Tech founders have long proclaimed that their products or services will change the world — to the point where it’s become a cliche — and Airbnb’s founding team is no exception.
“What we’re doing with Airbnb feels like the nexus of everything that is right,” Airbnb co-founder Joe Gebbia once said. “We’re helping people be more resourceful with the space they already have, and we’re connecting people around the world.”
But that resourcefulness has also impacted permanent residents in Airbnb markets — and not necessarily positively.
Studies have examined the impact of Airbnb on rent prices in New York City, finding that the short-term rental service pushes up rents. But Sophie Calder-Wang, an assistant professor at the Wharton School at University of Pennsylvania, took things a step further in a new study, which looks at the differential impact of Airbnb on renters by race, income, education or location.
Calder-Wang combined data on 2018 Airbnb listings scraped by AirDNA with demographic data from the Census Bureau’s American Community Survey to assess the impact of reallocation of units from the long-term market to the short-term rental market. In Calder-Wang’s study, a unit is considered “reallocated” if it has been marked as available on Airbnb for at least 180 days in a year.
The analysis found that New York City renters suffer a net loss of $178 million per year from rent increases, which stem from units being taken off the long-term rental market and listed on the short-term market.
Those losses aren’t concentrated among New York’s most vulnerable residents: Renters that are white, highly educated and high-earners lose more money, according to the study.
Source: Sophie Calder-Wang
While the median loss due to unit reallocation for all New York City renters is $125 per year, the median loss for white renters is $152 per year. Median losses are also higher for those with a college degree, those whose incomes fall in the top 20 percent of earners and those who live in single-person households.
The location and size of units occupied by those renters is key: White renters with college degrees with high incomes tend to live in desirable neighborhoods.
In Greenpoint and Williamsburg, for example, Airbnb listings made up nearly 10 percent of all housing units. The population in those neighborhoods is 61 percent white and has a median household income of $99,000, according to the 2019 American Community Survey data. The population of New York City is only 32 percent white and has a median household income of $69,407.
Calder-Wang also found that single-person households tend to suffer bigger losses, likely because Airbnb penetration is highest citywide for one-bedrooms.
Renters aren’t likely to make up the difference by putting their homes on Airbnb: New York City renters gain only $23 million per year via hosting, and those gains are highest among small, high-income households who live in expensive and desirable neighborhoods. The median gain for renters in the top 20 percent of earners is $5; that same figure is only $.01 for the renters in the bottom 20 percent of earners, the study found.
On its face, the study shows that Airbnb doesn’t worsen inequality among renters, because the most financially secure renters suffer the biggest losses. But Calder-Wang cautions against this conclusion, since those losses constitute a significant transfer of wealth over to property owners, who on average tend to be wealthier.
“In the presence of severe housing market supply restrictions, the welfare transfer from renters to owners becomes substantial,” she writes. “In a city where the majority of the residents are renters, unregulated Airbnb will likely hurt the median person.”
Calder-Wang also notes that the severe housing shortage in New York City is partly to blame for this dynamic.
“The entry of Airbnb provides a channel for the existing space to be used by the highest value bidder, but the total quantity restriction raises rents for everyone,” Calder-Wang writes. “Therefore, a reasonable alternative regulatory approach is to allow housing supply to expand more easily.”