4 ms·

I completely agree that there are negative externalities to AirBNB, so I'm not disagreeing with your conclusion. But point #2, the rising rents thing, seems unl

by jvm 13y ago

I completely agree that there are negative externalities to AirBNB, so I'm not disagreeing with your conclusion. But point #2, the rising rents thing, seems unlikely to me. AirBNB increases the supply of housing. It does nothing to demand. Prices should drop. I imagine it would either have no perceptible effect on rents, or in an extreme scenario would cause hotels to close and convert to apartments which would lower rents. Finally, this is a common misconception, rents for hotels are identical to rents for residential housing. Otherwise why wouldn't ever landlord switch to running a hotel? It costs more per night to stay at one because (a) you're paying for excessive housekeeping and (b) you're paying for the high vacancy in downtimes caused by ultra-high turnover in tenants. Basically, a high proportion of the hotel fee is paying for actual services, not the building's rent.

msrpotus 13y ago
Might be true in theory but not in NYC. There are constantly cases of illegal hotel conversions where landlords try to run their own hotels. That might be partially to avoid licensing (I know hotels in NYC need special permits) and taxes, but it's not the case that residential landlords don't want to run hotels.
gav 13y ago
This isn't true in NYC, we're at 98-99% utilization. If anything AirBNB makes this worse, it's encouraging people to rent an apartment to visitors instead of releasing it into the rental market. If you look at a $169/night AirBNB rate, that translates into about $5000/month if it's fully rented. Even at a 90% you are making more money than a 12-month lease. This will encourage landlords to not lease vacant apartments, thus decreasing supply and raising prices. I know of building owners that have been experimenting with AirBNB as it's more profitable for them.
- jvm 13y ago
  I've said elsewhere, but this is only true if short-term and long-term housing aren't fungible, which could only result from a messed up regulatory structure in need of some serious overhaul.
- fnl 13y ago
  I think your estimate might possibly be to high: According to what I've been explained by friends who let rooms via AirBnB, you don't fill your rooms or apartment with "average" city rates. You will have to be on the lower end to do that and have a "clean" rating, too. That seems to be about $ 50 for rooms and about double for flats in NYC, therefore I would assume the actual income is more likely to be about half your estimate. On top of that, there is an administrative overhead to normal renting of a flat. And, to be top-ranked, you have to be extra-nice to maintain an excellent rating on the site, too. Not so sure that beats the comforts renting with well-defined contracts... I think AirBnB is for you or your family & friends if you want to use that apartment yourself at times, too, or if you are sharing a room in your flat to pay the mortgage, and similar such cases. It probably does not beat renting, otherwise I assume this service would have gone even more "viral" long ago...
mapleoin 13y ago
> AirBNB increases the supply of housing. It does nothing to demand. That's your error, see also: http://en.wikipedia.org/wiki/Induced_demand http://en.wikipedia.org/wiki/Induced_demand
- jvm 13y ago
  The mechanism for the induced demand is lower prices. That was my point.
- saalweachter 13y ago
  Another factor: AirBNB increases the supply of temporary housing. It can only decrease the supply of 12-month leases. And since 12-month leases are in short supply...
  - jvm 13y ago
    > can only decrease the supply of 12-month leases Temporary and long-term housing should be fungible. I've learned from other commenters that maybe they're not due to the NYC regulatory structure. If so then that's creating horrible distortions, and maybe that's also the reason why AirBNB is so popular.
    - deleted 13y ago
      [deleted]
    - saalweachter 13y ago
      You can really only convert long-term housing into temporary housing. While technically the Holiday Inn is cool with me staying there as long as I want, they won't cut me a deal and charge me $400 / month instead of $100 / night. The cheapest, sleeziest roadside motel I have ever seen anywhere in the country was $30 / night. For a month that would be $900 with no discount, but I have a hard time imagining that an apartment comparable to that motel was even $300.

by jvm 13y ago

msrpotus 13y ago

Might be true in theory but not in NYC. There are constantly cases of illegal hotel conversions where landlords try to run their own hotels. That might be partially to avoid licensing (I know hotels in NYC need special permits) and taxes, but it's not the case that residential landlords don't want to run hotels.

gav 13y ago

This isn't true in NYC, we're at 98-99% utilization. If anything AirBNB makes this worse, it's encouraging people to rent an apartment to visitors instead of releasing it into the rental market. If you look at a $169/night AirBNB rate, that translates into about $5000/month if it's fully rented. Even at a 90% you are making more money than a 12-month lease. This will encourage landlords to not lease vacant apartments, thus decreasing supply and raising prices. I know of building owners that have been experimenting with AirBNB as it's more profitable for them.

jvm 13y ago
I've said elsewhere, but this is only true if short-term and long-term housing aren't fungible, which could only result from a messed up regulatory structure in need of some serious overhaul.
fnl 13y ago
I think your estimate might possibly be to high: According to what I've been explained by friends who let rooms via AirBnB, you don't fill your rooms or apartment with "average" city rates. You will have to be on the lower end to do that and have a "clean" rating, too. That seems to be about $ 50 for rooms and about double for flats in NYC, therefore I would assume the actual income is more likely to be about half your estimate. On top of that, there is an administrative overhead to normal renting of a flat. And, to be top-ranked, you have to be extra-nice to maintain an excellent rating on the site, too. Not so sure that beats the comforts renting with well-defined contracts... I think AirBnB is for you or your family & friends if you want to use that apartment yourself at times, too, or if you are sharing a room in your flat to pay the mortgage, and similar such cases. It probably does not beat renting, otherwise I assume this service would have gone even more "viral" long ago...

mapleoin 13y ago

> AirBNB increases the supply of housing. It does nothing to demand. That's your error, see also: http://en.wikipedia.org/wiki/Induced_demand http://en.wikipedia.org/wiki/Induced_demand

jvm 13y ago
The mechanism for the induced demand is lower prices. That was my point.
saalweachter 13y ago
Another factor: AirBNB increases the supply of temporary housing. It can only decrease the supply of 12-month leases. And since 12-month leases are in short supply...
- jvm 13y ago
  > can only decrease the supply of 12-month leases Temporary and long-term housing should be fungible. I've learned from other commenters that maybe they're not due to the NYC regulatory structure. If so then that's creating horrible distortions, and maybe that's also the reason why AirBNB is so popular.
  - deleted 13y ago
    [deleted]
  - saalweachter 13y ago
    You can really only convert long-term housing into temporary housing. While technically the Holiday Inn is cool with me staying there as long as I want, they won't cut me a deal and charge me $400 / month instead of $100 / night. The cheapest, sleeziest roadside motel I have ever seen anywhere in the country was $30 / night. For a month that would be $900 with no discount, but I have a hard time imagining that an apartment comparable to that motel was even $300.