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The Canadian province of British Columbia just recently enacted "rent control" on a massive scale, by making most AirBnB rentals illegal (thereby ostensibly "fo

The Canadian province of British Columbia just recently enacted "rent control" on a massive scale, by making most AirBnB rentals illegal (thereby ostensibly "forcing" the owners of these units to rent these units to local long term renters). Of course, this immediately has these first-order effects: - Putting thousands of home owners into financial dire straights, by reducing their income at the same time that their refinanced mortgages are increasing by as much as 100%. - Eliminating thousands more rental units of coming onto the market, by eliminating the AirBnB income stream necessary to rationalize building or renovating those units into existence. These first-order effects are so obvious, that it cannot be an accident -- the assumption would assume such a low intelligence on the part of the politicians enacting this legislation as to be deeply insulting. But the alternative explanation; that this was an intentional result, also brings into question: Why would a politician want to simultaneously destroy both tourism (making short-term rental accommodations both less plentiful and more expensive), while also destroying thousands of rental units from being constructed, making long-term rentals both less plentiful and more expensive? The obvious alternative -- goosing the production of all types of short- and long-term rental units by encouraging the production of AirBnB units (increasing their supply, thereby decreasing their cost and profitability, encouraging the migration of existing AirBnB stock to long-term rentals) -- appears to have bypassed the BC political elite. How (and why) would they not want that?

franga2000 2y ago
> Putting thousands of home owners into financial dire Not homeowners, short-term rental investors. Many probably are homeowners, but that's not relevant - many more homeowners saw absolutely no change, since they didn't invest into this particular industry. > Eliminating thousands more rental units of coming onto the market Thousands more short-term rental units, not real rental units. People who renovate/build for AirBnB will keep their units on AirBnB, not suddenly decide to put them up for real/long-term rental. The units that theoreticallt won't be built now wouldn't have helped the housing crisis even a little bit. Without regulatory intervention, tourism is so much more profitable, that anyone who wants to invest in realestate and optimise for profit would be foolish to deal in long-term rentals. By making the AirBnB business model less profitable, some investors might actually go "back" to investing in long-term rentals, increasing supply.
- pjkundert 2y ago
  Is your hypothesis that supplying more rental units (even if they were mostly short-term) would not reduce the both the price and profitability of that stock? And, that an increased supply and reduced profitability would not drive some of that short-term rental stock into the long-term rental market? It appears to be the consensus opinion of HN that reducing supply increases availability and/or affordability. Howso??
  - franga2000 2y ago
    The goal is to add more supply to the long-term rental market and drive costs down, right? That's (part of) how you solve a housing crisis. The AirBnB market is much more profitable than rentals, so all investment is going there and many flats are even being converted. By incentivising AirBnB, you're driving the supply of flats down as they are converted and the all the new supply that is created goes straight to AirBnB. The theoretical point of oversaturation when AirBnB supply starts leaking back into long-term rentals would only happen if the number of investors was infinite and prices were set by a perfect inverse relationship to supply. In reality, neither of those assumptions hold. Investors are finite and their number decreases with profitability, which is inversely proportional to supply, so it's unlikely they'd ever reach oversaturation. And AirBnB prices don't decrease linearly with supply, most people just look at what they'd make with long-term tenants and set their price so they end up with some margin more than that... For a (slightly gruesome) analogy: You have a leech. You want the leech to drink even more blood, until it finally fills up and your circulation reaches an equilibrium. Until that happens, you're bleeding out and you probably won't survive. Why not just cut the leech off?
    - pjkundert 2y ago
