How do you solve a problem like Airbnb?

With the deadline for comments on the Government's options paper around short-term holiday letting in New South Wales drawing near - they're due at the end of October - we're starting to see a resurgence of articles and musings about the impact of short-term holiday listing companies on Australia's fragile housing system. We thought we'd weigh in with some early thoughts.

The week kicked off with a comment from Stephen Goddard, strata lawyer and spokesperson for the Owners Corporation Network, in Domain. The OCN advocates that strata lot owners should be given the right to make rules about short-term letting at the micro-level - that is, owners within each individual apartment block should be able to decide for themselves whether they will allow short-term lettings in their building, and under what conditions. Goddard makes some strong points, and it's hard to disagree with the notion of short-term lettings being regulated at that very local level as far as strata is concerned.

It's worth pulling out a couple of items for further discussion. The first is that strata laws in New South Wales don't allow tenants to have any meaningful representation on strata committees, which is where by-laws that would include rules about short-term lettings would be made. Once a by-law is made, tenants can't really challenge them - only the owner of a lot can do that. This presents a problem for the "local democracy" model: those residents who do not want their building to allow short-term letting, and who rent, would be excluded from any discussions or decision around the relevant by-laws. On the other hand their landlords - who may not reside in the same town or city, let alone within the strata complex - would be invited to contribute. That means decisions about short-term lettings would be influenced by people who have no direct interest in the day-to-day concerns of their strata community. The issue could be fixed with a few tweaks of the Strata Schemes Management Act 2015, along the lines argued by the Tenants' Union prior to the Act's implementation, to allow tenants greater say on the management of their strata schemes.

The second is Goddard's comments about the impact of short-term letting on housing affordability more generally. On this he cites research from the University of Sydney's Urban Housing Lab which he says "recently found that short-term letting platforms have removed 6,000 properties from the long-term rental market throughout NSW". He links to an earlier article in which the research was discussed - it quotes the Housing Lab researcher and provides further context around the findings - but we'll have to wait until the research is published before we can get a clear look at what it tells us. Given the fluidity of Australia's housing markets, where properties are traded back and forth between owner-occupiers and investors with relative frequency, the growth of short-term letting raises some interesting questions around the interplay between existing and emerging residential property uses.

The journalist who wrote the earlier story also sought comment from the Tenants' Union prior to publication. Our remarks were not included in the piece, but reference was made to our own research into the impact of Airbnb on Sydney's rental market. This research found no clear correlation between rising rents and an increase in listings in Sydney's Airbnb hot spots, suggesting that deteriorating rental affordability across the city is not necessarily down to Airbnb. This is in keeping with other analysis we've presented about declining rental affordability and the changing shape of the private rental market.

Not surprisingly, vocal opponents of short-term letting are unimpressed with our report, and we've been accused as recently as last week of "cosying up to Airbnb". To be fair, Airbnb Australia has taken to citing our report as part of their arsenal in fending off claims about their company's negative impact on housing affordability - and well they might. But let's be clear, where short-term lettings are concerned the impact on rental affordability is not the only game in town. Far more concerning is the impact on housing security for people who rent, and who can be evicted without grounds by landlords who might consider themselves simply experimenting with a new investment strategy by trying their luck with short-term letting. To be fair again, our "cosying up" accuser has agreed with us on this point.

As our report highlighted, listings for short-term lettings tend to spike during peak tourist times, and many listings do not result in numerous or frequent bookings. This is in keeping with Airbnb's repeated claims that the majority of people listing on their platform are just ordinary folk looking to cover their own costs while taking time away from home. Available data doesn't tell us how many listings are made by owner-occupiers or renters, and how many are made by investors, so we're only able to guess as to the specific impact of landlords turning away residential tenants over the summer in order to take on short-term holiday makers. But there can be no doubt such an impact has long been felt in popular tourist areas across New South Wales, and there can similarly be no doubt the increased ease by which property owners can solicit short-term lettings by using Airbnb is making this worse. Reforming the Residential Tenancies Act 2010 to ensure tenants can't be evicted "without grounds" to allow experimentation with short-term lettings will be critical to solving this problem.

