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The Chartered Institute of Housing is the independent voice for housing and the home of professional standards

Could Airbnb devastate the housing markets in key cities?

01/07/2019


CIH senior policy adviser John Perry considers the latest reaction from major European cities to the rising impact of short-term lets on their housing markets.

Ten European cities are demanding action from the European Union to help them control the growth of short-term lets in their local housing markets. The fear is that providers like Airbnb could become exempt from local regulations that enable authorities to control lettings in the private rental sector, because they will be under no legal obligation to declare the existence of lettings or how much rent is being charged, even though they have this information.

The latest UK Housing Review points out that one of the cities signing the letter, Paris, has over six million overnight stays in short-term lettings annually and two more, Berlin and Amsterdam, exceed two million each.

Airbnb is the biggest of the providers with over six million listings in 190 countries. London has the biggest short-term lettings market in Europe, with more than 75,000 Airbnb listings of which over half are entire homes. But these listings are highly concentrated, with five boroughs exceeding 5,000 each while many have around 1,000 or fewer. By far the highest concentrations are in Westminster (8,328) and Tower Hamlets (7,513). In the Review, Alasdair Rae of the University of Sheffield looks in detail at how Airbnb potentially affects housing markets in some parts of the UK. A particular worry is that the properties listed might leave the ‘conventional’ private rented sector to enter the short-term market: if such moves become permanent they could have a huge impact on the local supply of relatively secure, long-term accommodation.

Rae’s investigation isn’t focussed solely on London, with its massive numbers, but also looks at the impact on two local markets in Scotland. Edinburgh is (not surprisingly) the top location for short-term listings with 10,500 in June last year, now up to almost 12,000. These are highly concentrated, with 13,000 dwellings in the City Centre ward, for example, having 2,610 Airbnb listings of which 2,042 are entire homes. It is not surprising that the issue has been debated in the Scottish Parliament, with calls for regulation similar to those now being made across Europe.

Rae also shows that a similar impact can occur in a much smaller market. He looked at the Isle of Skye, whose 550 Airbnb lettings account for one in ten of the island’s dwellings. While the economic advantages of the associated tourism are obvious, he points to local concerns that a ‘tipping point’ has been reached where the costs exceed the benefits, leading for example to a shortage of homes for modestly paid NHS staff and teachers.

The UK Housing Review anticipates the case being made by the ten European cities, in arguing that, first, local authorities must have access to better data to be able to see how fast the sector is growing and where the growth is taking place. Such a scheme exists on a voluntary basis in Barcelona (not one of the ten signatory cities), and appears to be a positive first step.

Second, to monitor and possibly regulate a rapidly expanding market will require resources. The Review suggests a tourist tax could do this, of the kind already working in Amsterdam. Airbnb actually collects tourist tax in some cities where it operates, and presumably could be obliged to do so more widely.

Third, and most controversially, local authorities should have powers to cap the numbers of short-term lettings in high-pressure areas, such as those provided for in the Scottish Parliament’s current planning bill. As well as needing legislation, there are obvious practical difficulties which suggest that trial schemes are required to test ways of setting and enforcing any caps.

One thing is obvious: the dangers of the geographical concentration of short-term lettings, highlighted in the UK Housing Review, are finding an echo in many of the places which enjoy the business generated by lettings services like Airbnb, TripAdvisor and Booking.com. But as with other web-based providers such as Uber and Amazon, their services bring costs as well as benefits.

This is especially true where they affect housing markets that are already severely stretched. Without a regulatory framework being set at national or preferably international level, local authorities that are struggling to keep up might find they’re faced with a double problem. Not only will they be unable to control short-term lettings, but abuses and slipping standards could have a knock-on effect on their ability to regulate conventional private lettings too.


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