The Rise of the Professional Airbnb Investor
priceonomics.com
priceonomics.com
This does not have to happen, but it does rely on relative draw of the area and therefore its relative "dullness" to visitors. In effect they can't be too externally interesting to survive.
Are you postulating that there is an infinite demand for interesting areas to visit, and an infinite supply of tourists who will completely displace locals everywhere?
However I do not think this process necessarily leads to the creation of an awesome area. Just one catered to particular type(s) of people which may or may not include people previously living there. "Awesomeness" depends on a personal point of view. I think most of us can think of an otherwise popular spot that we personally find repelling.
I also doubt it leads to increased supply of housing useful to locals in the same way as building hotels generally doesn't. It may increase capacity of a city to hold more people at any time, but without some redistribution (e.g. from taxes of such properties) may not have any (positive) effect on availability of long-term housing apart from moving some of it elsewhere.
I don't think there is infinite demand of areas or supply of tourists and certainly don't think locals will be displaced from everywhere. Their quality of life however may be reduced and it should be no surprise that they are not fond of this. If my daily commute becomes 15 minutes longer in each direction, than there are 2.5 hours fewer weekly or almost a week yearly over which I lost agency.
And I am only scratching the surface here of the problem(s) or my position which is unhelpfully that it depends. Sometimes such developments are positive, but not always or not forever. It may be a balancing act and what I am certain of is that there is no answer that would always be correct.
If that's the case, then building nice residential areas outside the touristic core which are useful to locals will not result in a horde of tourists AirBnBing those areas.
I think at this point it's important to note that the core issue here is that in most areas locals pass dumb protectionist laws against new construction, making it impossible for supply to increase.
I agree with you that when demand for a good increases the price of that good, the people who were previously enjoying lower prices might be unhappy. That doesn't mean the original purchasers of that good have some right to prevent new people from purchasing it.
Or, to put in other terms: your historic city centre is a gem, a rarity and such things are understandingly more valuable (in monetary terms) than ordinary locations. Want to live there? Make enough money to afford it.
Because investors' profits don't come from nowhere. You're prioritising the residents' wishes over the tourists' wishes, despite the fact that the tourists are willing to pay more to use the property. That's not fair.
Fair enough but are you willing to compensate the investors/landlords for the lost income from foregoing these opportunities or asking the govt to have the tax payers foot the bill to help tenants stay in their properties at artificially lower than market rates?
I say let supply and demand sort this out and just focus our efforts on exposing anti-competitive violations like price collusion among landlords etc etc.
Usually landlords/investors who are attracted to this "trade" are lured by the prospects of short-term profits and if that doesn't materialize for any reason, they'd seek more stable income by entering into long-term arrangements at more economic rates with permanent tenants.
Au contraire, Airbnb is primarily used by the young and (comparatively poor), students and young adults. The kind of person who comes to Berlin, Praha and Barcelona by Ryanair and Easyjet.
It is precisely the low-cost nature of Airbnb that has made it so popular: in order to save money you can fit multiple people into a small Airbnb if you really want, you cannot easily do that with a hotel. The wealthy (usually older) stay in posh hotels.
Airbnb, like low-cost airlines, has made travelling to major cities more affordable to the masses.
* * *
As for who is rich. Young, healthy, students who can afford to take time off and travel ARE RICH! You can say what you want about Ryan air being cheep and only €50 a flight. But the minimum wage in the Czech Republic is 11 000CZK or just €400 a month! Poor people have trouble paying for rent, and there is no chance they will be taking time off to take that ryan air flight to Brussels to spend the weekend in an AirBNB.
And those people don't benefit from AirBNB at all, given that they have no assets to invest in real estate.
this part of the city is going
to be too expensive for normal
people to live there, is nothing
short of theft.
Anyway, let me remind you that I don't believe your claim that Airbnb has a substantial influence on property prices. As far as I can see, the dominant factor in property prices is distance from center, and proximity to amenities, in particular public transport -- all that regardless of Airbnb.
because they live on the outskirts
students who can afford to take
time off and travel ARE RICH!
Of course you can compare the average student in Denmark with the average worker in Malawi, and find that the former is wealthy vis-a-vis the latter, but this is not an interesting comparison.