      Units that this “rent control” scheme disallows (source; direct, personal knowledge of individuals experiencing each of these scenarios): - Studio apartments that are rented to visitors in the summer, and students in the winter. - homes that the homeowner can vacate during the summer tourist season, and either occupied or rent in the winter. - Homes, which can be divided into two or more Airbnb, that the owner can can vacate because they have a second home. - all construction made possible to marginal borrowers, that was rationalized by the potential for Airbnb income in a pinch. - construction of hotel and apartment units, prevented due to that possibility of further legislative interference by government. - Loss of productive, wealthy, citizenry who could build, who can move to more business favourable jurisdictions at will. But, you’re willing to bet that none of these will occur, and that the market will not respond to vastly increased housing unit supply with lowering prices and increasing availability. Is this a bet that you’re really willing to make?
reitzensteinm 2y ago
AirBnB units are profitable but impose significant externalities on surrounding properties, including noise and antisocial behaviour. Unlike a hotel, they're not staffed with somebody who can deal with the problem or escalate to the authorities. For a while maybe it's a profitable trade to put your hands in your neighbour's pockets, but when it stops working, you don't get to cry about "dire financial straights".
- pjkundert 2y ago
  Having stayed in ~50 AirBnBs, we have very seldom used sketchy ones that have the problems you describe (once). Are you certain you are representing most unit owners fairly?
  - reitzensteinm 2y ago
    How would staying in an Airbnb give you any insight? The problem isn't the hosts, it's the folks staying. They're substantially more likely to be drunk and partying, and don't need to worry about any long term consequences of their antisocial behaviour. I check Airbnb when I move, and I'd rate a full time rental next to me similarly to a busy street. Not a deal breaker, but certainly a strike against it. If others do the same, that translates to a direct reduction in property value for the host's neighbours. I don't have any moral issue with Airbnb hosts or travellers - I have used it about as much as you have. I don't mind people making money from it. But when a city decides to quantify the externalities and impose restrictions, it is absolutely not appropriate to talk about financial losses hosts have. They made a cynical bet on relaxed (poor) governance, and lost. You or I shouldn't care any more than they should care about my startup failing.
    - pjkundert 2y ago
      The cities that have done so are likely to experience the outcomes historically associated with rent controls — disaster. I’m just stating the obvious.
      - 2y ago
gruez 2y ago
>- Putting thousands of home owners into financial dire straights, by reducing their income at the same time that their refinanced mortgages are increasing by as much as 100%. I doubt people are going to shed many tears for people who overleveraged themselves into a risky investment and got burned. >- Eliminating thousands more rental units of coming onto the market, by eliminating the AirBnB income stream necessary to rationalize building or renovating those units into existence. What good is all that supply if it's being used for airbnbs? Having a bunch of cheap airbnbs isn't going to help the local housing crisis. You might decry it is nativism, but I think it's totally appropriate for a polity to prioritize the wellbeing of its citizens/permanent residents over tourists.
- pjkundert 2y ago
  A first order effect of increasing a stock is that price/profit decreases, driving holders of that stock to diversify into different client bases: - lower profit AirBnBs to long-term rentals Reducing supply of AirBnBs does the opposite; drawing marginal suppliers (legal AirBnB units that used to be long term rentals, are converted to AirBnB.) You’ll have to provide extraordinary evidence that reducing total supply of something (units) can lead to lower prices and more availability. Because it has never done so, in all of history…
  - gruez 2y ago
    >A first order effect of increasing a stock is that price/profit decreases, driving holders of that stock to diversify into different client bases: You know what would result in "driving holders of that stock to diversify into different client bases" (ie. long term rentals) even more? Forcing them to do so eliminating all demand from the short term rental side. Moreover, doing that would convert almost all of those units to long term rentals, not some marginal percentage your model implies.
    - pjkundert 2y ago
      As someone who was considering building a home with a rental suite, and who knows multiple others who were planning to do the same — I can assure you this is an incorrect hypothesis.

