Saturday, June 27, 2015

Nobody actually lives here

Here's a site that maps local Airbnb listings and attempts to break down the data in ways that show their impact on the local housing market.
Airbnb hosts can list entire homes/apartments, private or shared rooms.
Depending on the room type, availability, and activity, an airbnb listing could be more like a hotel, disruptive for neighbors, taking away housing, and illegal.
The site's creator found that 67% of local Airbnb listings are for "entire home/apartment"  meaning those locations are more likely to be completely off the local rental market. Airbnb doesn't share data on actual rentals. So the owners of this site have taken some educated guesses based on the listing's minimum stay, price, and the number of reviews posted by customers.

That's not a perfect indicator of what's happening, but it's a decent starting point.  What it shows, generally, is that over 90% of local Airbnb listings are "highly available" most of the year for short term use and likely off the local rental market. It also suggests there are strong incentives for an unregulated market to swing toward more short term rather than long term rentals.  If we filter the data for landlords who are listing entire apartments on Airbnb as the property's primary use, we find an estimated monthly income of $2,348.  HUD calculates "fair market rent" for a one bedroom apartment in Orleans Parish at $767.

The site also reveals a trend toward individuals or companies who operate multiple Airbnb listings. Something like 42% of the Airbnb hosts in New Orleans have multiple listings ... sometimes in multiple cities.

Proponents of short-term rentals talk about their business in terms of what we've come to call the "sharing economy" where people rent out micro-units of their labor or their living space on an as-requested basis via the internet. This is problematic in and of itself, but we'll leave that for another time. (Here's Robert Reich on the subject if you're interested.) But from a branding standpoint, the image you're supposed to conjure is of a million little entrepreneurs scraping out some extra money on the side here and there.  But if the data we have available now is even remotely reliable, something very different is going on. Airbnb is not a tool of wealth creation. It is a means to further concentrate it.

Here's a quick and dirty analysis of the US housing market from Zero Hedge. They're looking at new home sales here. What they find is a kind of "recovery" for the investor class amid continuing disaster and displacement for "the rest of us."
Because while the US housing market suffered a depression-level collapse after the housing bubble burst in 2006, median new home prices had a modest dip and proceeded to levitate to new record highs without interruption until the last few months of 2014, when they hit an all time high of just over $300,000. Since then they have fallen to $282,800 but clearly they have a long way to go to match the implied supply/demand dynamics seen the last time housing sales were at this level. In fact, one can say that new home prices are about 3 times higher than where they should be to promote a housing recovery for "the rest of us" and not just Chinese "investors" and foreign oligarchs (who are buying existing homes anyway instead of new homes).

This also means that despite the "best efforts" of the Fed and the government to blow yet another housing bubble, this has proven far more difficult than reflating the stock bubble. And as a result of the failure of fiscal and monetary policy to trickle down to the common man, there is far less demand for new housing at these prices and hence, far less supply.

Until and unless prices tumble far more to where new homes are affordable for most, the unprecedented failure of new home sales to pick up in line with the general "recovery" will continue. It will also mean that most Americans will be destined for a life of renting instead of owning, something we already know courtesy of the latest homeownership rate plunging to multi-decade lows which means that rental prices across the US will continue rising to new record highs with every passing quarter.

That's a general look at what's happening across many different local markets. But the phenomenon of multiple properties being swept up by investors and converted to use as Airbnbs or vacation pieds a terre in New Orleans falls right in line with the pattern.   And that means, for most people, the rent is going to be too damn high for the forseeable future.
One in five renter households making $45,000-$75,000 a year are considered "cost-burdened," meaning they spend more than 30 percent of their income on rent, according to Harvard's State of the Nation's Housing 2015 report.

In the country's most expensive cities -- like San Francisco, New York and Boston -- almost half of renters making $45,000-$75,000 annually face "disproportionately" high payments.

Rent prices have been rising faster than paychecks -- especially among the middle class. "Income growth for those folks has been especially weak," said Keith Gumbinger, vice president of HSH.com.

As an increasing number of people are renting, vacancy rates have plummeted and rents are rising at twice as fast as overall inflation, according to the report.