Czech Republic is 11 000CZK
Poor people have trouble paying for rent
And those people don't benefit
from AirBNB
>Every proprietor, therefore, of cultivated lands, owes to the community ground-rent (for I know of no better term to express the idea) for the land which he holds; and it is from this ground-rent that the fund prod in this plan is to issue.
http://rationalrevolution0.tripod.com/articles/capital_distr...
Though I agree with both authors in general, my claim of theft was not the same as theirs at all.
> The main purpose of public transport is to enable those living in the outskirts to get to the center in the morning, and go back in the evening. The drive to separate out work from living quarters goes back to the industrial revolution when work suddenly became noisy, dangerous and polluting, so the old model (working and living in the same place) had to go. This required mass transport, be it cars or public transport Anyway, there is nothing wrong with living in the outskirts. Many prefer it, especially those with children.
In Prague, most people don't work in the center, so the commuting to the center argument is a mute point. The center is literally only for tourists.
> Yes, and why is this interesting? The minimum wage in Malawi is ... what $1 per year? The cost of accomodation always correlates strongly with the average income
The reason why it is interesting, is that a €50 flight to Brussels, and a €8O AirBnB stay for two nights, would be a third of a months salary at Czech minimum wage. So it is totally unrealistic for people on the east who make that kind of money to travel west. However, westerners have no trouble traveling east. (Some eastern students are able to travel west, but they are among the wealthy).
> economies of scale
Economies of scale do not exist in the urban housing market, because supply is pretty much fixed. The more demand, the higher the price.
I'm not %100 against AirBnB. But I feel that the use of AirBnB to rent out whole apartments is unfair in cities where taxpayers heavily subsidize infrastructure and common spaces. Especially when the investor is a foreign one. Then the money from the west flows east and then flows right back out again.
Economies of scale do not exist in
the urban housing market, because
supply is pretty much fixed. The
more demand, the higher the price.
There is no technical reason that prevent increase of supply. You could flatten the old town and build Dubai-style 100 floor skyscrapers, creating >20k new flats. The only reason why this doesn't happen is legislation, zoning laws, building codes etc, which in turn reflect the will of the majority of the population who don't want radical change of cities.
Edit: My point being, that buldozing the center and building high rises would solve the problem, not due to incresed supply, but due to decreased demand. There's a reason why Frankfurt and London are the only cities in Europe with high rise centers and its not the price of steel. There are pleanty of sky scrapers in Europe, but they always end up being some dead part of town that nobody visits for any reason other than work or sleep. I guess that just returns to my point about "real infrustructure". I think that in the US, you can't even really talk about the "center of the city" because people don't "go to the center" as a thing to do. People stay at home, or drive to the gym, or go to the movies. They don't "go to the center, stop to watch a movie, get out, walk around a bit, have dinner in the center." While all the time thinking of their activity as "spending time in the center" rather than "going somewhere".
http://www.independent.co.uk/news/world/europe/airbnb-rental...
Of course, it's a pretty controversial and complex topic, but I feel like the ban was a step in the right direction. I use Airbnb myself as a guest in other cities and I like that it exists, but I also don't believe that historical city centers should simply be sold to the highest bidder.
...though it's also entirely possible I'm just a hypocrite.
What ? You would have said Paris I would totally agree but Berlin, really ? It's definetly not expensive to live here compared to other european capitals (buying a flat costs 3,036€[1] per square metter, compared to the 8000 you need in Paris) and even compared to other german big cities (München, Hamburg).
[1] http://www.globalpropertyguide.com/Europe/Germany/Price-Hist...
Maybe in an old not renovated building, or concrete communist blocks. Anything refurbished or newly constructed starts at 4-5k euro/m^2.
i.e., an apartment which costs $1000 a month, could be rented out for about $100 a day, or $3000 a month.
That does mean you need to be there managing the thing, handling listing and bookings, doing a hand-over of the keys and a brief tour, and cleaning up after. I know a friend of a friend of a friend has been providing a service for 2 years now where he does all that for 20% of the profit on other people's properties.
