Zoning rules needed for Airbnb to stop suburban rents declining

A new study reveals Airbnb listings help to increase rents for landlords in apartment-heavy areas, such as CBDs but the accommodation platform can reduce rents in low-density, house-dominated neighbourhoods.

Monday, September 12th 2022, 10:27AM

by Sally Lindsay

Study authors, Auckland University business school senior property lecturer William Cheung and associate professor Edward Yiu say the impact of landlords’ Airbnb rentals on different neighbourhoods shows a need for designated zoning laws.

Cheung and Yiu say changes to Airbnb accommodation indicated by some councils will not fix the impacts of Airbnb allowed to operate anywhere.

Christchurch City Council, for example, has decided Airbnb operators will need consent and that consent will cost more than $1,000.

Chueng says consenting changes like that won't determine where Airbnbs can operate, whereas zoning laws could.

Their paper, published in Tourism Management, explores the effects of touristification on rent, catalysed by Airbnb.

Touristification, says Dr Cheung, is a process that sees unplanned tourism transform a space into one that caters mainly to tourists, provoking displacement pressures on local neighbourhoods.

The researchers' study shows that while increases in Airbnb listings raise rents in apartment-heavy areas like the central city, more Airbnb rentals can reduce landlords’ residential rental prices within low-density, house-dominated neighbourhoods.

Identifying properties and neighbourhoods compatible with Airbnb is essential for strategic tourism development and management, they say.

Problematic

Dr Cheung says the impact of short-term Airbnb rentals is much more problematic in residential neighbourhoods.

“In low-density residential neighbourhoods locals are more likely to notice strangers or increases in noise, and their area may not have the resources to cater to influxes of visitors. When visitors begin to swamp a community, local residents will be less willing to pay rent for that location and will move elsewhere.

“Whereas in the central city, residents are unlikely to notice this kind of change in population, and the area is typically more equipped to handle more people.

The researchers say designated zoning could give cities, including Auckland, flexibility to supply tourism accommodation while “avoiding creating severe urban conflicts in low-density suburbs”.

The study found an influx of tourists into an area may cause services, facilities and shops to be reoriented towards tourists’ preferences rather than residents.

Having zoning for where Airbnbs can operate could take into account whether there is appropriate infrastructure in the area, for example.

Dr Cheung says tourists are also prone to paying higher rents to enjoy convenience, and in high-density inner city areas, landlords’ rents will be higher as visitors compete with individuals who would like to live in the city centre in order to enjoy better accessibility.

Dr Cheung and Yiu used more than 22,000 Airbnb and 200,000 residential rental listings to provide evidence on how touristification affects different areas.

The study shows that the effects of Airbnb listings in an apartment submarket are different to those in a house submarket.

Designated zoning

“To partly resolve this, and in line with our findings, we propose a policy agenda for considering neighbourhood compatibility with short-term rental accommodation,” says Cheung.

As apartment-type properties in high density areas are more compatible with Airbnb, designated zoning could provide cities like Auckland with more flexibility to supply tourism accommodation while avoiding creating severe urban conflicts in low-density suburbs, says the researchers.

“Identifying properties and neighbourhoods compatible with Airbnb is essential for strategic tourism development and management, allowing tourism to continue without negatively impacting local communities.”

The study authors utilised more than 22,000 Airbnb and 200,000 residential rental listings to provide evidence on how touristification creates a tourism-led rent gap in high-density locales and a conflicts-led negative rent gap in low-density neighbourhoods.

“We used the Melbourne region as the case study because both the Airbnb and residential property rental markets are active in this area.”

Dr Cheung says the findings are relevant to many cities, particularly Auckland, which has a high number of Airbnb listings.

“Tourists affect the rental market, retail sales, and the diversity of neighbourhoods in both positive and negative ways, and it’s important to develop policies to manage and regulate short-term rental accommodation by type or location.”

Time for a crackdown

Wellington advocates say it is time for a crackdown on unregulated Airbnb-style accommodation, which could free up hundreds of homes for Wellington's under-pressure rental market.

There are more than 800 active Airbnb listings in the city – down from 1,700 before Covid-19 – with more than 2,000 in the wider Wellington region. Sixty-five per cent of the city’s listings are “entire homes” rather than sleep-outs, or single rooms.

Several city councillors and renters’ advocates believe enforcing commercial rates, such as the kind hotels and motels are required to pay – would inevitably boost rental supply.

It has been four years since the council last reviewed its policy, concluding then that actively tracking down Airbnb providers was too difficult.

The Government also has Airbnb in its sights with plans to force the platform and Uber to levy GST on bookings.

Tags: Airbnb