First, build more houses. | Scott Olson/Getty Images
There’s more to the housing affordability crisis than Airbnb.
The US housing market is scary right now, and Americans seem to be scrambling for signs that help is on the way.
This week a viral tweet said Airbnb revenue had fallen off a cliff. But what’s perhaps more interesting than a potentially misleading tweet is the response it got. Many suggested the revenue shortfall would mean more houses would come on the market and help reverse soaring housing prices, which have become unaffordable for many Americans. But like private equity investment in rental homes, short-term rentals like Airbnbs only play a small part in what’s a much bigger problem.
First of all, both Airbnb and another dataset contradict the findings in the viral tweet. An Airbnb spokesperson said, “The data is not consistent with our own data,” adding that their last financial report showed more people traveling on Airbnb than ever before. And AirDNA, which scrapes Airbnb data and also has direct data from about a million short-term rental properties, said revenue per listing was down a modest 3 percent, following a bumper year. Vox also reached out to AllTheRooms, whose data is cited in the tweet, to ask if the tweet did in fact represent their data and how they got it, but didn’t receive a response in time for publication.
The bigger takeaway from all this is simply that even a complete collapse of Airbnb’s business would not fix America’s housing market. There are lots of things contributing to out-of-control housing prices in the US, and short-term rentals are only just one tiny part.
Even after a slight decline from a year ago, home prices are near their most unaffordable on record, with annual payments for a median home representing 41 percent of the median income, according to data from the Federal Reserve Bank of Atlanta. Meanwhile, the Mortgage Bankers Association found that home buying has never been so unaffordable. That’s all thanks to near-record housing prices combined with mortgage rates not seen in more than a decade.
“It’s a one-two punch of needing to pay a high purchase price and finance it with this very expensive debt,” Zillow senior economist Jeff Tucker told Vox.
Interest rates aside, the fundamental reasons for the high prices of houses have to do with a lack of housing supply.
Since the Great Recession, home builders haven’t been building enough new homes to keep up with the growing population and the generation of millennials who reached their 30s and are starting families. New home construction had finally been ramping up in the last few years but has experienced a number of setbacks, including the pandemic, supply chain issues, and now — like the home buyers they’re trying to furnish — high costs to borrow money.
“You can’t, in a single year, change the housing stock all that much. It’s this long accumulative process,” Tucker said. “We accumulated this deficit acutely over about 10 years, say from 2008 to 2018, and so it would take several years of the builders firing on all cylinders to offset that.”
Another big issue hampering supply is the fact that homeowners are not putting their houses on the market. Zillow data shows that the inventory of existing homes for sale is about 50 percent less than it was pre-pandemic. New listings are down significantly this year.
That decline could be explained by the same reasons that are pricing everyone else out: housing prices and mortgage rates. Even if the price of their homes has appreciated a lot, so has the price of every other home. Current homeowners also don’t want to trade their low mortgage rates for the current, much higher ones by buying a new house.
“There’s a larger number of existing mortgage holders with record-low interest rates. So if you have a mortgage with an interest rate in threes or low fours, you’re less inclined to take on mortgages with rates in the sixes today,” Alexander Hermann, a research associate at Harvard’s Joint Center for Housing Studies, which recently released a report on the state of the nation’s housing, said.
Housing prices have also been driven by demand. During the pandemic, many people decided they no longer wanted to live with roommates and needed more space since many were working remotely. That helped usher in a rush of new household formations, according to a recent report by the Economic Innovation Group.
And scapegoating short-term rentals isn’t the answer.
“In the vast majority of places, something like short-term rentals is not going to drive supply challenges,” Hermann said. “They could exacerbate them.”
In the first quarter of 2023, there were 144 million housing units in the US compared with 1.2 million available short-term rentals like Airbnbs, according to AirDNA analysis of Census data. That means they make up just 0.8 percent of the housing stock, what Jamie Lane, AirDNA’s chief economist and SVP of analytics, calls a “rounding error.”
In a survey of recent studies on short-term rentals’ effects on housing prices, AirDNA estimates that short-term rentals were responsible for 1 to 4 percent of the increase in housing prices.
And even if people’s revenue from their Airbnbs were to decline, that doesn’t mean they’d all of a sudden sell those properties, driving down home prices.
“People are still going to have their second homes — they’re not getting rid of them,” Lane said. “Let’s say there’s their ski house in Breckenridge but now instead of only using it four weeks out of the year, they’re putting it into the short-term rental inventory those other 48 weeks.”
What could meaningfully increase the housing supply and stop the growth in housing prices?
“What you fundamentally need is more new construction,” Hermann said. “How you get that is probably a combination of things.” That includes lowering interest rates, reining in the cost of construction supplies, and addressing labor shortages. More liberal zoning — allowing people to build more accessory dwelling units or on smaller parcels of land — would also help.
But an Airbnb collapse and the downfall of the short-term rental market? That isn’t going to fix the housing shortage any time soon.