Brandi Linn
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Without a doubt, Airbnb has revolutionized the hospitality industry, inspiring an ecosystem of companies that take advantage of the sharing economy, such as co-living startups. While these companies have achieved impressive financial success, it has been claimed that they have produced problematic effects on a city scale. Airbnb, in particular, is alleged to have driven an increase in rental prices in cities already facing housing affordability challenges. Like the case of Uber’s impact on urban mobility, Airbnb’s rapid growth has caused significant challenges for local governments, demanding comprehensive regulation and a re-evaluation of its operation at the city scale.
In 2008, Airbnb was created to revolutionize the hotel industry. Founded in San Francisco, the startup quickly became a global company, greatly contributing to the growth of the sharing economy. Today, more than 500,000 properties are listed on Airbnb in the United States alone, creating new opportunities in the way spaces are rented and leased. Airbnb has allowed people to monetize their unused living spaces while offering travelers an authentic alternative to traditional hotels. The company’s disruptive business model has also had a profound impact on ideas about the utilization of real estate assets in the modern era.
Despite its enormous success, the repercussions of the Airbnb model are beginning to be seen. Some landlords in New York City are prolific and have hundreds of Airbnb listings. But other New Yorkers who have listings on Airbnb are trying to make ends meet, either by renting out their home while they’re out of town or renting out half of a duplex to help cover mortgage costs. In September 2022, New York City imposed a ban on unregistered short-term rentals in the city. The City recognizes that short-term rentals can create noise, litter and danger, and can pricing residents out of their own neighborhoods.
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Supporters of the rule argued would free up apartments for New Yorkers, who pay high rental prices and face housing shortages and insecurity. Six months after New York City’s ban, the number of short-term accommodations on Airbnb has fallen more than 80 percent. This highlights the contentious relationship between the short-term rental industry and the communities in which it operates. While Airbnb has revolutionized travel, its impacts on local real estate markets have led cities to take legislative action to mitigate the potential downsides of its model.
The growing number of short-term rentals in inner-city neighborhoods, in addition to being one of the driving forces of tourism gentrification, also affects housing affordability. These issues reflect how the growth of the short-term rental market has complex social and economic implications for local communities. While providing new income opportunities for some, long-term shrinking housing stock and an influx of transient visitors can disrupt the fabric of established neighborhoods. As cities continue to grapple with these trade-offs, the long-term sustainability of platforms like Airbnb remains an open question.
When owners convert their properties into Airbnb rentals, it can reduce the supply of long-term rentals in their neighborhoods. This could increase rental prices, stretching the budgets of low-income families. Furthermore, the supply of long-term rentals is reduced, favoring the transfer of residents to another district and thus promoting processes of gentrification and segregation. Residents struggle to find long-term rentals or affordable housing solutions, and are also faced with a significant increase in the cost of services, due to the growing presence of tourists pushing business owners to raise prices.
In addition to these effects of gentrification, Monica Bernardi observes the “Disneyfication effect” of the short-term rental market. Massive tourist flows, today favored by short-term rentals, run the risk of transforming the historic centers of key places of local cultural and political life into true citadels of consumption. Furthermore, the uncontrolled flow of tourists can affect the identity of the city, reinforcing the risk of social desertification of historic centers. The influx of transient visitors and the commercialization of local culture can undermine the authentic character of historic urban centers, contributing to a homogenization of experience that erodes the very essence of what makes these places unique. In this process, local life is marketed and sold as added value to the rental of accommodation.
Without a doubt, Airbnb has helped countless places become more accessible to tourists, contributing to the growth of tourism and the places’ income. Considering the issue of enriching cities, expressed by Airbnb, many scholars claim that the arrival of more tourists due to Airbnb’s lower accommodation cost is generating more jobs in the tourism industry. However, due to the large flow of tourists in cities that are not prepared to receive a large number of them, the impact on local communities can create imbalances. To track the economic impact of short-term rentals in cities, Airbnb can generate a concentration of externalities that can cause fluctuations in property value. This can be seen as a relevant indicator of gentrification processes that may affect specific areas of the city.
Various other cities around the world such as Barcelona and Paris has also called for regulations on short-term rentals., affecting the future of Airbnb as a business. While the bans have been effective momentarily, their long-term success remains to be seen. The primary goal of local governments should be to prioritize the public interest over capitalist entities seeking to profit. Policymakers must strike a careful balance: harnessing the economic opportunities of tourism while mitigating its negative effects on housing affordability and neighborhood character.
However, innovation in real estate business models must continue to advance taking into account its systemic influences. Startups like Uber and Airbnb have transformed the way people access transportation and accommodation. Where these companies fail is in their lack of a holistic understanding of their offerings and their broader implications for urban communities. While these platforms work exceptionally well at the individual user level, they have not achieved adequately address the complexity they introduce at the city scale.
This challenge requires a concerted effort not only from government regulators, but also from companies themselves. By taking a systems thinking approach that considers the full scope of stakeholders affected by your innovations, collective benefit can be taken into account. Instead of focusing solely on optimizing the individual experience, these startups must be responsible for mitigating the problems their business models can create system-wide. This can ensure that their offerings actually benefit the communities in which they operate, rather than prioritizing private profit over the public good.
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