Airbnb has undoubtedly disrupted the hospitality industry, inspiring an ecosystem of sharing economy companies such as co-living startups. Although these companies have achieved impressive financial success, they are believed to create problematic city-wide effects. In particular, Airbnb is said to have driven up rental prices in cities already struggling with housing affordability challenges. Similar to the case of Uber’s impact on urban mobility, Airbnb’s rapid growth has created significant challenges for local governments, requiring comprehensive regulation and re-evaluation of its operation on a city scale.
In 2008, Airbnb was created to revolutionize the hospitality industry. Founded in San Francisco, the startup quickly became a global company, contributing significantly to the growth of the sharing economy. Today, more than 500,000 properties are listed on Airbnb in the United States alone, creating new possibilities for how spaces are rented and rented. Airbnb has enabled people to monetize their unused living spaces while providing travelers with an authentic alternative to traditional hotels. The company’s disruptive business model has also had a profound impact on ideas surrounding the use of real estate assets in the modern era.
Despite its massive success, the implications of Airbnb’s model are beginning to peek through. Some New York landlords are prolific and have hundreds of listings on Airbnb. But other New Yorkers who have Airbnb listings are trying to make ends meet, either renting out their place while they’re out of town or renting out half of a duplex to cover their mortgage costs. In September 2022, New York enacted a ban on short-term rentals that are not registered with the city. The city recognizes that short-term rentals can bring noise, trash and danger and can drive residents out of their own neighborhoods.
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Supporters of the rule argued it would free up apartments for New Yorkers paying high rents and facing a housing shortage and insecurity. Six months after New York’s ban, the number of short-term listings on Airbnb has dropped by more than 80 percent. This highlights the contentious relationship between the short-term rental industry and the communities in which it operates. While Airbnb has revolutionized travel, its impact on local housing markets has prompted cities to take legislative action to mitigate the potential flaws of its model.
The growing number of short-term rentals in urban neighborhoods, in addition to being one of the driving forces of tourism gentrification, also relates to housing affordability. These issues show how the growth of the short-term rental market has complex social and economic implications for local communities. While providing new income opportunities for some, the decline in long-term housing stock and the influx of transient visitors can disrupt the fabric of established neighborhoods. As cities continue to grapple with these trade-offs, the long-term sustainability of platforms like Airbnb remains an open question.
When homeowners convert their properties to Airbnb rentals, it can reduce the supply of long-term rentals in their neighborhoods. This can drive up rental prices, stretching the budgets of lower-income families. In addition, the supply of long-term rentals is reduced, which encourages the relocation of residents to another neighborhood and thus promotes the processes of gentrification and segregation. Residents are struggling to find long-term rentals or affordable housing solutions and are also facing a significant increase in the cost of services due to the growing presence of tourists, which is pushing business owners to raise prices.
Beyond these effects of gentrification, Monica Bernardi observes a “Disneyification effect” in the short-term rental market. Mass tourist flows, nowadays favored by short-term rentals, risk turning historic centers from key places of local cultural and political life into real citadels of consumption. In addition, the uncontrolled flow of tourists can affect the city’s identity, increasing the risk of social desertification of the historic centers. The influx of temporary visitors and the commercialization of local culture can undermine the authentic character of historic city centers, contributing to the homogenization of experiences that undermines the very essence of what makes these places unique. In this process, local life is advertised and sold as an added value to the accommodation rental.
Without a doubt, Airbnb has helped countless places become more accessible to tourists, contributing to the growth of tourism and income for those places. Considering the issue of urban enrichment expressed by Airbnb, many scholars confirm that the arrival of more tourists due to the lower cost of Airbnb accommodation generates more jobs in the tourism industry. However, due to the large flow of tourists in cities that are not prepared to receive a large amount of them, the impact on local communities can create imbalances. To track the economic impact of short-term rentals on cities, Airbnb can generate a concentration of external factors that can cause property values to fluctuate. This can be seen as a suitable indicator of the gentrification processes that may affect certain areas of the city.
Several other cities around the world, such as Barcelona and Paris, have also called for regulations on short-term rentals, affecting Airbnb’s future as a business. While the bans are effective for the moment, their long-term success remains to be seen. The primary objective of local governments should be to prioritize the public interest, not the capitalist entities that seek to benefit. Policymakers must strike a careful balance – harnessing the economic opportunities of tourism while mitigating its negative effects on housing affordability and neighborhood character.
Innovations in real estate business models, however, must continue to advance, taking into account their systemic influences. Startups like Uber and Airbnb have changed the way people access transportation and accommodation. Where these companies fall short is a lack of holistic understanding of their propositions and their wider implications for urban communities. While these platforms work extremely well at the individual user level, they have failed to adequately address the complexity they introduce at the urban scale.
This challenge requires a concerted effort not only from government regulators, but also from the companies themselves. By adopting a systems thinking approach that considers the full range of stakeholders affected by their innovations, collective benefit can be realized. Instead of focusing solely on optimizing the individual experience, these startups should be responsible for mitigating the system-wide problems their business models can create. This can ensure that their offerings truly benefit the communities in which they operate, rather than prioritizing private profit over the public good.