Amsterdam has set up rules that limit Airbnb to 60 days a year. I think that's sensible. It allows people to make some money while traveling two months of the year, lowers costs of housing because in the up to 60 days the home owner is gone, the space is not wasted but instead utilised. But it prevents investors from arbitraging the 3:1 ratio between short-term subletting income vs costs of holding the property long-term, which turns your city into a tourist paradise at the expense of raises prices for actual citizens too much (because all the investors push up prices) for my taste. This 60d rule is a good balance. (it's just yet to be enforced)
Not trivial at all. Without even pausing to think, I could offhand list at least four different ways of writing my home address that would be impossible for AirBNB to automatically disambiguate from other (potentially) different residences, without actually visiting the building... but which would be perfectly unambiguous for a guest who actually visits.
Address verification is hard. Not impossible, but when you're operating in many cities and countries that have wildly different ways of organizing their addresses, it's not trivial at all.
AirBNB doesn't offer insurance - it offers a "guarantee", which is legally different in an important sense.
In any case, if you're looking to rent out your place full-time, you probably don't really care about AirBNB's guarantee anyway.
Though I'm honestly not sure those are as comprehensive as certain other countries, as you mentioned. Germany has the Meldepflicht[2] for instance, which requires all residents to register their address with an Einwohnermeldeamt, and I'm pretty sure that's validated against a nationwide database. Granted, it's not granular enough pinpoint exact apartments (since apartments aren't generally numbered here), but still, I imagine that kind of thing would make it pretty difficult to bypass a law like Amsterdam's 60 day rule.
[1] https://www.usps.com/nationalpremieraccounts/manageprocessan...
Therefore, Airbnb doesn't really verify addresses at all, and lets people bypass any system that relies on this. This happens in major markets where Airbnb has people on site too: A good chunk of listings in San Francisco's SoMa are doing this.
Thus, I have little faith that any system to prevent breaking local laws based on addresses will go anywhere unless Airbnb does a lot more work to verify the accuracy of listings.
I love how you make sound like it's no big deal to have six people split on an expensive capital asset like real estate, all to get around an AirBnB law.
1. 6% house sales tax.
2. BAG registry contains all address registrations in incredible details. Public data. More available for a price.
I don't see why it being public would matter: the whole point is that this should be legal since the owner is only airbnbing it for 60 days.
The citizens, who live and work in attractive city, pay hefty taxes to make the whole thing possible - running the public transport, collecting the garbage, keeping the running water and sewage operating.
Obviously taxation policies and city budgets vary a lot from place to place, but it's very common for these things to be funded by income taxes on the citizens salaries - which is fine with the citizens, but then why should to tourists get to come in and freeload off all the nice things paid for by those taxes?
In a parallel universe where all these services were paid for by taxes on property values or rents, I would agree with you - whoever wants to pay the most per night can have it, but in the real world the market is already skewed to start with.
For the same reason retirees should not be permitted to move into a city funded by income taxes.
In the US, far more cities are funded by property taxes than income taxes. NYC and Yonkers are the only cities I can think of with an income tax.
If you believe in Laissez Faire, or that the market should be allowed free rein to shape or society, you would perhaps disagree.
While I can agree to some extent to this being the metric optimized, this metric depends on who gets to be a citizen. For example, the situation when the city becomes too expensive for particular class of people and they move out leads to increased in quality of life of remaining citizen, but people (not me) usually express negative views on this.
That's true, but not what I meant: by changing the group you measure the metric over, you change the value of the metric.
I understand why rent seeking locals would favor this. But how is this any different from, e.g., Austin cabbies ripping off the tourists and getting Uber banned?
In the US I'm sure you can find people who _HATE_ when their neighbors enjoy the company of guests that they found on Grindr.
Does that mean we should shut down Grindr (or prevent Grindr from giving 1 person more than 1 match/month) or pass laws against these activities?
You can pay for services by charging property taxes. since the value of land will go up (thanks to it being used for it's most productive use) and lower income people getting pushed out (such people are more likely to be a net drain on resources), you'll actually have more money to pay for services.
When did this become a valid reason to regulate an activity? Can I use this as a reason to regulate other private activities as well? If not, why not?
For many living next to a constant stream of strangers is undesirable.
Typically we consider those desires morally invalid and not something to be supported. Why is "short term" a morally valid way to characterize the "wrong type of people"?
Are you unable to see the difference and how that might affect you?
I don't see any difference that matters, nor do I see the underlying moral principle that allows me to distinguish between one and the other. The principle you've stated clearly isn't it, unless you also favor regulating Grindr.
