Airbnb makes houses more expensive because it makes them better

· October 23, 2017  
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The Wall St. Journal has conducted an analysis concluding that Airbnb, the service that lets tenants rent out their apartments to short-term tourists, is making housing more expensive, implying that this is a cause for concern.

The worry is that housing is already unaffordable, and that therefore anything that makes it more expensive is bad.

The most surprising thing about this story is that anyone should be surprised. It’s obvious that the use of Airbnb would increase rents, for the simple reason that it increases the options of what you can do with your property. Airbnb transforms a house from a simple residence into a potential source of income, and allows tenants to to turn a profit on weeks when they may be out of town — time that would otherwise go to waste.

The fact that owners and renters have more flexibility with regard to their space makes that space more valuable, and therefore causes the price to rise. This is no different from any other perk that increases property values. Modern appliances, a swimming pool, a nice view, access to public transportation, parking, and a lack of crime will all make housing more expensive. So why don’t you see smartypants economists writing articles about how these things are ruining the housing market for the poor?

The answer is probably that Airbnb is at the center of a much larger controversy over the viability of the sharing economy. Anything that removes middlemen and allows customers more direct access to services is going to raise the hackles of established industries, and Airbnb is no exception.

The hotel industry has been flexing its muscles to try to shut down the service, because it allows a way for ordinary people to compete in the tourist housing market, with none of the overhead and regulatory requirement. Landlords and labor unions have comparable reasons to complain, as Airbnb enables low-cost competitors to succeed.

This is why you see so many articles bemoaning the existence of new technologies. Rather than celebrating the improvements that come from disintermediation, incumbents resent the disruption of their business model and try to stop it. The insinuation that Airbnb is bad because it increased housing costs is just another angle from which to go after the competition.

Of course, the idea that anything that increases the price of rent must necessarily be damaging is nonsense. Rents are lowest in the places people least want to live, but no sane or honest economist would argue for making neighborhoods worse in order to bring down housing costs.

Another reason why Airbnb might be causing rents to rise, apart from the benefits to the tenants themselves, is the effect on tourism. Hotel costs and availability are a significant factor in the decision to travel. Anything that reduces those costs and makes finding a place to stay easier will encourage more people to visit (relative to staying home or traveling to other locations). An increase in tourism brings more dollars into the area, thereby increasing prices, including the price of housing.

Space is at a premium in tourist destinations, so it will always be more expensive to live in one than in a town no one wants to visit. Again, these prices simply reflect people’s individual preferences, and are not the symptom of a housing crisis designed to keep poor people off the streets.

Yes, affordable housing is important, but the problem of high prices is a function of government regulations, zoning, building height restrictions, construction codes, OSHA, and anything else that raises the cost of building a house. High prices caused by the quality of residences is certainly not something we should be worried about, and to blame Airbnb is a disingenuous ploy to prop up existing lobbies.


 

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Author: Logan Albright

Logan Albright is a researcher for Conservative Review and director of research for Free the People. You can follow him on Twitter @loganalbright73.