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How Airbnb accidentally screwed the US housing market and made $100 billion
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this post was submitted on 12 May 2024
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US policymakers screwed themselves with crappy urban planning, leading to insufficient housing supply and bad transit options. Blaming AirBnB for high housing prices is like setting up a chain of dominos, and criticizing a guy who comes by and knocks it over. If it wasn't him, it would have been someone else, or the wind.
This is happening worldwide. It has very little to do with urban planning and more with lax homeownership restrictions that allows the wealthy and corporations to scoop up housing supply for profit.
"The wealthy and corporations" have choices of how to invest their money. If housing supply is sufficiently elastic to meet demand, they'll find somewhere else other than housing to put their money. Ain't nobody trying to corner the Chinese real estate market in 2024, for instance (*).
There are a few places where land shortages genuinely constrain housing supply, like Singapore and Hong Kong. But the US has tons of land; things are simply not well optimized. That, plus high interest rates due to fiscal/monetary mismanagement.
(*) Not saying the Chinese real estate market is worth emulating.
I'll agree that there is indeed a housing shortage, but I don't necessarily think that is what's at play here. Capitalists will always park their money when they see an opportunity to make a return, regardless of industry. Housing has never really been an elastic commodity, it is inelastic in nature due to the time it takes to build and the fact that it is a reasonably sizable asset that doesn't change hands at the drop of a hat (granted there are market products that contradict this, but I'm going to ignore them for the sake of this conversation). Further, they have always been marketed as an investment vehicle, albeit a long term one.
And while there is plenty of land in the US to build on, housing is only as attractive as it's local market. Plenty of communities have popped up via ambitious developers, but fall on their faces when the demand is inexistent (California City being a famous example). Better transit options can alleviate this, but people are still drawn to geographic proximity to jobs, schools, entertainment, etc.
Homes in high demand areas fetch a premium because people want to live where they work and play without the commute. These areas are already well developed, and yes had their been more relaxed zoning laws, more housing stock could have been built. But, I would argue that many communities built 50+ years ago were built with the then current demand in mind, not the demand of today. Sure that could be pinned on developers and city authorities not having enough foresight, but I don't really blame them for not being able to comprehend both prospects of an exploding population and the demand these cities currently see.
Short term rentals are tricky because no one is going to vacation to a suburb 30-45 min from an urban center or destination location, they want to be in the heart of the action. These properties present an ideal investment opportunity for these operators in that a) they purchase an appreciating asset, and b) they generate a short term return. It's almost a guaranteed profit for them.
Cities saw this problem growing, and should have taken preemptive action. Yet they ignored it because they were listening to moneyed interests. Now that it's become a full epidemic, it'll be much harder to contain.
Soil consumption is one of the many environmental problems we face. Polluting and consuming more soil to condition the market is nonsense IMHO. Governments should simply regulate more so that people vacationing will go to hotels and houses will be available for residents. This also addresses the issue of locals being pushed further and further away in the cities they live, which creating more houses doesn't solve (it will just be the next round of isolated dormitory periferic areas, which have already tons of problems).
Short term rentals for houses was a very good and lucrative idea, but it's harmful to basically everyone but the landlords who rent out houses there. As such, we should simply strongly regulate it to discourage it as much as possible, if not banning it directly.
Berlin did exactly that: You can rent out your apartment for IIRC 30 days a year, or while you're also living there, if you want to rent out more you need a hotel license and tough luck getting one while there's a housing shortage, least of all for a flat in a residential area.
But OTOH that's all only taking the edge off there's been decades of under-investment in social housing in Germany overall, and the little social housing that got built got built via attaching conditions to building permits for private investors, those apartments lose their social housing status after 20 or such years.
And it's not like there aren't companies who want to build, and build plenty -- but they don't because they can't recoup costs, not in this market where every rich fuck who can afford rent already is living somewhere else: Building costs are too high. Some of that is building standards, permitting, etc, but the bulk of it is financing costs, that is, interest on loans for new construction is way too high. Getting at land is not always easy but there's plenty of mechanisms such as municipalities having right of first refusal for any land sale (if they want to, that's another topic). There's really only one way out of this and it's state coffers because the capital market certainly isn't going to get less greedy.
Agree. Social housing has been one of the first areas to suffer from cuts everywhere. It is a problem on its own, which short term rental makes worse.
The problem is that building is basically an irreversible use of land. It's only recently that we started seeing land as a commodity (few centuries) and with the current state of affairs, it's insane to leave it as such. Soil is too precious and too scarce to let market inefficiencies waste it. We should really explore all options before we decide to simply build more, especially in Europe where the population growth is basically null.
The build more thing is in urban areas to accommodate urbanisation. Coming to think of it the 49 Euro ticket might actually reverse some of that because there's tons of smaller towns, sometimes villages, with proper train connection to the next large city. Low prices drive usage which prompts higher train frequencies which, infrastructure permitting, takes even more pressure off the metropolitan housing market.
That said urbanisation isn't in itself a bad thing -- it makes a lot of sense for a lot of reasons to not have a gazillion tiny villages, it'd just be another form of sprawl. Here in SH, if every train station we do have had a small urban core around it surrounded by village structures in cargo bike distance and then long stretches of fields and nothing, that'd actually be quite nice. The state was very good at doing that in the Hamburg metropolitan area, focussing development on a couple of axes radiating out from Hamburg but it should become more of a general pattern.
But it takes ages to build houses. You're again blaming something that's a given just to ignore that housing is a basic need. Obviously if the basic need is manipulated there's loads of money to be made.
Singapore actually has housing pretty much nailed down. If Singapore had US-style housing policies 95% of Singaporeans would live in Malaysia and commute because only bank execs etc. could afford living in the city.
...also Singapore would have zero green space left. It'd all be single family homes interspersed by parking lots. You can't spit out a chewing gum over there without hitting a public park.
You can't chew gum in Singapore at all, maybe this is why
There's exceptions for therapeutic uses (dental, nicotine gum) and you can also import small amounts for personal use. Chewing is perfectly legal, improper disposal isn't.
Elastic housing supply is nonsense.
Once a house is there it is there. You dont just demolish it, and build it up again somewhere else.
The only thing that can be elastic is demand. And it is not because moving has high opportunity costs, people are socially integrated in the area they life, feeling at home is a crucial feeling for mental well being...
People renting/buying to life are at a fundamental disadvantage against landlords, who only care about the money coming in. Thinking of housing as a "normal" market like idk. headphones or something shows a lack of economic understanding.
It's both.
An example of bad urban planning is low density urban sprawl, which requires lots of resources for few housing units.
Less housing, price go up. High build cost, price go up.
Yeah, and that's exactly what they chose to do. They contributed to the reasons John Public can't afford housing, and were rewarded massively for it.
Yeah, anyone can rob a bank with poor security, but we should still punish the guy who actually robs the bank.
Air BnB effectively pitted average renters and homeowners against the luxury hotel market. From a supply/demand standpoint its basically moving something like 10% of the rental market to the hotel market.
What this does is it means luxury long term rentals slot out the next lower tier of housing at higher pricing it slides down the economic ladder until a percent of people at the bottom is simply outbid for the reduced normal rental housing stock.
Its not airbnb's fault the market shifted but it is a problem with the market as a result of blending the luxury hotel market with residential housing.
Updoot for wind because Mother Nature doesn’t give a fuck :)