franga2000 2y ago

> Putting thousands of home owners into financial dire Not homeowners, short-term rental investors. Many probably are homeowners, but that's not relevant - many more homeowners saw absolutely no change, since they didn't invest into this particular industry. > Eliminating thousands more rental units of coming onto the market Thousands more short-term rental units, not real rental units. People who renovate/build for AirBnB will keep their units on AirBnB, not suddenly decide to put them up for real/long-term rental. The units that theoreticallt won't be built now wouldn't have helped the housing crisis even a little bit. Without regulatory intervention, tourism is so much more profitable, that anyone who wants to invest in realestate and optimise for profit would be foolish to deal in long-term rentals. By making the AirBnB business model less profitable, some investors might actually go "back" to investing in long-term rentals, increasing supply.

pjkundert 2y ago
Is your hypothesis that supplying more rental units (even if they were mostly short-term) would not reduce the both the price and profitability of that stock? And, that an increased supply and reduced profitability would not drive some of that short-term rental stock into the long-term rental market? It appears to be the consensus opinion of HN that reducing supply increases availability and/or affordability. Howso??
- franga2000 2y ago
  The goal is to add more supply to the long-term rental market and drive costs down, right? That's (part of) how you solve a housing crisis. The AirBnB market is much more profitable than rentals, so all investment is going there and many flats are even being converted. By incentivising AirBnB, you're driving the supply of flats down as they are converted and the all the new supply that is created goes straight to AirBnB. The theoretical point of oversaturation when AirBnB supply starts leaking back into long-term rentals would only happen if the number of investors was infinite and prices were set by a perfect inverse relationship to supply. In reality, neither of those assumptions hold. Investors are finite and their number decreases with profitability, which is inversely proportional to supply, so it's unlikely they'd ever reach oversaturation. And AirBnB prices don't decrease linearly with supply, most people just look at what they'd make with long-term tenants and set their price so they end up with some margin more than that... For a (slightly gruesome) analogy: You have a leech. You want the leech to drink even more blood, until it finally fills up and your circulation reaches an equilibrium. Until that happens, you're bleeding out and you probably won't survive. Why not just cut the leech off?
  - pjkundert 2y ago
    Units that this “rent control” scheme disallows (source; direct, personal knowledge of individuals experiencing each of these scenarios): - Studio apartments that are rented to visitors in the summer, and students in the winter. - homes that the homeowner can vacate during the summer tourist season, and either occupied or rent in the winter. - Homes, which can be divided into two or more Airbnb, that the owner can can vacate because they have a second home. - all construction made possible to marginal borrowers, that was rationalized by the potential for Airbnb income in a pinch. - construction of hotel and apartment units, prevented due to that possibility of further legislative interference by government. - Loss of productive, wealthy, citizenry who could build, who can move to more business favourable jurisdictions at will. But, you’re willing to bet that none of these will occur, and that the market will not respond to vastly increased housing unit supply with lowering prices and increasing availability. Is this a bet that you’re really willing to make?

reitzensteinm 2y ago

AirBnB units are profitable but impose significant externalities on surrounding properties, including noise and antisocial behaviour. Unlike a hotel, they're not staffed with somebody who can deal with the problem or escalate to the authorities. For a while maybe it's a profitable trade to put your hands in your neighbour's pockets, but when it stops working, you don't get to cry about "dire financial straights".

pjkundert 2y ago
Having stayed in ~50 AirBnBs, we have very seldom used sketchy ones that have the problems you describe (once). Are you certain you are representing most unit owners fairly?
- reitzensteinm 2y ago
  How would staying in an Airbnb give you any insight? The problem isn't the hosts, it's the folks staying. They're substantially more likely to be drunk and partying, and don't need to worry about any long term consequences of their antisocial behaviour. I check Airbnb when I move, and I'd rate a full time rental next to me similarly to a busy street. Not a deal breaker, but certainly a strike against it. If others do the same, that translates to a direct reduction in property value for the host's neighbours. I don't have any moral issue with Airbnb hosts or travellers - I have used it about as much as you have. I don't mind people making money from it. But when a city decides to quantify the externalities and impose restrictions, it is absolutely not appropriate to talk about financial losses hosts have. They made a cynical bet on relaxed (poor) governance, and lost. You or I shouldn't care any more than they should care about my startup failing.
  - pjkundert 2y ago
    The cities that have done so are likely to experience the outcomes historically associated with rent controls — disaster. I’m just stating the obvious.
    - 2y ago

gruez 2y ago

>- Putting thousands of home owners into financial dire straights, by reducing their income at the same time that their refinanced mortgages are increasing by as much as 100%. I doubt people are going to shed many tears for people who overleveraged themselves into a risky investment and got burned. >- Eliminating thousands more rental units of coming onto the market, by eliminating the AirBnB income stream necessary to rationalize building or renovating those units into existence. What good is all that supply if it's being used for airbnbs? Having a bunch of cheap airbnbs isn't going to help the local housing crisis. You might decry it is nativism, but I think it's totally appropriate for a polity to prioritize the wellbeing of its citizens/permanent residents over tourists.

pjkundert 2y ago
A first order effect of increasing a stock is that price/profit decreases, driving holders of that stock to diversify into different client bases: - lower profit AirBnBs to long-term rentals Reducing supply of AirBnBs does the opposite; drawing marginal suppliers (legal AirBnB units that used to be long term rentals, are converted to AirBnB.) You’ll have to provide extraordinary evidence that reducing total supply of something (units) can lead to lower prices and more availability. Because it has never done so, in all of history…
- gruez 2y ago
  >A first order effect of increasing a stock is that price/profit decreases, driving holders of that stock to diversify into different client bases: You know what would result in "driving holders of that stock to diversify into different client bases" (ie. long term rentals) even more? Forcing them to do so eliminating all demand from the short term rental side. Moreover, doing that would convert almost all of those units to long term rentals, not some marginal percentage your model implies.
  - pjkundert 2y ago
    As someone who was considering building a home with a rental suite, and who knows multiple others who were planning to do the same — I can assure you this is an incorrect hypothesis.