How to Get Sustainable Solutions for Airbnb in High-Pressure Housing Markets

Airbnb expands more and more in cities worldwide. Good for the tourists, but it disrupts local housing markets, pushing rental prices up and limiting availability for long-term renters. Property owners are increasingly converting homes into short-term rentals to maximize profits, which reduces the housing supply for residents and intensifies demand for remaining long-term rentals. This shift leads to higher prices and exacerbates housing affordability issues, especially in popular tourist destinations.

In this article we try to find a middle way, so that a sustainable housing solution can be obtained in a market that shifts with the entry of players like Airbnb.

Impact of Airbnb on Rental Prices and Housing Affordability

Studies confirm that Airbnb listings directly impact rent and housing costs. For every 1% increase in Airbnb listings, rents rise by approximately 0.018%, while house prices increase by about 0.026%. This correlation becomes more significant in areas with a high density of short-term rentals.

For example, in neighborhoods in Barcelona with elevated Airbnb activity, rents surged by 7%, and housing costs soared by up to 17%. In such regions, the influx of tourists disrupts the housing market, making it harder for locals to afford rent or buy property.

Other cities, including Amsterdam and San Francisco, report similar trends. In Amsterdam, Airbnb-driven housing inflation has contributed to rent hikes of over 3% annually, while San Francisco’s long-term rental market has been significantly impacted by an increasing number of short-term listings.

These examples illustrate clearly how, as more property owners opt for short-term rentals, communities experience restricted housing availability and price spikes.

City Initiatives to Counteract Airbnb’s Market Impact

Many cities now impose regulations to counter Airbnb’s effects on housing. Here are several noteworthy strategies:

  • New York City: New York has implemented Local Law 18, imposing strict limitations on short-term rentals. This law requires hosts to register with the city and prohibits entire apartment rentals for less than 30 days unless the owner is present. While this regulation aims to make more housing available for residents, initial data suggests it hasn’t yet achieved noticeable changes in rental rates or long-term housing supply. Yet, the law sets a precedent, with other cities watching closely.
  • Barcelona: Barcelona plans to ban all short-term tourist apartment rentals by 2028, a move that underscores the city’s housing crisis. The constant demand from tourism has driven up both rental and housing prices, limiting options for locals. Barcelona’s comprehensive ban will address the issue head-on, preserving housing stock for residents and potentially encouraging alternative, sustainable tourism options.
  • Paris: In Paris, lawmakers raised taxes on holiday rentals to curb Airbnb’s market impact. This tax hike, designed to make short-term rentals less lucrative, redirects funds to support affordable housing projects. Paris also imposes strict rental limits, allowing homeowners to rent their properties for only up to 120 nights annually. By capping rental days and increasing taxation, Paris is working to balance short-term rentals with residents’ needs.

Sustainable Solutions for Airbnb in High-Pressure Housing Markets Are Possible

Airbnb’s presence doesn’t have to conflict with local housing needs. Cities and Airbnb can collaborate to establish a sustainable approach that supports both tourism and community stability. Here are effective strategies for creating a balanced relationship:

  1. Limit Annual Short-Term Rental Days: Cities can set a cap on the number of days a property can be rented as a short-term listing. This approach allows homeowners to benefit from Airbnb while maintaining sufficient housing for long-term renters. By limiting rentals to around 90 to 120 days per year, cities can manage demand without a complete ban.
  2. Enforce Host Registration and Licensing: Requiring hosts to register with local authorities offers better oversight of short-term rentals. Licensing ensures that property owners comply with regulations and allows cities to monitor market activity, helping prevent over-saturation of short-term listings. Registration fees could support affordable housing initiatives or community programs.
  3. Introduce Taxation on Short-Term Rentals: Introducing a specific tax on short-term rental income addresses Airbnb’s impact on housing affordability. The funds collected could finance affordable housing projects or community programs, offsetting the negative effects on long-term rental availability. In Berlin, for example, authorities implemented a 5% “city tax” on short-term rentals to support public housing and infrastructure.
  4. Promote Home-Sharing over Entire Home Rentals: By promoting a home-sharing model where hosts remain on-site during guest stays, cities can reduce the number of full residences removed from the rental market. This approach encourages a more sustainable use of Airbnb, as homeowners can supplement their income without reducing housing stock for long-term residents.
  5. Encourage Airbnb’s Partnership in Sustainable Tourism: Airbnb can actively collaborate with city authorities to promote sustainable tourism initiatives, such as incentivizing stays in lesser-known areas outside of tourist hotspots. This would spread the tourism impact more evenly and support smaller communities without straining high-demand neighborhoods. Such partnerships help Airbnb align its growth goals with the broader objectives of city planning and community well-being.

Toward a Balanced Coexistence of Airbnb and Housing Markets

While Airbnb offers clear economic benefits to local economies through tourism, it has measurable effects on housing markets, especially in cities with already high demand. With data showing that Airbnb listings drive up rental prices and reduce long-term availability, city governments must take decisive action to protect local housing markets.

By implementing regulations such as rental caps, increased taxes, and stringent registration requirements, cities can curb the negative effects while allowing the platform to coexist in a more sustainable, community-friendly way.

A collaborative approach, where Airbnb actively participates in sustainable housing and tourism solutions, will be vital. Through responsible practices and local partnerships, Airbnb can support both its hosts and the communities it operates in, ensuring that it remains a valuable partner rather than a pressure point in urban housing markets.

The Risks of an Unregulated Airbnb Market: Oversaturation and Reduced Earnings

Besides the housing market being under pressure, there is also another downside to an unregulated Airbnb Market. In cities without regulation, an unchecked influx of Airbnb listings can lead to an oversaturated market, which ultimately harms hosts’ earnings. As more property owners see Airbnb as a profitable venture, they convert long-term rentals into short-term accommodations, especially in high-demand tourist areas. This rapid expansion often creates a surplus of listings, flooding the market and diminishing the competitive edge of each rental.

In oversaturated markets, hosts must compete on price, often resulting in lower nightly rates and reduced occupancy rates. For example, in cities like Barcelona and Amsterdam, neighborhoods popular with tourists have seen such an influx of short-term rentals that hosts experience declining revenues, even as housing availability shrinks for residents. Additionally, guests have more options, pushing hosts to offer discounts or additional amenities, further cutting into profit margins.

Moreover, oversaturation can diminish the appeal of certain neighborhoods, as the shift toward short-term rentals disrupts community dynamics. Noise, overcrowding, and other tourism-related issues can discourage both tourists and long-term residents, creating a cycle where hosts face lower earnings and communities experience instability.

Regulation, again, plays a critical role in maintaining balance.