Short-term rentals have “gobbled up” homes, worsening housing supply, the Philly Fed chairman said. But Airbnb pushes back, saying that’s too easy an explanation.
Short-term rentals are partly to blame for the housing shortage in the market, a Federal Reserve chairman has said.
In a blog post about the spike in housing prices in New Jersey, Patrick Harker, President and CEO of the Federal Reserve Bank of Philadelphia, said that the supply of housing in the United States was limited due to an increase the number of people buying houses to turn them into vacation rentals.
“Short-term rentals have eaten up a significant portion of housing supply, especially on the Shore, for example,” Harker said.
“Airbnb ABNB,
recently announced Ocean City, New Jersey as its most booked US destination. (Did I mention we have the best beaches?),” he added.
To be clear, home prices have also skyrocketed in the Garden State due to an increase in median wages and Jersey residents’ proximity to well-paying jobs.
“New Jersey has the highest share of any state of people between the ages of 18 and 34 living with their parents.”
Additionally, New Jersey has the highest share of any state of people between the ages of 18 and 34 living with their parents, Harker added, “the state desperately needs to build more affordable homes.”
But when Airbnbs appear in residential neighborhoods, it affects housing supply as it takes properties away from the long-term residential market to the short-term travel market, a 2019 report of the Economic Policy Institute said.
And that ends up driving up house prices, PPE added.
A home buyer says MarketWatch that his last house was sold to an Airbnb investor.
When Erin Piedmont, who was looking for a house in Savannah, Georgia, went to an open house, she was told that a potential buyer was considering buying the house she was visiting with the intention of transforming it. in Airbnb.
“This is the cutest little family home. …and all of these people are going to have to run an Airbnb in a neighborhood where families have lived for a very long time,” she said. “It looks like it’s sort of destroying the housing market.”
The former home in Piedmont, Alabama, where she previously resided, was also sold to an Airbnb investor.
Short-term rentals are an ‘important part’ of holiday destinations
There’s another side to the story, an Airbnb spokesperson told MarketWatch. Airbnb hosting — or short-term rentals — offers landlords a way to earn money at a time when inflation is still high, they said.
Additionally, only 0.4% of New Jersey’s housing stock was listed on Airbnb, they added.
They acknowledged that while the country hasn’t built enough housing for its people, blaming short-term rentals for the housing shortage isn’t entirely fair, they argued.
“The reality is that home sharing has been an important part of the fabric of vacation destinations for decades,” they added.
Other solutions to boost the housing supply
Jenny Schuetz, senior fellow at Brookings Metro and author of the new book, “Fixer-Upper: How to Repair America’s Broken Housing Systems,” said Harker’s assessment of short-term rentals taking market share from potential homeowners was “ambivalent”.
Schuetz noted that in his blog post, Harker also suggested that local zoning rules be changed to allow landlords to rent out garages and basements, creating accessory dwelling units, or ADUs, to improve housing supply.
In California, after the law allowed homeowners to build ADUs, or granny flats or backyard homes, a building boom followed. Since last year, based on Mr. Nolan Gray, director of research at California YIMBY, a community of neighbors, one in seven homes allowed to be built in California was an ADU. In Los Angeles, that share is even higher – one in four homes built last year in Los Angeles was an ADU.
“Encouraging landlords to create these types of secondary suites is an important way to increase overall housing supply,” Schuetz said, “even if some of them are used as short-term rentals.”
Zoning law changes
More broadly, Harker also talked about reforming global zoning laws to pave the way for more multi-family units to be built — like townhouses or apartments.
By that, he was referring to local zoning laws across the country that prohibit developers from building multi-family units or apartments, and are instead forced to build only single-family homes. “Many towns in New Jersey are… zoned for single-family homes,” he said.
Schuetz noted that New Jersey actually offers a variety of approaches to addressing housing affordability.
For example, Jersey City and Hoboken built large numbers of apartments, “which helped offset some of the pressures in the greater New York area,” she explained. Yet, as Harker said, many affluent suburbs have very restrictive zoning, which excludes middle- and low-income households.
Build housing for the workforce
Harker also suggested developing housing for workers close to their employers. “Tourism-dominated areas like the Jersey Shore lack housing for workers,” Harker wrote.
“The workforce housing incentive could begin to alleviate these supply shortages,” he added. “And in those same high-tourist areas, local governments could seek to limit the number of short-term rentals to ensure local residents have places to live.”
Efforts are underway to address the housing shortage.
There are a record number of homes under construction that will eventually hit the market. According to the US Census Bureau, 1.7 million homes were under construction in August, up 20.5% from last year’s level, as shown in the chart below.
It also happens to be a all time record.
Housing under construction across the country, according to the federal government.
Source: US Department of Housing and Urban Development
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