We are just weeks away from Thanksgiving, when more than 50 million Americans will travel to visit family and friends. That’s a lot of people who will need somewhere to stay. The introduction of websites like Airbnb, HomeAway, and FlipKey have given travelers an alternative to the often costly and limited hotel options in and around major cities like New York City.
Unfortunately, instead of making room for innovation, municipalities like Jersey City are closing their doors to these forms of short-term rentals. Jersey City’s successful referendum to crack down on short-term rentals was a win for the hotel lobby and hotel workers unions, but a loss for women and families just looking to earn some extra income.
Now, it will be a lot harder for visitors to find inexpensive Airbnb rentals just a short ride from the city, compared to pricey hotel options in Manhattan.
This loss has national significance. It sent a message to other cities that established, connected interests can beat innovation and stifle competition.
The new restrictions are punishment for the majority of Airbnb hosts who just want to use their properties to pay for their mortgages, family trips, and other life expenses like long-time Jersey City resident 49-year-old Felicia Palmer. Palmer rents out her second home through Airbnb. The new rules are expected to shrink the number of listings since homeowners will not be able to rent out their vacation homes most of the year — a penalty against vacation rentals.
Short-term rentals have always been around, but online home sharing took off when regular homeowners in areas beyond beach towns realized that stranger would pay to stay in their spare rooms and entire homes. Technology has lowered the bar to short-term renting making it easier to list vacant spaces and find willing renters.
Travelers who use Airbnb and other online platforms are willing to venture beyond tourist areas and hotels hubs to stay in suburbs and even low-income communities (such as African American neighborhoods of Washington, D.C.) for an authentic community experience or a lower price.
As a result, according to Airbnb about three-quarters of their rental listings are located outside of tourist neighborhoods. That delivers huge economic impact to those communities in different ways.
Since its founding, Airbnb hosts have earned over $65 billion. The average Airbnb hosts makes about $11,088 per year or $924 per month — nearly three times as much as other gig economy workers. Women are the big winners from home sharing; they make up over half of Airbnb hosts worldwide.
Home-sharing travelers also spend significantly in the neighborhoods where they stay on shopping, dining, and transportation. Airbnb says their travelers spent an estimated $6.5 billion on restaurants alone in 44 cities around the world and generated $34 billion in direct economic impact in the U.S. in 2018.
When roughly one in 10 Americans have used a home-sharing website to stay in someone else’s home, we have a trend that will not disappear anytime soon.
The goal of good policy should not be to pick the winners and the losers in the hospitality industry. It should be to develop thoughtful solutions that encourage innovation while being responsive to legitimate public concerns.
Generally, there are two arguments against short-term rentals: not-in-my-back-yard concerns from neighbors and claims that Airbnb is driving rents and housing prices higher.
Certainly, the appetite to live beside a party house is about the same as frat houses. The extra trash and noisy parties may be a nuisance. However, does that truly outweigh the benefits to the communities that short-term rentals provide?
The other concern is that Airbnb rentals are taking valuable homes for rent or purchase off the market as well as driving up housing prices. Commercial rentals by big developers and real estate companies are the villains, not necessarily individuals just listing their own home. The facts do not entirely support this claim.
When FiveThirtyEight analyzed Airbnb data several years ago they found that commercial listings represented a tiny fraction of all rental units — below 1 percent — and that was too small to have any significant impact on rental supply. (The caveat is that commercial listings comprise a large chunk of host income and that as these listings grow, their impact on rental supply could change over time.)
Also, in cities like New York City, San Francisco, and Los Angeles there are other factors driving rents higher such as increased demand for urban living, rising incomes, less housing stock, and restrictive zoning codes. You cannot isolate Airbnb listings and place all of the blame on them.
Opponents of innovation emphasize the negatives of home sharing while outright ignoring the economic benefits they deliver to residents and communities. We can support innovation through Airbnb and other gig economy companies, but work to address policy concerns. However, the discussion needs to begin with data not rhetoric.
The hotel industry’s only interest is self preservation, and it will continue to push for legislation based on rhetoric and exaggerated claims of harm.
Women and families should not be swept up in one-size-fits-all policies that have the unintended consequences of limiting their ability to earn extra income by legally renting their homes. That is the real harm of New Jersey’s efforts and those that are likely to follow elsewhere.