A growing number of people are booking extended stays through Airbnb. Airbnb CEO Brian Chesky believes people value flexibility with their housing now more than ever. He predicts that extended stays (30+ days) will eventually replace the need for long-term leases and traditional landlords.
A Shifting Culture
Currently,10.6 million Americans earn income from rental properties. However, there are only about 660,000 Airbnb properties listed in the United States. While there’s a small handful of other short-term rental properties listed independently or through other platforms, like VRBO’s 10,000 homes listed in the U.S, it’s still significantly more common for property owners to generate income through long-term tenants.
Chesky believes the interest in short-term rentals will only increase. A recent study found that two-thirds of people want to work remotely permanently post-pandemic. The increase in remote work allows people to live more nomadically, making permanent residencies inconvenient. If Chesky is right, many of the 10.6 million Americans currently renting their properties with long-term leases, will need to shift their strategy over the next few years.
Will It Work?
As short-term renting becomes more popular, it will only replace long-term leases if people have reliable options for bookings. As more people are booking longer stays, Airbnb is struggling to come up with enough inventory to meet demand.
In an effort to incentivize hosts to join the platform and increase inventory, Airbnb announced multiple changes to the platform. These changes make it easier for hosts to list properties, get paid, price listings, and write descriptions among other things.
The day Airbnb announced these changes, the price of shares in the company increased, showing that investors believe the changes will have a positive impact. Hopefully, they bring in hosts as intended, otherwise, the short-term rental market may not be as successful as Brian Chesky predicted.
How Does a Shift to Short-term Rentals Impact Landlords?
Airbnb reported that hosts who joined in the last year earned a combined total of over $1 billion during the pandemic. There’s potential for profit in short-term rentals, however, there are different costs to consider with this rental model.
Because renters pay upfront, the risk of renters defaulting on their payments is gone. However, there is an increased risk that you’ll have frequent gaps between renters, which means you’ll miss out on some income while your property is empty.
Additionally, short-term rentals don’t typically require a security deposit. Without that deposit, property owners could get stuck with the bill for damages. However, some Airbnb hosts are already finding ways to manage the costs of maintenance and repairs without a security deposit. Instead of a deposit, hosts charge a cleaning fee, which can be used for both cleaning and repairs. Around 81 percent of U.S. listings charge a cleaning fee in addition to the price of the stay.
Will Renters Benefit?
Chesky believes the shift will positively impact renters. Not only does it allow a more flexible lifestyle, but renting an Airbnb property doesn’t require tenants to verify income, submit credit scores, or pay a security deposit. This makes it easier for renters with a limited budget to secure a place.
While it may be easier for renters to initially secure a place at a short-term rental, without a lease, the price isn’t locked in. It could change at any time. This model could decrease stability and create more housing insecurity for low-income renters.
Similarly, the cleaning fees, while a good solution for property owners, may end up leaving renters worse off. The typical cleaning fee for listings in the U.S. is between $75 and $95. While this is much lower than a typical security deposit, the money is never returned, regardless of whether or not the guests leave the property in good condition.
As both technology and culture evolve, housing markets shift. Only time will tell if short-term rentals will completely change the way the rental market works. Whether or not Airbnb transforms the industry, in order to best take advantage of the market, both property owners and renters should keep an eye on these shifting trends.
About the Author:
Rachel is a writer, marketer, and content creator at Workman Success Systems. After obtaining her Bachelor’s degree in English, she taught high school students about writing, persuasion, and creativity. She then took her passion for people and communication into the marketing field as she pursued an M.B.A. with a marketing emphasis at Utah Valley University. After obtaining her M.B.A, Rachel has focused on writing and marketing within the real estate industry.