Why banning Airbnb won’t solve the housing crisis, Cape Town take note: Betsey Stevenson

In a world where housing affordability is a pressing concern, governments often enact policies that contradict their stated goals. Recent bans on short-term rentals, like Airbnb, under the guise of freeing up residential space, have backfired. Instead of lowering costs, these bans have boosted hotel prices and displaced tourists to neighbouring areas. Such restrictions limit housing flexibility and hinder economic growth, undermining the very communities they aim to support. The path to affordability lies in fostering a dynamic housing market, not stifling it..Sign up for your early morning brew of the BizNews Insider to keep you up to speed with the content that matters. The newsletter will land in your inbox at 5:30am weekdays. Register here..Join us for BizNews' first investment-focused conference on Thursday, 12 September, in Hermanus, featuring top experts like Frans Cronje, Piet Viljoen, and more. Get insights on electricity and exploiting SA's gas bounty from new and familiar faces. Register here..By Betsey Stevenson .___STEADY_PAYWALL___.When it comes to housing, almost all governments say they want to make it more affordable — and then they embrace policies that do the opposite. The latest illustration of this unfortunate trend, a ban on short-term rentals, came to Barcelona just last month, and similar policies are being tried in New York and elsewhere..The theory is that services such as Airbnb in effect take units off the market, driving up rental costs for city residents. By effectively banning Airbnb, cities are betting that they can make more affordable housing more available..That's not what happened in New York. Instead, hotel prices rose and tourists were pushed into New Jersey, benefiting homeowners and businesses there..A ban on Airbnb may sound good to local residents who see it as opening up more housing for them. Yet by that logic, why not ban home offices, or even commercial real estate? Both take up space that could, theoretically at least, be used for more residential housing..The truth is, all these restrictions ultimately make residents worse off..The first reason is economic. A strong community needs a strong economy, which requires space for commerce. Tourism is part of commerce..There has always been tension between visitors to a community and its residents. Visitors are there to have fun, so they may be loud, messy and disrespectful. They also tend to spend a lot of money in restaurants, at shops and for entertainment. That benefits locals both by providing an income and by creating the demand necessary to have such amenities in the community. The crash of the tourism economy during the pandemic hurt many communities and bankrupted many businesses..Read more: Frozen US housing markets and inflation – are high interest rates keeping inflation elevated? .People who advocate for Airbnb bans rarely argue that they want fewer tourists. And if places want tourism, they need to provide tourists somewhere to sleep. Those higher hotel prices that come after significant limits on short-term accommodations will ultimately lead to the development of more hotels — using space and capital that could be used for residential housing..Limiting short-term accommodations can make less space for residences by reducing flexibility in the market. The beauty of letting families make their own decisions about whether to rent out their home is that when demand changes — for example, when the Olympics come to Paris — then supply can elastically respond. High demand drives prices higher, which will convince some people to stay with friends or family, go on vacation to a less crowded place, or even take in a tourist..This helps density increase during peak times and allows residents to benefit from the ebb and flow of demand in their community. Without such flexibility, a city would need more hotels to accommodate peak travel season, and then those rooms might sit empty for large parts of the year..Yes, a ban on Airbnb may cause some city residents to put their place on the traditional rental market or take in a housemate. But others may simply leave. There is no doubt that current homeowners are hurt when a city adopts new restrictions on how they can use their home, but future homeowners are also hurt. Some people can afford living in a city only if they can rent out their place on Airbnb..Read more: 🔒 NIMBYs can't hold the UK's housing market hostage forever: Matthew Brooker.The development of platforms such as Airbnb has helped democratize the hotel business by allowing any homeowner to tap into the tourist market. But there is a more profound change: The rise of short-term rentals is helping to democratize homeownership, which remains the primary source of wealth for most households. Short-term accommodations offer Americans a way to put this wealth to work for them, giving those with less steady or lower incomes another path to home ownership..As an economist, I see this change, which allows for the more efficient use of housing capital, as nothing short of miraculous. Living standards improve when people — whether locals or tourists — get more bang for their buck..Tourists can be more noisy or messy than residents would like. But there are ways to address these problems without an outright ban. Limitations on the number of guests or number of days a property can be rented out, combined with stronger enforcement of local noise ordinances, can help reduce the negative impact on neighbors..Governments are using the rise of short-term accommodations as a scapegoat for their own failure. Consider some of their other policies: rent control, which indirectly reduces supply by lowering the returns to building housing; limits on density, which directly reduce supply; restrictions or processes that slow down construction and reduce the return to housing development; and tax systems that encourage people to hold onto property even as fewer people live on it..The best way to reduce the cost of housing, as several of my Bloomberg Opinion colleagues have pointed out, is to build more housing. And, I would add, we should also continue to build people's incomes. That means ensuring that they can use their housing as fully as possible — to live in, to work in, and to rent out when they're not using it..Read also:.How Cape Town can become richer: Affordable housing, efficient public transport🔒 Global housing market pain has echoes of a crash 30 years agoUK house prices dive as mortgage rates creep higher ahead of elections.© 2024 Bloomberg L.P.

Why banning Airbnb won’t solve the housing crisis, Cape Town take note: Betsey Stevenson

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