(I'm deliberately choosing Grindr here in order to make my example conflict with left wing mood affiliation.)
Are you willing to admit that this may change the local community dynamics in a negative way for long term residents?
I use Airbnb. I think it's great (from my perspective). However, I understand why some may want to limit it.
I guess I'm just the kind of person who believes that two consenting adults should be allowed to do whatever they like in the privacy of their own bedroom.
When you operate on the assumption that people aren't affected by AirBnB rentals in their buildings this is an easy argument. But sometimes people are affected.
In many US cities renting out a home is a violation of local zoning code. The government places a large number of restrictions on what you can do on 'your land.'
Simplicio (historical): "In the US the answer is clearly 'yes you can regulate his private business'. In many US cities renting out a home to a negro is a violation of the local zoning code."
Do you see the fallacy of this argument? I'm arguing "should", not "is".
All the reasons cited in this thread seem pretty bad. I say they are bad because when you apply the same reasons to regulating anything other than AirBnB, suddenly they don't seem like good reasons at all.
The Supreme Court says otherwise: https://en.wikipedia.org/wiki/Rational_basis_review
In order to justify the New Deal the Court lowered its standard for state infringement of liberty to: "You just need any reason for this law, it doesn't have to be a good one"
I do. If you go read the historical justification for zoning law in the US (by the way zoning and land use laws were originally intended to keep negroes out rich neighborhoods) they rest on the idea that as long as the government can come up with a "rational basis" that the law would "improve the public welfare" than zoning laws are a legitimate exercise in state police power. This was around the 1920's.
Later you have a concern for civil rights but the courts pretty much ignored the issue of how zoning might impact poor minorities.
There's been some lefty rumbling about maybe modifying the zoning code so that poor minorities can still afford to live in rich areas. Of course the remedies proposed are better zoning laws, not no zoning laws.
My concern is that these land use laws take away yield from capital (ie rent from landowners). The US economy has not been growing very fast lately - I don't think the US can any longer afford the costs of an extensive regulatory state. Locking away the returns to land in exchange for centrally planning all the land uses might make things feel "nice" in the short run but in the long run could impoverish the country.
It's also easy to imagine that the land owner's rent gains are higher than the "externalities" endured by the neighbors. I'm skeptical that the government can find a good tradeoff here.
Another is that usually short term rentals are already against rules or regulations so the people who bought assuming they weren't going to live next to a hotel have a reasonable expectation to have a say on if that's going to change.
Another is that usually short term rentals are already against rules or regulations so the people who bought assuming they weren't going to live next to a hotel have a reasonable expectation to have a say on if that's going to change.
At one time people purchased homes assuming they weren't going to live next to negroes. Did they also have a reasonable expectation to have a say on if that's going to change? If not, why not?
I.e., it's a rationalization, not a reason.
Typing these words doesn't remove the differences between the situations. "Desiring to rent out my apt to tourists" is not a protected class.
Kasey_junk - if I understood him correctly - was arguing that the law should not be changed because "the people who bought assuming they weren't going to live next to a hotel have a reasonable expectation to have a say on if that's going to change."
If that argument were valid, then the law about renting to non-whites should not have changed either to create protected classes (which didn't exist at the time the original zoning laws were made).
Edit: I'm less interested in Kasey_junk's argument and moreso in your unwillingness to acknowledge the vast difference between discriminating against protected classes and regulation of commercial activity in private recidences.
I have no strong opinion on the legality of discrimination by race. It offends my moral intuitions, but I cannot construct a solid argument in favor of it that doesn't lead to other crazy conclusions. So I accept my uncertainty here.
Edit: I'm less interested in Kasey_junk's argument and moreso in your unwillingness to acknowledge the vast difference between discriminating against protected classes and regulation of commercial activity in private recidences.
I acknowledge the vast difference in feelings that these situations inspire. But I cannot come up with a good principled argument to justify the existence of protected classes, or to distinguish between these cases in some other way.
I argue that this line of reasoning is invalid - if it were valid, then white homeowners had some reasonable expectation to have a say on if segregation was going to change. I don't believe they did.
Let me return the favor. To paraphrase yummyfajitas everyone should be allowed to sublease their apartment in anyway they see fit. If we ban iron smelting in residential buildings what is next? I'll tell you what, slave labor camps.
