The video examines the impact of Airbnb and other short-term rental platforms on the housing market, exploring how the proliferation of such services contributes to housing shortages and increased property prices. It offers an insight into the dynamics between second homes, short-term rentals, and the resultant effects on local communities, especially in densely populated urban areas. Concerns are expressed over the disruption caused by investors purchasing properties for rental purposes, driving prospective local homebuyers away due to escalating prices.

Further exploration in the video addresses the historical backdrop that led to the rise of Airbnb and similar platforms, offering a perspective on how short-term rentals transitioned from stigmatized housing sharing to a widely accepted, even glamorous, mode of travel accommodation. The video provides data and examples, including research and statistics, highlighting the economic effects of short-term rentals in major cities. It discusses policy efforts and regulatory challenges that cities face in managing their housing markets while balancing tourism benefits.

Main takeaways from the video:

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Key Vocabularies and Common Phrases:

1. aspirational [ˌæspəˈreɪʃənl] - (adjective) - Something that is desired or sought after, often related to ambitions or goals. - Synonyms: (desirable, ambitious, sought-after)

Second homes have long been an aspirational dream for middle class families.

2. homestays [ˈhoʊmˌsteɪz] - (noun) - Accommodations where visitors stay in a local's home, experiencing local life firsthand. - Synonyms: (lodging, accommodation, residency)

Airbnb arrived on the market through its online marketplace for homestays.

3. glamorize [ˈɡlæməˌraɪz] - (verb) - To make something seem more appealing or exciting than it is. - Synonyms: (romanticize, enhance, embellish)

And what Airbnb did was legitimate and glamorize it. Airbnb marketed it as cooler, a greener way to travel to visitors.

4. penalized [ˈpiːnəˌlaɪzd] - (adjective) - Subject to a penalty or disadvantage, often in a financial context. - Synonyms: (punished, sanctioned, disciplined)

A lot of people have been penalized tax wise on long term rentals, and so a lot of people are thinking, oh, it's fine, I'll just go into short term rental.

5. legitimate [lɪˈdʒɪtəmɪt] - (verb) - To make something legal or acceptable. - Synonyms: (validate, authorize, justify)

And what Airbnb did was legitimate and glamorize it.

6. exacerbated [ɪɡˈzæsərˌbeɪtɪd] - (verb) - To make a situation worse or more severe. - Synonyms: (worsened, intensified, aggravated)

Together, these factors are predicted to impact 1.6 billion people by 2025, exacerbated by rural to urban migration and shortages in labor and materials.

7. corporatization [ˌkɔrpərətaɪˈzeɪʃən] - (noun) - The process of transforming state assets, governance, or companies into corporations. - Synonyms: (commercialization, privatization, merger)

If we can get our hands on enough data and enough ways to control the corporatization of these rentals, I think we'll have done a good part of the job.

8. boombust [buːm-bʌst] - (noun) - A cycle of economic expansion and contraction that occurs repeatedly. - Synonyms: (fluctuation, cycle, oscillation)

Other factors include boom bust cycles in the housing market, such as the subprime mortgage crisis of 2008 and the impact of climate change on properties.

9. incentivizes [ɪnˈsɛntəˌvaɪzɪz] - (verb) - To provide someone with a reason or motivation to do something. - Synonyms: (motivates, encourages, stimulates)

We're talking about a contribution and a rent gap between a short term rental and a long term rental incentivizes the shift.

10. unintended [ˌʌnɪnˈtɛndɪd] - (adjective) - Not planned or meant - Synonyms: (accidental, unplanned, unforeseen)

These factors have led some to question the unintended consequences of second homes.

The Airbnb effect - why second homes have become so divisive

Second homes have long been an aspirational dream for middle class families. Then, in 2008, Airbnb arrived on the market through its online marketplace for homestays. The Silicon Valley based company has had a huge impact on the travel industry, with self catering accommodations now as popular as hotels. But it has also created what is called the Airbnb effect, where the growing number of short term rentals in a location in high demand leads to a rise in both rental rates and house prices, and many people unhappy about it.

We are a sort of young, newly married couple and looking to live around here. You're competing with people who basically buy up these properties to let out. There aren't many properties for sale. It means that the local children, as they're growing up, they can't afford to buy houses, so therefore they have to move out of the area. It's killing the area. Second housing short term rentals Airbnb? No. But how much of this crisis in the housing market is due to Airbnb and its competitors and what's being done to solve the problem?

I totally understand that there is a housing crisis and that people are struggling to get on the housing ladder. Amanda is one of many people earning an income through Airbnb. She started her holiday vacation rental business in the Cotswolds in 2018. There's a difference between holiday homes and holiday rentals because holiday rentals drive tourism. Holiday homes or second homes are quite different because people only go and stay there occasionally and the rest of the time they're empty. So they're not contributing to the community. The properties that I chose are not taking homes away from families because they're not the kind of properties that families would be able to or want to live in long term.

In a 2018 study, researchers said that Airbnb's presence in a market shrinks supply of long term rentals, which results in price increases. In the hundred largest us cities, a 10% increase in short term rentals was responsible for a 7th of the average annual increase in housing prices and about a fifth of the average annual increase in rents for a house. In the center of Los Angeles, for example, where the median price for a house in 2016 was more than $500,000. Nearly $75,000 would be attributed to the growth of short term rentals.