According to the Data Center, 37% of Orleans Parish households were considered "severely cost burdened" in 2013. That's up from 24% in 2004.  The proliferation of short term rentals is in no way the sole cause of the problem. But it's clearly not helping.

It's important to remember, also, that the Airbnb data is not the entire picture. There are other players on the short-term rental market. Homeaway lists 917 available units in New Orleans. Here are 919 on VRBO. There are other sites. It's likely there are duplicate listings of properties across all of them. But it's good to note that as many short term rentals as there are listed on Airbnb, there are probably a significantly larger number of them operating.

If you're interested in confronting the housing crisis through local politics, the Airbnb problem seems like a good start. The first step would be getting elected people to take it seriously. Kalen Wright has been pursuing it for a few years now. The results have been slow.  She recounts some of this experience in a Humid City post this week.
I began asking Mayor Landrieu the following question at the District C Community Meeting in September of 2011:
In the French Quarter, one of the biggest threats to the residential base is the proliferation of illegal short-term rentals. What action will the city’s Administration take to stem this tide and enforce the laws on the books? This is a potential revenue stream for our cash-strapped city. These operations don’t pay the hotel/motel taxes and they undercut legitimate hotels and bed & breakfasts. They reduce the availability of rental units for people who wish to reside in this neighborhood.
At the District C Community Meeting in 2012, I repeated that question — word for word — and received an equally lackluster response.

In 2013, I briefly referenced the subject again, but instead of repeating the question noted, I chose to use that opportunity to address the mayor by advocating on behalf for the New Orleans Police Department’s budget, as it had become obvious by that time that addressing the issue of illegal short-term rentals was not a priority for our city’s administration.

Last week the city aborted an attempt at enforcing its prohibition against short term rentals under the vaguely implied threat of a lawsuit. Stacy Head is leading an effort to legalize the practice. An advocacy group of landlords led by former City Attorney Bob Ellis is pushing for legalization also.

It should be noted also that three council members own rental property themselves. Stacy Head owns at least six.
When asked by NOLA.com | The Times-Picayune to disclose any financial interests in such properties, Councilwoman Nadine Ramsey said she owned three rentals.

Council President Stacy Head did not respond to the question, but records show that there are at least six residential properties in the city that are owned by limited-liability companies associated with her or her husband, Jeremy Head.

Councilwoman Susan Guidry said she owns a single rental unit, which is on the property of her personal residence and would therefore be exempt from the requirements, according to a recent draft of the ordinance.
LaToya Cantrell is not a landlord and has been publicly vocal about gentrification concerns lately. At a recent public forum hosted by Tulane Hillel, Cantrell was asked about the Airbnb problem.  Unfortunately, her response, toward the end of the video here, was not encouraging. Cantrell more or less conceded the point that short term rentals are driving up rents.  But when it came to the possible policy response, she stressed the need for "balance" and reminded us that "we are a destination city."

We're still months away from seeing what a city ordinance on Airbnb might look like. But LaToya's comments strongly imply that so long as the tax revenue looks good, councilmembers don't care so much whether anybody actually lives here.

Update:  Stacy Head says she is close to introducing a new ordinance.  One thing she wants to do is use Airbnb permitting as an incentive to encourage rehabilitation of "blighted" property.  Funny how she imagines this working, though. 
One solution to the 10,000 blighted properties in the city could involve allowing people who purchase them and fix them up to fully rent them out to short-term tenants for several years, giving the neighborhoods they are in a chance to stabilize to the point where longer-term rentals are possible, Head said.
Brilliant. Head's idea is, let's put blighted property to work for Airbnb first and then maybe there is a "chance to stabilize to the point where longer-term rentals are possible."   No guarantee, of course. Meanwhile she sounds a lot more optimistic about the plan eventually leading to... more full time Airbnbs.
And that, in turn, could lead to a situation where it might be less of an issue to ease the restrictions on short-term rentals elsewhere in the city.

“There are so many blighted properties that if all of our efforts to get them into commerce were successful, it’s possible there would be a place for non-owner-occupied short-term rentals,” she said.
I still don't see anything  that directly deals with the problam of  the rent being too damn high to the point that nobody actually lives here.  But that's probably not the point of any of this.

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