Of course the world does not work that way. The extreme arguments do not define what is and is not valid, and no one actually believes they do after their introduction to rhetoric in the 8th grade. It is perfectly valid to hold the opinion that residents of a neighborhood should be able to prevent toxic waste from being dumped in adjacent yards and to hold that they shouldn't be allowed to ban people from living near them due to race.
Dumping toxic waste does directly interfere, but AirBnBing, long term leasing or Grindring to a non-white person does not.
Feel free to follow this principle and see if you can derive any conclusions from it that I don't support. If so, I'll recognize that my argument is flawed and retract it.
What's your core principle that I can follow as far as it leads?
Most usage restrictions are not about limiting how you use your property, they are about how common property is used. It is just much more efficient and workable to encourage grouped rules based on usage expectations than any other option we've come up with.
In the AirBnB case there are all manner of common property issues that may come up. An obvious one off the top of my head is security key accessibility. In hotels it is very common to allow access to security keys to many many people, therefore hotels have the infrastructure to support removing/changing access frequently. Lots of multi-dwelling buildings do not have that infrastructure and do not need it for most usages that would be considered residential.
Another issue, that is literally impacting me right now, is expected use of pest control services and waste disposal. In my building someone is running a catering business out of his kitchen, against the rules of the association, the lease he has agreed to, and the laws of our city. But he is in his property so what is the issue? The higher usage levels lead to higher pest levels, the units nearest to him are dealing with unprecedented problems and we as the association are having to foot the bill for increased pest control services, and for more garbage pick up as he generates an outsized amount of waste.
Why aren't these individual property issues? Because pests don't observe property boundaries and the trash collection is common. Why don't we charge extra for these things to the individual unit? Because the law states that we can't for unmetered services (for private property rights preserving reasons) and it is infeasible to make trash individually serviced.
The principle is fairly easy to understand, when you live in a community there is a give and take between individual rights and responsibilities to the community. A robust system of regulations and the rule of law help to enforce those lines and the system needs to be actively shaped, monitored and embraced for it to work, with special emphasis placed on making sure the rights of the individual are impacted in as fair and moral ways as we can.
As long as you're paying for the externalities (which in most cases of AirBnb rentals, you aren't) then sure.
Hotels are pretty profitable too. If you take a hotel and remove the requirements for safety regulation, taxes, use of commercial real estate and provision of amenities, it will be more profitable.
Airbnb is great because the company turns a blind eye to many things and makes it easy.
Surely, as people who favor good governance rather than just arbitrary governance, we can all favor eliminating those costly and pointless regulations now? Or do we just favor arbitrary regulations just because we like regulations?
The regulatory model around hotels is good governance.
Fire safety is the most obvious example. A modern hotel is engineered to slow down the spread of fire and preserve life. Sprinklers, fire resistant doors and walls, etc.
Airbnb is an awesome thing when it does what it initially did -- handle house rentals. When that business model failed to provide growth, they pivoted to the current model where they've become the eBay of real estate by turning a blind eye to obvious fraud and abuse.
If you legally convert your property to a hotel, that use change triggers a need to become code compliant.
Also, accidents are more likely to happen with short term rentals. People tend to take care of their stuff better than someone else's.
That's what the law currently says. Since you are so worried that people might burn to death, why shouldn't we change this law?
If not, why not?
It's called building codes. We don't allow balloon frame houses anymore, for example.
With commercial property rules can be applied differently. Airbnb just dumps responsibility on others.
Unfortunately that means if you're in a wheelchair, are a victim of a crime due to lax judgement/practice by the property owner, or die in a fire because there's no lit sign pointing to the stairs, you as a "guest" and the "host" are fucked.
Many of those regulations that affect hotels were pushed by the large hotel groups - regulation is simply the most cost effective way for large multinationals companies to keep out competition.
The regulation act as a floor that essentially ensures that only projects of $X millions of capitalization makes sense to pursue, which by default favors the large hotel chains.
The average mid market hotel (Holiday Inn, Hampton Inn) costs $50-75k per room to build, with the typical project costing $6-8M. Nearly all hotels like this are built from standardized components and are owned by small local or regional operators.
