Here are some of the most significant trends to be expected in the U.S. housing market as a result of the ever-tightening regulations on vacation rentals:
PROPERTY PRICES AND RENTAL RATESWILL DROP IN PLACESWHERE AIRBNB INVESTING IS ILLEGAL. As investors cannot buy properties to rent out on a short-term basis in some of the top locations, they will pull out of these markets. This move is expected to have a downward pressure on listing prices and home values, making such markets a bit more affordable for homebuyers. Some investors will choose to switch their rental strategy, turning Airbnb rentals into traditional ones. This will relax the local rental market and lead to a decrease in rents. So, the overall effect on residents is expected to be positive. As real estate investors switch their short-term rentals to long-term ones, this will increase the supply of the latter. While this will make renting more affordable for tenants, it will also lead to a decline in the rental income and return that landlords can expect. Thus, it is important for investors to conduct investment property analysis to see whether changing the rental strategy or selling their property and moving to a new market makes more financial sense. RETURN ON INVESTMENT ON LONG-TERM RENTALSWILL DECREASE. INVESTORSWILLMOVE TO PLACESWHERE AIRBNB INVESTING IS STILL LEGAL. Last but not least, investors who favor the short-term rental strategy will relocate to markets where Airbnb is still a viable investment strategy. Some of these include Dallas, Memphis, Phoenix, Philadelphia, Tampa, and Houston. As these locations welcome new investors, they can expect to experience the effects previously felt by other markets. This could, in turn, lead to a new spiral of Airbnb regulations and prohibitions. •
homebuyers and renters. Real estate investors were quick to swipe opportunities in the major U.S. markets, pushing home values even higher. In addition, hundreds of thousands of what-could-have-been traditional, long- term rentals were turned into short-term ones in search of a higher profit. Meanwhile, the deficit in traditional rentals in some locations caused the already-high rental rates to continue to upsurge. These effects were more pronounced in hot markets such as New York, Boston, San Francisco, and Los Angeles. In response to the swift expansion of Airbnb investing, authorities in numerous U.S. cities decided to act on behalf of locals and impose restrictions and sometimes even prohibitions on short-term rentals. At the beginning of 2020, non-primary residence, non-owner-occupied short-term rentals are no longer allowed in New York, San Diego, Chicago, Boston, Miami, Los Angeles, Las Vegas, and many others. What this means for investors is that in 2020 they cannot buy properties to turn into Airbnb rentals in what used to be some of the most profitable locations for this rental strategy. So, what will Airbnb investing look like in 2020? And what will the repercussions be on various markets across the U.S.?
Daniela Andreevska is Marketing Director at Mashvisor, a real estate analytics tool, which helps real estate investors quickly find traditional and Airbnb investment properties. A research process that’s usually three months now can take 15 minutes. We provide all the real estate information in easy-to-understand visualizations. Reach out to Daniela
directly at daniela@mashvisor.com.
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