By Living Room Realty, September 21, 2023
Written by: Sorcha Porter, Short Term/ Mid Term Rental Specialist
“No thanks, encouraging people with wealth to buy up homes so that our already suffering housing market and limited rentals are snatched up? #whiteprivilege”
This comment on my instagram stopped me in my tracks. I like many real estate agents am trying to solve the problem of housing affordability for my clients and friends. It’s why my primary focus in real estate is understanding, teaching and practicing the use of short and mid term housing investments to help make home ownership affordable and in some cases possible for those who hope to achieve it. With interest rates at a 20 year high, and housing prices continuing to increase it’s a huge hurdle for buyers. And I see platforms like Airbnb, Swimply, Sniffspot, Furnished Finder and Hello Landing as a solve to the question of “how can I afford this?” Thats what we do as realtors, we guide people through life transitions and help clients solve problems along the way to make those transitions smoother. I am a problem SOLVER, not a problem CONTRIBUTOR… or at least that’s what I thought before this comment smacked me upside the head.
Initially I became defensive… thinking, “at least apps like Airbnb can help people get on the property ladder. At least this can help them achieve the housing stability and accessible passive income from equity!”
But if that comes at the cost, and potentially cause of our devastating houseless numbers. Is it actually ethical to practice? Should I be advising my clients on how to do this!? AM I PART OF THE PROBLEM???? One of the core values at Living Room Realty is Integrity and this response to my instagram post made me think… am I being a good representation of that value?
The Premise: Airbnb is driving housing inequality and inaccessibility in the US and Portland OR.
I read countless articles about this. I polled people, including the person who made that comment on my instagram. Asking friends and colleagues in the housing and social justice space what they recommending reading/ reviewing to inform my search. While I was given several suggestions, and found many more articles and papers on my own, almost every single person I talked to pointed me to ONE article. Gary Barker’s “The Airbnb Effect on Housing and Rent.” Written in 2020 just before the onset of the pandemic but still during the rising concern and travel warnings increase leading up to March 11th. Barkers article speculates that Airbnb’s effect on the UK housing market is similar to gentrification and drives increases in rent and the negative impact that has on the UK’s housing supply as a whole. He posed that Airbnb’s major stock hit at the onset of the pandemic was potentially good for communities. What he didn’t know he was referring to at that time, and what many people who read that article today don’t know, unless they were an active Airbnb investor or host, is that period from Feb 2020 to August 2020 is often referred to as “The great cancellation.” As many Airbnb hosts experienced mass cancellations as a result of the Covid19 Pandemic. This caused a dramatic drop in Airbnb listings, and had a big impact on the companies previously high performing stock. This caused a huge pause in the short term rental investment space and a temporary decline in the housing market at the onset of the pandemic.
Barker was also speaking specifically to the UK housing market, though he was supporting much of his data with US housing market trends. I imagine because there wasn’t a sufficient supply of data on UK housing market trends related to Airbnb. I suspect that is because the data supporting the premise that Airbnb drives housing price increases is negligible and insignificant in the UK except in cities like London, Edinburgh, Glasgow, York and Belfast. But the point here is. Gary’s article is an observatory one. Not a statistically driven argument. And while these types of observations are vital to the greater conversation about housing at a global level. They don’t answer the question of whether or not short term rentals are having a detrimental effect on the US housing market, and for the purpose of this article, the Portland OR housing market.
So what do the numbers say?
Here’s what the stats say about Airbnb’s effect on the US housing market and Portland’s housing market. According to the US Census Bureau there are approximately 142 million housing units in the United States. It’s estimated that there are between 2.2 million and 1.9 million Airbnb listings in the USA, we also have the highest number of listings of any country in the world. Seconded by France at 1.2 million. That means that the percentage of housing in the US which is used for Airbnb is around 1.3-1.5%. I am going to use 1.5% to calculate from here on out for the sake of easier math. Of that 1.5% an estimated 20% are rooms in peoples houses (these stats are from Airbnb). Those houses are occupied, and are being counted as occupied units by the Census Bureau. So we cannot count that towards unoccupied/ inaccessible housing. The actual number of units being taken up by the Short term rental market is around 1.7 Millon or 1.2%. This isn’t a small number, but statistically it’s not as significant as many people believe it to be. It’s certainly not a housing crisis inducing stat. Nor is it significant enough to make the case that Airbnb is causing housing inequality or driving up the price of housing and rents. In fact most statisticians consider a margin of 5% or greater to be statistically significant. Anything below that is considered marginal. The reason for that being is often, there is another factor at play that drives more statistically significant numbers.