If you go downmarket, that cost goes in half. If you look at older, but still legally compliant hotel property, acquisition cost is probably $5-10k/room in many markets. Obviously big city hotels costs more to build/buy and operate. That's why a NYC hotel is often 2x-3x other places -- and that is being challenged by lower operating cost business models.
The large hotel chains don't own a lot of property. They are brands who license their trademarks and access to their reservation system.
If SaaS businesses were like houses you could buy ~$30k in MRR for $200k down with the other $800k at 2% APR fixed over 30 years... a proposition which would not be untempting to many people on HN.
Parasites need land value taxing.
The tenant, as the one "consuming" the land for that term is the one who ought to pay the tax for the value of the land. It's only when the land is unoccupied that the owner/landlord will pay (which is also perfectly fair).
With apologies to Henry Ford: https://www.brainyquote.com/quotes/quotes/h/henryford122318....
You don't know how prices are set.
We just had this in the UK. The government put up costs for landlords who all said rents would rise. They fell because people have less money due to inflation in other cost areas.
Avoid foreign real estate though unless you are very careful
The long-run real returns to real estate are essentially zero. TINSTAAFL.
The only reason it's "profitable" for the average person is because the financial system allows for easy leverage (home mortgages). Take away that subsidization and real estate is just another asset class with no advantages.
>Homes in many regions of California have increased 3-4x since 1996
And many random stocks have increased 3-4x since 1996. So what?
Leverage is only an advantage if your return is higher than your cost of borrowing.
Which it is for housing, and many other investments. Only the bank won't lend you $500,000, backed by the government, to buy stocks.
My qualm with the OP was the implication that real-estate has outsized returns. Unless you're taking advantage of a home mortgage, there's nothing significant about real-estate returns. Of course most of us here are of the generation that saw nothing but rising house price (except for that one time where they didn't, but that's an anomaly, right?)
That doesn't necessarily make it one of the best ways overall, but it is a very good way if you're starting with little because it's basically your only option. Trying to scale that up (into real estate beyond your personal residence, rental properties, etc) is pretty close to buying yourself another job. If you work at that job diligently, you will do better in rental property than in your own residence, but it's work.
For those with some capital (say 1+ million USD) and a full-time job, real estate as a second job is not a particularly good fit IMO. The un-levered returns you can get in the stock market are better and the time commitment is largely optional and can be at a time of your choosing.
House prices have indeed gone up, but there is no guarantee that they will continue to climb. There is a limit to how high they can climb relative to income. You also picked one of the hottest real estates markets as a point of reference. The returns in many other places are much lower. As a comparison, the S&P 500 with dividends reinvested over that same period (january 1996 to january 2017) has returned 440%.
When buying a house, timing is crucial for the return. Renting and monthly investing in the stock market has the advantage that your investment is spread out in time.
For most people, the biggest advantage of buying a house with a mortgage is that it imposes a discipline: you have to pay off the monthly instalment. If you rent you might be tempted to spend the rest of your income instead of investing it.
Both have advantages and drawbacks. I just don't think it is the no-brainer you make it out to be.
Investment advice: Get something for a fraction of the actual price.
Doesn't matter what happens next, you are already making a profit.
Rental property is buy an asset, break it into manageable and consumable chunks (nights, months, or a year of tenancy) and sell those chunks for more than you paid for them.
Airlines buy (or lease) entire airplanes and sell individual seat-routes. They're somewhat less successful at turning a profit than real estate, though.
I wouldn't consider him a "professional Airbnb Investor"; he just did it once.
Regular apartment rentals often lock renters for multi-month contracts (due to difficulty, length, and expense of the eviction process, in which landlords lose money during the lengthy eviction process, when a renter rents for a single month and does not leave after not paying); air BNB, although it's more expensive per night, doesn't have such long time commitments for renters.
You gloss over "other costs". Many anti-AirBnB people's concerns are precisely about those other costs.
It's evident in this discussion who are the people pushing the externalities onto others, and who are the people having to deal with them.
Precisely, there should be no profit incentive. Society doesn't need lazy landlords speculating on gentrification. I don't give a fuck if you're disincentivised to own 8 homes which you can rent out while you holiday in the carribean. Productive societies needs affordable housing for all classes of people. Property is not an asset for speculation or a VC-backed venture return model. Feel free to invest your spare cash in innovation and businesses seeking growth.