25 August 202024 September 2020 Main Posts / Housing Safe as houses? Airbnb and the socialisation of investment risk Miriam McGarry In March 2020, as the pandemic began to spread globally, Irish reporters cited a 64 per cent rise in rental properties listed across Dublin. The impact of COVID-19 on tourism saw owners of short-stay accommodation de-list their properties on Airbnb and other share economy platforms, and place them (often, back) into the rental market. By the end of the month, a decline in tourism was also being felt more locally. Over a three week period, ‘furnished rental listings’ grew an enormous 530 per cent in Tasmania – the majority of these located in Hobart, previously the city with the lowest rental availability in the country. As freedom of movement was restricted globally, and the island state took strict measures on border control, property owners reckoned with the changing conditions and realisation that tourist accommodation would no longer yield strong financial returns. Nationally, Realestate.com reported a 152 per cent increase in furnished rental properties in the week after Scott Morrison announced national border closures. Real estate websites were overflowing with beautifully furnished homes, available for flexible period of three to six months – a timeframe imagined back when the pandemic seemed like a short-term event. Real estate companies began an advertising strategy targeted towards Airbnb owners, realising there was an opportunity to gain new clients. EIS Property used Instagram to cater to this new market of empty homeowner: Airbnb Owners, we can help! Many Airbnb owners are faced with ambiguity around the occupancy of their properties right now. We can help you to secure a tenant for the next 6-12 months to get you through this uncertain time. Rock Property also published sponsored Instagram content: Has your holiday property income STOPPED? You can strengthen your current financial position with Rock’s long term tenancy management. In Hobart, the advertised rental prices of these ex-Airbnb properties were, in general, above the average rental price. This reflected both the desirable locations and sophisticated ‘airspace’ aesthetic interiors. However, it also suggested the properties might be highly leveraged and necessitating mortgage repayments at rates that average Hobart rental prices would struggle to cover. Additionally, of the newly listed rentals, several were linked to landlords with two or more properties. In 2018, Hobart’s residential vacancy rate was the lowest in the nation (0.7 per cent, against a national average of 2.3 per cent). By 2019, Hobart had the lowest median income of any Australian capital city, and its rental prices outgrew Melbourne’s. The Parliamentary Inquiry into Housing Affordability published in April attributed this housing stress to a range of factors, including: population growth, long public housing register lists, increased university student numbers, and the rise of short-stay accommodation. Short-stay accommodation has impacted rental availability in Hobart and, post-COVID, Airbnb hosts are now financially reliant upon the tenants who they previously considered economically unattractive. In placing their furnished properties on the short-term rental market, the owners are not providing ongoing stability to renters, but rather finding short-term solutions to covering costs. The March/April increase in Hobart’s rental availability was not a reflection of a changed mindset or new future for renters, but a brief moment where tenants who don’t own furniture could find precarious housing. The temporary rental agreement indicates that once tourism is viable again, the landlords will turn back into hosts and to profit-as-usual. COVID-19 has exposed and illuminated the impact of Airbnb on housing, and clearly demonstrated that the problem cannot simply be blamed on a lack of homes, but the shift from house-as-home to house-as-investment. The concept of personal gain through property investment is not new to the Australian economy or cultural identity. Approximately one in five Australians own an investment property, and around 10 per cent of taxpayers negatively gear one (or more) of their assets. But short-stay accommodation platforms have exacerbated the idea of expanding housing debt as an asset, and the idea that a speculator should be guaranteed an economic reward. Tasmanian Airbnb owners who lost more than 50 per cent of their income stream through the decline in tourism were eligible for the Small Business Emergency Support Grant from Business Tasmania. This state government funding allocated $2500 to successful applicants and was shared within the Airbnb hosts group on Facebook (screenshots were anonymously made available to the author). Several members of the group reported ‘receiving the funding within a few days’, and one landlord was relieved for the assistance as ‘it is 100 per cent of my income.’ One member of the group who resides interstate was ‘jealous’ that the Tasmanian Government was offering such assistance. According to statistics released by Inside Airbnb, 47.3 per cent of Airbnb hosts in Hobart currently have multiple listings. Despite Airbnb’s ongoing claims that the site is primarily used by homeowners to share spare rooms or list properties on a short-term basis when the owners are travelling, short-stay accommodation has incentivised investors to turn homes that were previously long-term rentals to holiday escapes. As beneficiaries of Business Tasmania funding, these properties were run as businesses as their primary (and often exclusive) function. The impact of this shift on rapidly growing homelessness, declining rental availability, and housing affordability was recognised by the Tasmanian government in 2018, when the state attempted to incentivise private landlords to make their properties available to lower-income tenants. Between $10,000 and $13,000 was offered to individual owners to bridge some of the gap between what can be charged for lease at a weekly rate compared with two nights as short-stay accommodation. The $2500 stimulus from the government to those Airbnb hosts who applied and were successful allowed speculative investors to make a claim as small business owners. Their loss of income was due to a calculated decision by the owners who previously understood that unstable, short-term accommodation was more profitable than a long-term rental agreement. This socialisation of risk and privatisation of reward is both entirely legal and socially encouraged. The Airbnb owners identified and acted upon a legitimate opportunity to mitigate financial loss. The growth of Airbnb as a business exists within a national culture where investing in property to ‘get ahead’ is normalised and promoted – enabling an asset economy. Australian settler-colonial history continues to inform how we relate to property (and how wealth is distributed). Real estate industry leaders, in lockstep with government ministers, continue to promote a view of property as a vehicle of wealth and celebrate rising housing prices as a marker of national economic growth. The concept of getting a foot on the ‘property ladder’ is a standard way of describing purchasing a home. Rather than being an aberration in the system, then, government subsidies for Airbnb owners who have lost income due to COVID-19 are a logical extension of the normalisation of the commodification of housing. The pandemic has exposed long-existing vulnerabilities in housing. At a local level, it is impossible not to acknowledge the impact of Airbnb on rental availability following reports of the 530 per cent increase. Internationally, the company has started to experience a growing backlash. In July 2020, the company sent an email to customers inviting them to contact their favourite Airbnb hosts and ‘create personalised kindness cards that make it easy to send a message of appreciation of encouragement, with the option to add a contribution.’ In response, New York Times tech reporter Mike Isaac tweeted airbnb has created a mechanism in which you can … donate money to landlords … many of whom have overextended themselves by leveraging multiple properties which they rented out pre-covid, and are now going empty it’s like the mortgage-backed securities of the sharing economy? By July, there appeared to be a sense of a changing public sentiment towards the role of short-stay accommodation on augmenting local housing landscapes, and an increased understanding of the tangible impacts of transforming homes from rental to Airbnb, in order to maximise profit. However, in Tasmania, where COVID is currently under control, the return of internal tourism has re-stimulated landlord use of the Airbnb economy. Current market conditions render it more lucrative to have local weekender tourists stay for two nights a week than to provide a home to a tenant. In mid-July, the Tasmanian Government announced a stimulus package for the tourism industry that encourages internal travel by offering $100 accommodation vouchers for hotel stays for mid-week travel. Several days later, the vouchers were extended to include Airbnb accommodation. As long as it remains easy and more profitable to place a property on a short-stay accommodation platform than a long-term lease agreement, individual landlords are incentivised to select the option that maximises their income. The COVID-19 crisis has revealed the extent of the impact of Airbnb in diminishing the rental market and exacerbating the Hobart housing crisis. Cities such as Paris and Barcelona or states such as California have introduced policies necessitating licensing and limiting numbers of short-stay accommodation in the aim of preventing the displacement of local residents. There are ample international examples available to the local government to consider. A larger challenge is to alter the ideology of property-as-profit-maker, towards an understanding that a home is an essential piece of infrastructure to deliver the basic human right of shelter. Miriam McGarry Miriam McGarry is a researcher and writer. More by Miriam McGarry Overland is a not-for-profit magazine with a proud history of supporting writers, and publishing ideas and voices often excluded from other places. If you like this piece, or support Overland’s work in general, please subscribe or donate. Related articles & Essays 2 First published in Overland Issue 228 15 November 202216 November 2022 Housing Housing, class, and ‘classless’ residential capitalism in Australia Martin Duck The total value of residential real estate in Australia currently stands just shy of $10 trillion. People’s class position and life chances are now significantly shaped by their share—and often their parents’ share—of this extraordinary wealth. First published in Overland Issue 228 11 November 202211 November 2022 Main Posts On the last day of Subscriberthon, our amazing online editor gives you one last (very good) reason to subscribe Editorial team What's in store for the last day of Subscriberthon?