Monday, November 28, 2016

Airbnb doesn't put rents up, landlords do

Over the weekend a story broke regarding a tenant who was evicted and later found that their former home had been listed on Airbnb. We thought this a good opportunity to give a preview of some of our research into the impact of Airbnb in Sydney.


Domain reports that after his eviction, Nicholas’s landlord listed the property on Airbnb at up to “three times the rent”, partly by listing separate rooms rather than the whole of the premises, but partly simply by making the nightly rate far more than could have been made from weekly rent. One element of our research into Airbnb is looking at how much business the Airbnb host really needs in order to replace the equivalent rent for that property.

As anyone who's rented in Sydney lately knows, our rents are extraordinarily high. Unsurprisingly then, our research finds that Sydney Airbnbs have to actually be booked for significant amounts of time in order to replace the rent. Of the top 10 Sydney post codes where entire homes are listed on Airbnb, 9 would need paid up bookings for well more than 6 months of the year.


This is about in line with research carried out by the city of San Francisco in 2015 which recommended the Mayor's proposal of limiting listings to no more than 120 days. It does not make financial sense for a landlord to remove a private rental from the market unless they could be assured of Airbnb bookings at least within cooee of the rental replacement number.  San Francisco has subsequently adopted a limit of 60 days.

The recent inquiry into short-term lettings in NSW has also recommended a limit of sorts, where an Airbnb host would need to seek council approval before using the property on Airbnb over a certain number of days. A common number discussed was from the City of Sydney, which suggested 100 days in a year should be the limit.

Across Sydney, there are very few listings which go over 100 days, and even fewer who come close to replacing the rent.



Readers of the property pages know that not all property owners, or landlords, always act in the most economically rationalist way. The host of Nicholas' former home is a bit unique as far as Airbnb hosts go – from the info on Airbnb it appears he manages 3 other properties around Sydney, all divided into multiple listings. He also links to his TV appearance regarding his commitment to the ‘sharing economy’. It's entirely possible that this host, and others, would choose to list properties even if they didn't happen to be more profitable than the regular rent.

But let us step back and consider who - aside from tenants, of course - would be so upset if someone was evicted in order for a landlord to take another tenant at a much higher rent. We suspect the response would largely be “let the market decide!”, “it’s the landlords right” and "who can blame them if that's what the tenant is willing to pay?" It is curious then that a landlord responding to a market demand for short-term lettings does not attract the same type of response.

Could it be that concern for this particular tenant is a little on the shallow side? Why do we only hear about the evils of property owners extracting maximum value from their investments when it's actually something else that's bothering us? We understand there's a party going on across the hall that it seems everyone else was invited to, and no doubt that can be frustrating... but for tenants it's been someone else's party all along.

Of course, Nicholas couldn’t have been evicted to make way for Airbnb at all without NSW's tenancy laws that allow for terminations without a good reason. From the article it appears that Nicholas was misled into believing that the owner would be moving back in themselves. This kind of disappointment is well known to tenants as a consequence of no grounds notices.

Those dismayed at this story must recognise that no complaint about the impact of Airbnb can match the impact of our unfair and one-sided housing system. We do not mean that Airbnb has had no negative impact – but whatever impact exists is a direct result of the way our housing system has been designed, and the values that we place upon it.


8 comments:

  1. I agree with part of your argument - that some landlords buy into the "sharing economy" myth because it is trendy rather than financially viable, but there is evidence that areas that were once considered accessible for young Sydneysiders - and are therefore attractive to holidaymakers - are soon going to be well out of the reach of ordinary Aussie renters.
    Bondi and Manly - the hottest of airbnb hotspots - have seen rents rise by five times the rate of the rest of Sydney in the last five years. For Newtown, Coogee and Darlinghurst, it's about three times.
    By the way, if you consider that that the proposed 100 nights a year limit is the equivalent of every weekend - suddenly it doesn't seem like such an impossible target.
    If the pro-airbnb lobby has its way, I would put money on tenants being offered winter-only rentals in the holiday hot spots - maybe eight months a year - then as soon as the flashpackers start rolling in, tenants will be relegated to the inner fringes so that landlords can top up their income with holiday rentals.
    I was interviewed on this by the ABC recently and the camera crew told me they had been talking to a guy in Bondi who had converted two investment properties to airbnb rentals and was buying a third just for that purpose. However, he refused to go on camera. Wonder why.
    By the way, I am not anti-airbnb and have used them myself in the past. However, I object to the oft-repeated Trumpian lie that it's all about sharing. It ain't.

