Everything Isn't an "Investment"

We’ve been living in a “short term rental” for the past 5 months, just as we did last winter. We’re not leasing it via Airbnb, but rather directly from the owner. Long story, but this owner never intended to have a short-term rental but life circumstances dictated it.

That’s, unfortunately, not the case with most of the other units in this 80 or so unit condo building in a relatively desirable location in the Denver area. The front porch and many other areas of the building have these hanging around:

They’re on the entry way fence, in the stairwells and on doors. I would guess that roughly half the units here are Airbnbs. I would guess at least half of the AirBnB units here are empty most of the time. This was also the case in the residential neighborhood where we rented last year. If you look on Airbnb, there are many vacancies in this area except during the peak summer months.

We’ve met a few of the neighbors here, but I see strange faces all the time. A lot of the residents here are older, and I can’t imagine that they thought they were buying an apartment in an ad-hoc hotel when they purchased their unit.

In addition to the alienation and safety issues, I think the impact of Airbnb on the housing shortage and the expensive housing in Denver hasn’t been fully appreciated. Obviously, my observation is anecdotal, but given what you can find on Airbnb, VRBO and other short-term sites, a significant percentage of housing in desirable areas has been purchased as an investment rather than a place for the owner to live.

Denver isn’t the only place where Airbnb has made an impact. In the wake of the Lahaina fire, Maui is considering a ban on Airbnbs. On an island with a population of a little over 150,000, there are 14,000 short-term rental units. The current proposal would ban 7,000 of those units in order to provide more housing for locals, but it’s stalled for various reasons. There’s been big pushback from the tourism industry — a previous study claimed that the eliminating 7,000 rentals would cause the loss of 14,000 jobs and $137 million in tax revenue.

Much of the fight against short-term rental bans is led by Airbnb itself. Here’s a page detailing their “grassroots” efforts, where they help short-term rental owners band together to fight regulations.

One thing that Airbnb can’t astroturf is their value proposition. For short stays, the Airbnb fees make staying in an Airbnb more expensive than the average comparable hotel room, at least in my experience. Still, Airbnb has sold “hosts” on the notion that they’ll make more money using their service than simply renting their place. But those numbers only work if the host can rent their place consistently, and that’s not the case in the neighborhood where we stay. For example, for the place we rented last year, we paid roughly 1/3 of the rate advertised on Airbnb. The owner chose to rent to us for an amount that was a couple hundred bucks a month more than her mortgage payment because she knew that there’s very little interest in her place in the off-season. She and all the other hosts on the block bought their houses as investment properties that stay empty most of the year.

The fairly simple solution to this issue is to ban rentals of less than a month. But, once Airbnb is established in an area, the hosts are going to fight restrictions tooth and nail. They believe the promise of making 2, 3 or 4 times a reasonable monthly rental by doing multi-day or week or two rentals via Airbnb.

So here we are: a startup “disrupted” the hotel business, which has basically recovered due to a combination of Airbnb’s greed (fees) and better rates. The rest of us are left with empty houses dotting neighborhoods.

(The subtitle is a reference to waking up this morning, hearing a fire alarm, and investigating. I was expecting that the alarm was in an empty unit, but luckily it was the unit of one of the permanent residents we know here, and he had already called maintenance because it was a false alarm.)