Second homes and short term rentals started after World War one with the development of transport and better social conditions, giving workers the right to holiday in the 1930s, the expansion of the middle class after World War two, and the growth of commercial air travel in the 1960s led to more demand for such options. Home sharing has always existed, but it had a boarding house sort of skid row connotation. Liddy Hoffman is the co author of the book Airbnb, short term Rentals and the Future of Housing. And what Airbnb did was legitimate and glamorize it. Airbnb marketed it as cooler, a greener way to travel to visitors. The Airbnb model was very interesting, very positive, because was based on the real sharing philosophy.

It was followed quickly by competitors like homestay, Homeaway and Vrbo, all having a share of the big short term rental market. These companies, including Airbnb, did not respond to a request for comment. Barring the pandemic, Airbnb has seen consistent growth since 2008, generating $8.4 billion in revenue in 2022. The company reached 150 million users in 2019, with an average of 6.6 million listings worldwide. Airbnb would post its first annual profit in 2022.

In the UK, hosts make, on average more than $22,000 per year. In Australia, the figure rises to $28,000. And in the US, hosts make, on average, more than $44,000 per year. In England, the number of privately rented homes has more than doubled between 2022 to 4.6 million. I had a property, it's very small buy to let in London. I'd bought it in my twenties. I didn't have a pension, I had young children. I decided to use the equity from the business and very quickly grew that over the last five years to five holiday cottages. The first one was in Boughton, on the water in the Cotswolds. I had always loved it. I'd gone there sort of as a youngster, as four out of five of my properties I've had to refurbish, and I used local builders, and then we have local housekeepers, a lot of cafes and restaurants and pubs. They wouldn't be able to exist if there wasn't tourism coming into that area.

Turning second homes into a fully fledged business is becoming increasingly popular. A 2015 study looking at Airbnbs effect on hotel sales growth in many us cities showed that multi unit operators total nearly 40% of Airbnbs revenue. In the italian city of Florence, property investors have hoarded apartments to such an extent that 1000 rental properties are run by just 20 landlords. The city recorded 15 million overnight stays from tourists before the pandemic in 2019, or 20 times its population. In the big majority of apartment on rentals is practically a business. Dario Nordella is the mayor of Florence. We have more than 7000 of apartments involved in this kind of system of short tourist rentals.

And now it's very difficult for a young guy or a new family to find an affordable house to rent. They are the fastest growing segment of the market, an adequate supply of housing at all times. And to get more supply. If, for example, I'm a corporation and I own 20 apartments and I make a deal with Airbnb, I can property manage those 20 apartments and put them into the Airbnb market. That's 20 easy ones, rather than just finding one host. A lot of people have been penalized tax wise on long term rentals, and so a lot of people are thinking, oh, it's fine, I'll just go into short term rental. But the problem with that is it leads to an oversupply.

For the past ten years, from Lisbon to Santa Monica, local governments have been trying to balance the benefits of tourism with a worsening housing crisis. New York City has been in a long battle with Airbnb. Hosts who need to be registered with the city can only accept two people at a time, and the latest restrictions, announced in 2023, will force owners to prove they reside in the rented properties in Paris. Second, homes need to first be registered before renting. Then the city asks for compensation where owners have to buy a commercial building of the same size before renovating it to be used for housing. And in Singapore, hosts are preventing from renting out all public housing, which is home to more than 80% of locals. Private properties, however, can be let out for a minimum of three consecutive months.

We are introducing an urbanistic rule who forbid in the UNESCO area any kind of short tourist rentals and zero taxes for the house for three years. If you move from short tourist rentals contract to a residence contract, enforcing the rules is difficult, costly and frustrating because the cities do not have the exact data they need. But short term rentals and Airbnb aren't solely responsible for the hike in house prices. Other factors include boom bust cycles in the housing market, such as the subprime mortgage crisis of 2008 and the impact of climate change on properties. Together, these factors are predicted to impact 1.6 billion people by 2025, exacerbated by rural to urban migration and shortages in labor and materials. As a result, housing that is available is being priced out of many peoples budgets.

Between 2010 and 2022, property prices have increased considerably in most countries, especially in emerging markets such as Turkey and India. The housing problem has been made worse by wealth inequality. In recent years, average house prices have risen much faster than average incomes making housing less affordable. In New York City, a buyer will need ten times the average yearly salary to afford the cost of the average house. In Paris, almost 20 times, and in Shanghai, more than 50 times.

These factors have led some to question the unintended consequences of second homes. Commercial hosts and investors are a direct response to incentivizing housing as an asset. There's no way to say that Airbnb is a cause of the housing crisis, but we're talking about a contribution and a rent gap between a short term rental and a long term rental incentivizes the shift.

But would banning Airbnb and short term rentals be the solution? In Switzerland, for example, the government banned the construction of second homes following a referendum in 2012. It depressed the house prices of new build properties, but increased the house prices of the current stock, inadvertently benefiting existing second home owners who saw the value of their properties go up.

Part of the solution, for example, is to invest more energy and money on affordable and public social housing. I feel that it's a government issue that they have missed their house building targets year after year after year, and that's a really huge issue. And something that they need to rectify is to build more homes. And if they're not doing that, then it's a really easy way for them to blame somebody else by saying, oh, it's just because there's loads of short term rentals around.

As we've discussed, it has plenty of problems for renters, for Airbnb owners, for the company itself, for cities. How do you see it evolving? If we can get our hands on enough data and enough ways to control the corporatization of these rentals, I think we'll have done a good part of the job.

Economics, Business, Technology, Housing Crisis, Airbnb Effect, Short-Term Rentals, Cnbc International