• Candice Cangialosi

The Airbnb Effect

Since we moved to our new West Seattle neighborhood a few years ago, we’ve noticed a sharp increase in Airbnb traffic in the community. Everything from MILs to single bedrooms to backyard yurts are available within just a few blocks of our home. Based on the number of website reviews, it seems several are doing quite well in terms of volume. I had the opportunity to speak with one host renting out their backyard cottage. She stated that the rental averages about $100/night and was rented about 60% of the time last year. That adds up to about $22k in revenue per year. We'll feature one such backyard cottage turned Airbnb along with this post about the impacts of short term vacation rentals on local long term rental markets.


Please reach out if you have any questions or want more information.



This backyard cottage sits atop a 2 car garage.

Even more interestingly, there was a Forbes article from late ‘17 telling the story of a Seattle host that rented out their backyard hammock for $45/night in addition to other parts of their home.


Airbnb’s explosive growth was initially fueled by young audiences but has quickly evolved to be a very well recognized and respected brand. In fact, the company’s valuation exceeded hotel giant Hilton last year.


However, the short-term rental platform has been the subject of several critical research papers that have blamed it for raising housing prices, changing employment dynamics, and taking chunks out of city tax revenue. A new analysis from the Economic Policy Institute attempts to more comprehensively catalog these local impacts—and measure what, if anything, cities get out of the deal. To better align the costs and benefits, the study’s author Josh Bivens, argues that cities need to start treating Airbnb like any other hotel business and regulate it accordingly.


Entry to the backyard cottage features a compact kitchen and opens to vaulted ceilings that offer airy warmth.

I'm sure many people who depend on the additional side income from their ADUs (accessory dwelling unit), would not welcome this type of restrictive regulation. For many individual home owners that list parts of their property on sites like Airbnb, it may become cost prohibitive if cities start regulating and collecting fees and/or taxes based on these rentals. Of course, some of these costs would likely be passed on to the consumers seeking out unique vacation rentals that offer a more authentic experience while visiting a city rather than the cardboard version often found at the big box hotels.


Since Airbnb helps homeowners take existing housing stock and turn some of it into short-term units, it must have some effect on the rental market. If the platform didn't provide its service, would these cottages and MILs be long term rentals instead? Researchers seem convinced that it’s playing a powerful role of increasing costs for renters.


The open studio offers a convertible seating area, dining counter, and a spacious bed.

In Boston, one working paper from the University of Massachusetts Boston Department of Economics found a causal relationship between Airbnb proliferation and housing prices: with every 12 Airbnb listings per census tract, asking rents increased by 0.4 percent. These findings were reinforced at the national level in another working paper in SSRN, which used American Community Survey data to find that with each 10 percent increase in Airbnb listings in a U.S. ZIP code, there was a .42 percent increase in rental prices, and a .76 percent increase in house prices. Then, using that working paper’s same regression model, David Wachsmuth, a professor of Urban Planning at McGill University, found that in New York City, Airbnb was associated with a 1.4 percent increase in NYC rents from 2015 to 2017.


Parsing just how much of those bumps were natural growth and how much was Airbnb-related has proven difficult. In Boston, “a one standard deviation increase in Airbnb listings … relative to total housing units is correlated with a 5.9 percent decrease in the number of rental units offered for rent,” University of Massachusetts researchers wrote, which they say then translates into the price changes outlined above. But take the Brooklyn neighborhoods Bushwick and Bedford-Stuyvesant, which observed a 41 percent jump in the number of Airbnb listings from 2012 to 2016, for example: While rents there leapt an average of about $131 per year, according to the SSRN working paper, only about $27 of it can be attributed to Airbnb.


Guests can freshen up in the full bathroom that features a timeless design.

Regardless of the severity of the impact, short term renting is becoming more mainstream and is on the minds of many home buyers. Many recognize the viability of offsetting their mortgage payment while adding value to their investment. While we are touring homes or hosting opens, the plausibility of making a home Airbnb friendly is a frequent conversation. As Seattle continues to grow and updates are made to zoning regulations, more homeowners and buyers will take this into consideration when deciding on improvements and real estate investments.


Stay Savvy, Seattle! Sign Up to receive our Newsletter to your Inbox Monthly.

Further references:

  1. Economic Policy Institute - The Economic Costs and Benefits of Airbnb

  2. CityLab - There's New Research Behind the Contention that Airbnb Raises Rents

©2019 by settleinseattle.com.