But lets narrow down the numbers even more to our corner of the world here in Portland OR. In Portland Oregon we have about 299,000 housing units and of those 4700 are Airbnbs. Of that 4700 it’s estimated that 950 are single bed rooms in a house. That means in reality there are approximately 3750 Aribnbs/ registered short term rentals in the city of Portland that are taking up actual unoccupied units. A total of 1.3% of the total housing supply in Portland.
In order to rent a short term rental, which is defined by a unit that is rented less than 30 days in a month, and be granted a shorter term rental permit you must be a resident of that property for more than 9 months out of the year. This means that the city of Portland is counting all those houses with rooms for rent, as occupied. We assume this because the city of Portland defines a unit as;
“A single unit providing complete, independent living facilities for one or more persons, including permanent provisions for living, sleeping, cooking, eating, and sanitation.”
Currently the city of Portland’s occupancy levels, (the percentage of single units that are currently lived in by one or more tenants) are at 94.7%. that’s down from 97.2% in 2022. This means we have MORE supply this year than last. This leaves a vacancy rate of 5.3%, or in this case a total of 15,847 available units in the city of Portland. Of that 15,847 an estimated 23.6% (Or approximately 4700) are being utilized as STR’s. That would bring the true amount of available housing in Portland to an occupancy rate of 96%. Meaning the supply of housing has still gone up 1.2% from 2022 to 2023. This is again statistically insignificant. It’s less than 5% but it’s also a sign that Airbnb is not driving housing supply shortage. If airbnb was driving the housing supply shortage the increasing number of Airbnb’s cropping up in Portland would coincide with the decreasing volume of housing available. Because thats what driving forces do, they push or drive the direction of the market or object they act upon.
So then what IS driving the housing crisis in Portland?
Well remember how I said there was likely another factor driving housing pricing/ availability that was more statistically significant? We’re about to talk about that…The answer isn’t super straight forward, I mean, if it was, we probably would have resolved it and the housing shortage wouldn’t be a discussion, but from all the outside factors I’ve analyzed the main drivers appear to be the same thing that’s causing housing shortages in other cities/ communities. COVID19 and its effect on the remote workers market, causing employee’s to be able to move to Portland from more expensive areas like San Francisco, Seattle, Los Angeles and NYC. From 2019-2023 housing prices in Portland have gone up an average of 30%. This combined with record low loan rates took the median price of homes in PDX from 400,000 in 2019 to $532% in 2023. The other piece is less measurable but has to be acknowledged, and that is the increasing building restrictions slowing the building of new housing in Portland. It’s VERY hard to build new housing in Portland and turn a profit due to long timelines for inspection approvals, disconnected departments, and significant and expensive requirements around building. And while I would love to live in a world where we could just build housing for the sake of housing, in order for the housing market to produce more housing, there has to be investors willing to take on the building risks, associated with our fair city. There has to be a balance of doing good, and making money, if building isn’t profitable for investors, they run out of money to create more housing. And if they run out of money to create more housing, we’re right back where we started. And right now, it’s very hard to make money as a builder within Portland city limits ethically. So we are left with good builders moving outside of Portland investing in our surrounding cities and leaving Portland with big developers who’s goals are more about skirting systems, than integrating with them.
The conclusion is. While it can be frustrating to be competing in the Portland Oregon housing market for rentable space, I don’t think from an empirically significant data perspective we can say Short Term Rentals like Airbnb are the cause of the housing shortage because housing supply is actually increasing not decreasing. I think the better question to ask is, how do we as real estate professionals and investors continue to provide, make space for and create affordable housing ethically and sustainably.
