Is Airbnb making UK cities less affordable?
The short-term lettings industry has seen huge growth over the past decade, driven primarily by companies like Airbnb. What began as homeowners renting out spare rooms on a temporary basis, has become a commercialised industry tentatively attributed to reduced housing affordability all over the world. But what does the data tell us about the situation in the UK?
In London, the number of active Airbnb listings increased by 80 per cent between 2016 and 2017, rising further in the last few years to a peak of almost 80,000 active listings. While an early study by Airbnb found that in 2013 the company generated $824 million and supported over eleven thousand jobs, many housing experts have alluded to the detrimental effects of such a surge in short-term lettings. Generally these concerns relate to the increasingly commercialised nature of the industry, whereby properties that might previously have been on the private rental market are now rented on Airbnb. Lower supply of housing stock pushes up rents, leading to reduced housing affordability in areas that have seen a surge in Airbnb listings.
Two indicators of a commercialised market are high proportions of ‘entire home’ listings (unlike room listings with live-in landlords), and multi-listings (where the same host is renting several properties). The most recent data from InsideAirbnb shows that in London, 55 per cent of listings are for the entire home, and 55 per cent are multi-listings. These multi-listings are clustered in London’s most central boroughs, including the City of London, Westminster and Kensington and Chelsea.
In London, the higher the median rent price in a borough, the higher the density of Airbnbs. While this is in no way causal evidence that Airbnbs push up rents, it does suggest there is a strong association between the two. Research from University College London has also found a reversed relationship, as tourists are drawn to “attractive and well-to-do areas with young and tech-savvy residents”.
While London may seem like the most obvious area to study in the UK, other cities see different Airbnb trends, with different outcomes. Edinburgh is somewhat of an outlier when it comes to Airbnb, as it sees great variation in demand and prices throughout the year. With the exception of high-prices for last minute Christmas and New Year getaways, London’s listing prices are fairly steady year round. Meanwhile, Edinburgh’s prices increase dramatically during the Fringe Festival which runs throughout August.
Analysis of InsideAirbnb data by Dan Cookson (an Independent Housing & Spatial Information Specialist) revealed that in 2017, 19.6 per cent of dwellings in Edinburgh’s Old Town were listed on Airbnb. He questions "how many of these short-stay properties were previously homes?". Furthermore, given that almost two-thirds of Edinburgh’s listings are ‘entire home’ and demand is seasonal, many of these properties may be empty for large parts of the year.
Governments are struggling to impose legislation that keeps up with Airbnb’s disruption of housing markets, but steps are being taken to increase regulation. Airbnb itself has implemented a ‘90 day rule’ where (without necessary permits for longer rentals) hosts can only let their properties for up to 90 nights a year. Even 90 days provides ample opportunity for Airbnb to encroach on the private rental sector, and hosts are certainly looking to maximise bookings with the average number of days available for listings in the next year in London and Edinburgh sitting at 119 and 113 days, respectively.
"How many of these short-stay properties were previously homes?"
Despite efforts to curb Airbnb, some housing policies are working to encourage a shift to short-term lettings. Changes in Mortgage Interest Relief - a tax relief in the private rental sector - are making short-term lettings more attractive to landlords who could see their profits rise with a shift to Airbnb. While there is insufficient data to show a direct transfer to short-term lettings, the number of dwellings being privately-rented in Scotland fell by 6 per cent in the year to March 2018. The Scottish Expert Advisory Panel on the Collaborative Economy is looking to new methods of regulation. They are investigating a seasonal system in Edinburgh, with more relaxed rules during peak times like the Edinburgh Festival and the New Year. Additionally, just two days ago, the Scottish Government announced new measures allowing local authorities to enact licensing schemes for short-term lets starting in 2021.
While organisations like InsideAirbnb are making data more accessible, “this certainly doesn’t provide anywhere near the information a city needs to properly regulate the sector” according to Dan Cookson. Additionally, the lack of comparable indicators across short-stay supply and the long-term private sector makes it difficult to truly assess Airbnb’s impact on housing. Cookson explains that more research is required and advocates for greater cooperation between platforms like Airbnb and city legislators.
by Helena Robertson