Airbnb Runs Rampant Across America

Dominating Local Markets

Airbnb (ABNB) has changed the way that many people vacation. Instead of staying at a hotel, users can easily book homes, apartments, and cabins in cities across the US — not to mention the haunted mansions, glamping domes, and even UFOs.

But some would argue the dominant homesharing app has become too popular, with Airbnb rentals accounting for as much as 15% of short-term rentals in some markets. While this might be a good thing for remote workers and travelers, the prevalence of short-term Airbnb rentals is throwing local real estate markets out of whack.

Upsetting the Ecosystem

Thanks to the rise of remote work following the pandemic, more people than ever are starting to move out of large metros and spread across the country. As a provider of short-term housing, Airbnb plays a major role in accommodating them.

However, short-term Airbnbs have proved to be so profitable that institutional investors are gobbling up properties. It’s common for large investors to own hundreds of Airbnb properties. In big cities, this amounts to a drop in the bucket. But it can take a serious bite out of local housing markets, ousting mom-and-pop investors and even residents.

Airbnb renters bring larger workforces to certain markets, such as tourist towns. But with major investors buying up housing to rent on Airbnb, fewer long-term rental units are available. The result? A massive increase in the cost of renting, making it difficult for modest earners like teachers or service workers to afford to live in the areas that they work.

Looking Forward

One of the reasons this imbalance exists is that regulators have yet to catch up with Airbnb. In other words, Airbnb makes it possible for commercial investment firms to bypass zoning regulations that would otherwise keep them out of residential neighborhoods.

Drafting up new rules to level the playing field takes time. So far, lawmakers haven’t had time to catch up. But expect the real estate landscape to continue to change over the next few years as legislators hustle to impose new restrictions — and hopefully bring the cost of housing back down to realistic levels.

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