather than rent it to long-term tenants, thus increasing rents.
The logic is there, except for one problem: Airbnb isn’t big enough to move the rental market in most places by any non-trivial margin. Take New York City. In 2023, the city severely curtailed short-term rentals. The argument was that Airbnbs, Vrbos, and other competitors were pricing out locals (ah yes, because we all remember how cheap NYC was before 2010.) The numbers might sound large - city officials estimated at the time that there were 10,800 listings in March of 2023. That pales in comparison, however, to the size of New York. The city has a whopping 3.7 million housing units. That means Airbnbs in the Big Apple took up 0.29 percent of available housing. In other words, a rounding error. The city’s vacancy rate, that is, apartments that are available but empty was over four times as large. With the possible exception of some small, tourist dependent towns, Airbnb is never going to be common enough to significantly impact rents. There just aren’t enough people willing to host, and not nearly enough people traveling that frequently.
The more reputable sources that parrot the “Airbnb prices out locals” story rely on some dubious thinking. This article from the Harvard Political Review has one of the more bone-headed statistical errors I’ve come across. The writer claims that:
Additionally, a working paper from the Harvard Business Review found that the number of Airbnb listings within a neighborhood and the asking price for rent are positively correlated. This means that as the number of Airbnb units in a neighborhood increases, the asking prices for rental units would increase as well.
The link to the working paper is dead, but the claim being made in the Harvard Political Review betrays a total lack of statistical understanding. Of course Airbnb listings and rents are positively correlated! If a neighborhood is desirable to live in, it’s going to be desirable to visit. Thus, if rents are high, one would expect there to be a lot of Airbnbs in the area. Correlation, however, does not mean causation. Its important to emphasize that a positive correlation does not mean that “as the number of Airbnb units in a neighborhood increases, the asking prices for rental units would increase as well.” That is completely incorrect, akin to concluding that umbrellas must cause rain because anytime morning commuters are holding one it rains later that day.
This Forbes article is even worse. They at least quote a bona fide academic study, but then the wheels come off:
A separate U.S. study found that a 1% increase in Airbnb listings leads to a 0.018% increase in rents and a 0.026% increase in house prices. It might not seem like much on the surface but there’s a cost creep for those looking to rent long-term or buy.
Yes, a 0.018% increase doesn’t sound like much, because it isn’t. That’s almost zero! To put it in perspective, imagine that a town sees a rapid increase in tourism. Maybe the latest season of The Bachelor did a weekend trip there. It’s such a success, that the number of Airbnb’s double. That would increase rents by… 1.8%. Most rents go up by more than that every year due to inflation.
The academic study cited seems decent, but still suffers from a potentially fatal flaw. The issue, again, is that tying an increase in Airbnb use to an increase in rents is going to be tricky. Take the town of Fayetteville, West Virginia, where I visited several months ago. It’s a cool, quirky town, that few people had ever heard of. Then, in 2020, the nearby New River Gorge was changed from being a national river to a national park. This is a huge upgrade. The National Park Service manages 429 different units, but only 63 are national parks. With this promotion, a lot of attention moved to little Fayetteville. But just as more people want to visit the area, increasing Airbnb prices, more people want to live there as well. Especially as the number of hospitality jobs increases because of tourist demand, demand for housing will increase. So how can a researcher separate the increase in rents due to the area being more attractive compared to the increase in rents because of Airbnb?
The reality is that Airbnb is a scapegoat. A boogeyman. Meant to distract from the real issue: not enough housing is being built in the United States. We do have an epic housing shortage on our hands (I previously wrote about the problem and the solution). The issue is not Airbnb or Vrbo or evil landlords. It’s a lack of housing. More housing needs to be built. It needs to be built quickly, and by the millions of units. Cities need more housing. Suburbs need more housing. Rural areas need more housing. That is the only way to bring housing back to affordability. Restricting short-term rentals and kicking out immigrants ain’t gonna do it.
If you want housing to be cheaper, build more of it. The rest is smoke and mirrors.