Even with the above-mentioned reforms in mind, there will still be a need to regulate the short-term letting sector. Findings in our report suggest landlords would need to operate on a more-or-less commercial basis if they are to make short-term letting a viable financial alternative to simply renting a place out, but of course there are some who are already doing that. With various examples of third-parties offering their services to manage such operations there is a huge risk this practice will grow, particularly in high demand tourist areas that are already struggling with affordability issues. This is clearly a problem. A commercially operated short-term letting business should only be allowed subject to local government approval, and there should be clear guidelines as to what constitutes a "commercial operation" and the conditions under which it will be approved.

We'll return here to Airbnb's oft quoted claim that the majority of their hosts are not commercial operators, but everyday people simply sharing a spare room for extra cash or keeping their homes lived in and looked after while taking some time away - all part of the global "sharing economy" that some are even calling a financial lifeline. As far as a corporate narrative goes, it's not a bad one, but it clearly sidesteps some of the problems that are created or exacerbated by this highly profitable business. If they were genuine about the claim, they could very easily make it true by limiting the number of bookings a host could solicit via their online platform. There is no doubt they'd lose listings, as the commercial operators would take their business elsewhere, but they'd recover some credibility and perhaps even restore a little faith in their so-called sharing economy. They could trade a bit of money for some moral high-ground. But they don't.

Make sure you get your response to the Government's short-term holiday letting options paper by October 31st.

Airbnb and the rent in Sydney

Today we released our report into the impact of Airbnb on the rent in Sydney. You can check out the full report here: https://tenants.org.au/tu/airbnbsydney2017. Let's have a closer look at some of the findings.

One of the interesting numbers we've examined is the number of Airbnb listings that are actually active in any given month. While it's true that people keep creating more and more listings on Airbnb, that doesn't always tell us the really important number - how many are active, and therefore what impact these listings are having on the rental market.

We really can't explore some of these issues due to the lack of data around housing in Australia. We don't know which properties are rented homes or owner-occupied, and this makes it difficult to read a lot into the numbers.

We can be clear that simply being listed on Airbnb does not mean a property has been removed from the rental market and there are two clear examples we can imagine to illustrate the point. Imagine a 2 bedroom unit in Bondi. The occupant lists the place on Airbnb for the week between Christmas and New Year's while they go away and visit family. If the occupant was an owner-occupier then this property wasn't available for rent, and Airbnb hasn't changed anything about that. If the occupant was a renter, then this property has also have not been removed from the rental sector - it is still in it.

The Greater Sydney area 

Whether it is owned or rented, what is more relevant is how often a property is booked. This chart covering the whole of Sydney from August 2014-August 2016 illustrates that there actually is a large number of listings on Airbnb which don't even receive one booked night in any given month. This suggests a large number of people have listed their property in the lead up to summer, booked it perhaps for a few nights over summer, and have no intention of listing the place again.

We can clearly see the summer bump both in December 2014 and December 2015 - far more activity then, than for the rest of the year. What is interesting though, is that the numbers of listings with 8 or more nights booked in a single month (or roughly 100 nights in a year) is much more constant throughout the year. This effect is very clear in our three hotspots with really large summer bumps in beach-side Bondi and Manly, and a still sizable but reduced bump in inner city Darlinghurst.

All of this leads us to think that for the majority of users, Airbnb activity is sporadic. However more commercial operators of course act differently, and are looking to maximise their occupancy all year round, leading to a more consistent level of activity. Regulation of short term lets should look to effectively control commercial operators, and ensure that their activity in short term lets does not produce harmful effects on residential tenants.

For the full report, including interactive maps - check out tenants.org.au/tu/AirbnbSydney2017

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.