Does Airbnb Have an Effect on the Real Estate Market? - Topouzis & Associates Does Airbnb Have an Effect on the Real Estate Market? - Topouzis & Associates

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April 25, 2019

Does Airbnb Have an Effect on the Real Estate Market?

Does Airbnb Have an Effect on the Real Estate Market?

When the peer-to-peer living-space rental service Airbnb came on the scene, some were prescient enough to recognize what a potentially lucrative avenue it might represent within the real estate investment market. Meanwhile, policymakers and homeowners have been wrestling with what effects the service may have on local real estate landscapes—particularly in places where tourism is significant.

The question falls into the concept of “externalities”—the effects generated by a phenomenon which reverberate outward from the phenomenon itself into the surrounding context. Here, the question has mainly been: will the presence of a significant number of Airbnb units have the effect of depressing neighborhood values because of an increase in turnover of people exhibiting poor behavior who do not value formerly quiet neighborhoods, also increasing traffic—as though the units are basically unsafe hotels? Or will these externalities instead prove relatively benign, resulting in transforming the available housing stock in an area from what might have been more permanent residences into short-term-rentals—creating scarcity and driving prices up overall?

A paper by Stephen Sheppard of the Williams College Department of Economics and Andrew Udell of Dropbox, Inc. was among the first attempts to wrangle with these questions utilizing the (admittedly scant and early) data available. They focused on New York City, because of its significant number of Airbnb units—in excess of 35,000 active listings, which is remarkable when compared to a total number of hotel rooms in the area of around 102,000.

Their findings seem to support, for now, the argument that the presence of Airbnb properties increases the prices on the housing market at an average rate of around 17 percent. The rise is particularly strong where the units are found closer to tourist draws. In the case of NYC, inside the city—where the concentration of Airbnb properties was high—prices increased as much as 65 percent, while on the periphery of the city, where the concentration of units was lower, prices increased only about 3.5 percent.

The wise real estate investor, besides avoiding running afoul of local laws and regulations regarding temporary shelter and multiple domiciles, does what they can to ensure that their title to a rental property is clear of defects. At Topouzis & Associates, P.C., we are experts at ferreting out and disposing with problems that may occur with property title in advance of closing. We take pride in the great amount and quality of experience we bring to the closing table in Rhode Island, Massachusetts, and Florida. Contact us if you want a partner in your property closing—one who makes everyone involved feel like family.