How Airbnb Distorts Local Real Estate Markets

Performance Property Real Estate Question

Q: Do you think Airbnb contributes to housing shortages in big cities? Nancy, Nashville, TN

A: I like and use Airbnb when I travel because I prefer staying in a real place rather than a hotel whenever possible. That said, there is no question that Airbnb and other short term rental platforms distort local real estate markets where they operate because supply and demand are the two most important factors that affect real estate prices and Airbnb affects both supply and demand. The commercial use of Airbnb has more of a corrosive effect on real estate markets than individual owners trying to make extra money renting out their place which has enabled speculators to buy real estate for the sole purpose of renting on Airbnb and other short term rental platforms. The danger for these speculators and for the property values of other owners in the areas where these speculators buy is when municipalities begin regulating rental platforms like Airbnb or when new Airbnb competitors enter the marketplace and alter the rental landscape—when this happens, these speculators may be left unable to maintain a property they bought that is solely dependent on a platform they don’t control in the similar way that many online companies that were dependent on Google ad words to generate traffic were crushed when Google changed its algorithm. Thanks for your question, Nancy.

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