    ReplyDelete
    Replies
    1. Cheers Jimmy.

      It's hard to argue with the data though, right? Landlords would be well advised to keep a place rented out than to try and get a paying Airbnb guest almost every single weekend.

      As for tenants only being offered short term tenancies in sought-after tourist spots - this was an issue long before Airbnb came along and it would remain an issue even if Airbnb are sent packing. Especially at this time of year, tenants know only too well how easy it is for landlords to make a killing on a short-term holiday letting.

      And while ever landlords reserve the right to "deal with property as they choose", it wouldn't matter if Airbnb just up and disappeared. The only thing that would change for tenants is that the issue would become invisible again.

      Cheers,
      Ned.

      Delete
  2. Hi Jimmy,
    There's a larger conversation happening about the rents, so I'll just respond to the other two points you raise there. 100 nights = every weekend is true enough, and a fair enough concern if you live next door to the let, but it means you have to leave the property empty the rest of the week. There are a truly miniscule number of properties on Airbnb making anywhere near enough to replace the rent if they only list every weekend. The people doing that mostly have no interest in a proper tenant, and would be holding back on rental supply regardless. The full report will look more closely at that question.
    I think the winter-only rentals is a bigger concern, and it emphasises our point well. It is weak tenancy law which allows for that kind of behaviour, not any particular platform. A landlord can't jump between rental and short-term if they can't evict the tenant on a whim.
    Cheers,
    Leo

    ReplyDelete
  3. Where do the figures come from and how are they produced and reviewed?
    Every property short-term let in our building was let this way, 365 nights of every year.
    Airbnb's constant claim that it's mums and dads $2 000 a year had never ever rung true.

    ReplyDelete
    Replies
    1. Hi Chris,
      The full methodology will be included in the report, but the Airbnb data presented here is from a company called AirDNA who have provided data for a number of reports around the world. The median rent figures are from the Rental Bond Board and the analysis is my own.
      365 nights is an incredible amount - and to be in the middle of multiple properties doing the same thing is astounding. I'm sure you have already reported the change of use to council.
      We haven't tried to work out the family profile of Airbnb hosts but Australia is fond of characterising our landlords as "mums and dads", so perhaps its unsurprising Airbnb does it too!
      Cheers

      Delete
  4. Great work as always! Timely and informative, I will be sharing with TUACT followers

    Have you seen the UK doco - https://www.youtube.com/watch?v=QyQXvRl7uYY

    ReplyDelete
    Replies
    1. Hi Deb,
      Yes, I saw that. Nice bit of drama - I must admit I tuned out when they started going social housing tenants. The government there is happy enough flogging off council housing, but don't you dare put it on Airbnb!

      Delete
  5. Data - Here's some. And good luck tenants:-

    SYDNEY HAS 23,165 HOMES SHORT-TERM LET JUST ON AIRBNB - A 75.5% INCREASE IN THE LAST SIX MONTHS

    COUNCIL OF THE CITY OF SYDNEY AREA
    5,527 homes for rent on Airbnb
    1,529 homes for rent on Domain.com

    WAVERLEY COUNCIL AREA
    4,087 homes for rent on Airbnb
    350 homes for rent on Domain.com

    RANDWICK COUNCIL AREA
    2,377 homes for rent on Airbnb
    573 homes for rent on Domain.com

    MANLY COUNCIL AREA
    1,343 homes for rent on Airbnb
    141 homes for rent on Domain.com

    WOOLLAHRA COUNCIL AREA
    1,333 homes for rent on Airbnb
    218 homes for rent on Domain.com

    WARRINGAH COUNCIL AREA
    1,128 homes for rent on Airbnb
    284 homes for rent on Domain.com

    NORTH SYDNEY COUNCIL AREA
    1,048 homes for rent on Airbnb
    649 homes for rent on Domain.com
    - - - - -
    BYRON SHIRE COUNCIL
    1,483 homes for rent on Airbnb
    36 homes for rent on Domain.com

    No data available for other NSW regional areas. Shoalhaven Shire estimates that in some areas, between 70%-80% of their residential housing is holiday lets of some description
    http://insideairbnb.com/sydney/ - as at 04 DEC 16 https://www.domain.com.au/rent/ - as at 15 DEC 16

    ReplyDelete

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