Airbnb has undoubtedly disrupted the hospitality industry, inspiring an ecosystem of companies leveraging the sharing economy such as co-living startups. While these companies have achieved impressive financial success, they have been purported to produce problematic effects at the scale of the city. Airbnb, in particular, is alleged to have driven an increase in rental prices in cities already grappling with housing affordability challenges. Much like the case of Uber's impact on urban mobility, Airbnb's rapid growth has caused significant challenges for local governments, demanding comprehensive regulation and a re-evaluation of its functioning at the city scale.
In 2008, Airbnb was established to revolutionize the hospitality industry. Founded in San Francisco, the startup quickly became a global company, greatly contributing to the growth of the sharing economy. Today, over 500,000 properties are listed on Airbnb in the United States alone, creating new opportunities for the way spaces are rented out and leased. Airbnb has empowered individuals 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 deep impact on ideas around the utilization of real estate assets in the modern era.
Despite its massive success, the repercussions of Airbnb's model are starting to peek through. Some landlords in New York City are prolific and have hundreds of Airbnb listings. But other New Yorkers who have listings on Airbnb are trying to make ends meet, either leasing their place while they're out of town or renting half of a duplex to help cover their mortgage costs. In September 2022, New York City set in place a ban on short-term rentals not registered with the city. The city acknowledges that short-term rentals can bring noise, trash, and danger, and can price residents out of their own neighborhoods.
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Urban Mobility in the United States: How Ridesharing Services Impact American CitiesSupporters of the rule argued it would free up apartments for New Yorkers, who pay high rent prices and face housing shortages and insecurity. Six months after New York City's ban, the number of short-term listings on Airbnb has fallen 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 impacts on local housing markets have prompted cities to take legislative action to mitigate the potential downsides of its model.
The rising number of short-term rentals in inner-city neighborhoods, in addition to being one of the driving forces of tourism gentrification, also concerns housing affordability. These troubles depict 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 reduction 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 into Airbnb rentals, it may reduce the long-term rental supply in their neighborhoods. This could increase rental prices, stretching the budget of lower-income families. Additionally, the offer of long-term rentals is reduced, encouraging the relocation of residents to another district and thus encouraging gentrification and segregation processes. Residents struggle to find long-term rentals or affordable housing solutions, and in addition, they clash with a significant increase in the cost of services, due to the growing presence of tourists that push business owners to raise prices.
Besides these effects of gentrification, Monica Bernardi observes the "Disneyfication effect" of the short-term rental market. Massive tourist flows, nowadays favored by short-term rentals, risk transforming the historical centers from key places of local cultural and political life, into real consumption citadels. Furthermore, the uncontrolled flow of tourists can affect the identity of the city, reinforcing the risk of social desertification of historic centers. The influx of transient visitors and the commercialization of local culture can undermine the authentic character of historic urban centers, contributing to a homogenization of experience that erodes the very essence of what makes these places unique. In this process, the local life is marketed and sold as an added value to the rental of the accommodation.
Airbnb has, without a doubt, helped countless locations become more accessible to tourists, contributing to the locations' growth of tourism and income. Taking into account the issue of making cities richer, expressed by Airbnb, many scholars affirm that the arrival of more tourists due to Airbnb's lower accommodation cost is generating 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 follow the economic impact of short-term rentals on cities, Airbnb can generate a concentration of externalities that can cause fluctuations in property value. This can be seen as a relevant indicator of processes of gentrification that can affect specific areas of the city.
Several other cities across the world such as Barcelona and Paris have also called for regulations on short-term rentals, affecting the future of Airbnb as a business. While bans have been momentarily effective, their long-term success is yet to be seen. The main goal of local governments must be to prioritize public interest rather than capitalist entities that seek to benefit. Policymakers must strike a careful balance - leveraging tourism's economic opportunities while mitigating its negative effects on housing affordability and neighborhood character.
Innovation in real estate business models must continue to advance, however, with consideration of its systemic influences. Start-ups like Uber and Airbnb have transformed the way people access transportation and accommodations. Where these companies fall short is in their lack of a holistic understanding of their offerings and their broader implications for urban communities. While these platforms work exceptionally well at the individual user level, they have failed to adequately address the complexity they introduce at the city scale.
This challenge demands a concerted effort not just from government regulators, but from the companies themselves. By adopting a systems-thinking approach that considers the full scope of stakeholders affected by their innovations, collective benefit can be accounted for. Rather than focusing solely on optimizing the individual experience, these start-ups need to be liable for mitigating the systems-wide issues their business models can create. This can ensure their offerings truly benefit the communities in which they operate, rather than prioritizing private gain over public good.
