Mapping the Debate: Airbnb and Its Effects on Affordable Housing in San Francisco and New York City

Abstract

The development of the sharing economy in the past decade has posed new global policy challenges, as it has disrupted inefficient economies and generated new revenue streams on the one hand, while creating a plethora of social and regulatory issues on the other. Airbnb, a short-term rental company and a pioneer of the sharing economy, represents this dynamic perfectly. While Airbnb has garnered significant respect for disrupting the travel industry, stimulating local tourism economies, and providing additional means for homeowners to make money, it has also been accused of harming communities. Specifically, Airbnb critics claim that short-term rentals change the character of local neighborhoods, threaten the hotel industry, and displace long-term residents. From a policy perspective, the issue of displacement has raised the most debate. Opponents argue that individuals who opt to list their properties on rental sharing platforms such as Airbnb instead of the long-term rental market deplete the housing stock, and thereby increase rental prices and diminish access to affordable housing. In this thesis, I seek to answer two questions: first, how do the different interest groups in the Airbnb debate – the hotel industry, municipal and state governments, and Airbnb itself – manipulate the affordable housing narrative to build their arguments? And second, regardless of how Airbnb’s impact on the community has been framed, does Airbnb’s presence in a city empirically increase rental rates in that geography? To answer the first question, I employ a comparative case study analysis, focusing on San Francisco and New York City. By analyzing how different interest groups build their arguments with data, grassroots campaigns, and marketing tactics, I uncover the motivations behind the Airbnb regulations in each city. The analysis reveals that while San Francisco’s Airbnb policy is complex and extremely difficult to enforce, it prioritizes affordable housing above all other considerations. San Francisco has partnered with Airbnb to create legislation that clarifies rental sharing rules and protects the housing stock, revealing the city’s desire to support both the sharing economy and affordable housing. While the New York City Airbnb policy is also unenforceable, it does not properly address the affordably housing issue; it unnecessarily prohibits Airbnb rentals that do not increase rental rates, while simultaneously allowing Airbnb rentals that do increase rental rates. This suggests that New York politicians are less concerned with affordable housing and more concerned with protecting the hotel industry – a fact the state government has obscured under the façade of the affordable housing narrative. To answer the second question, I empirically test Airbnb’s impact on rental prices using San Francisco Airbnb data for thousands of listings and rental market data from August 2014 through January 2017. Although the data is San Francisco specific, the results uncover general trends and principles that can be applied more broadly. The analysis reveals that Airbnb increases local rental prices when hosts convert long-term traditional housing to short term Airbnb rentals, as indicated by hosts who own multiple listings or rent out properties full-time or nearly full-time. To combat this issue, I recommend that states enact the minimum guideline of a one-host-one-property policy, and encourage municipalities to examine their own rental markets and city conditions to create reservation day caps specific to the characteristics of each community, thereby limiting Airbnb’s negative impact on affordable housing and preserving the wellbeing of all city residents.