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Study Shows Real Costs of AirBnB Outweigh Benefits

short-term rental

A bill was introduced Thursday at the State House that would make imposing Short Term Rental bans illegal. This bill seeks to supersede local referendums and ordinances that are now in place across the state that limit STR.

In the press release announcing the bill realtors cite the economic benefits of STR for the state of South Carolina. “The dollars that we’re talking about translate for real opportunity for real people to help build their communities and their lives,” South Carolina REALTORS President Rob Woodul said.

A closer look shows that the beneficial economic impacts of STR are inflated and that the overall economic impact of STR in the state are negative. Additionally, one of the major findings from a report by Granicus, an industry leader in short- term rental compliance monitoring and enforcement solutions for local governments, is that STR limits and rules need to be in place to insure that traditional residential neighborhoods are not turned into tourist areas to the detriment of long-time residents.

The rules and STR limits defined by local governments are in place because the community’s involved wish to protect the balance of long term and short term residents. For the most part, communities like Folly Beach, acknowledge that STR are now a part of the housing situations and pose no threat to eliminate STR. The rules in place simply insure that a viable longterm community continues to thrive.

The bill introduced yesterday ignores the voice of the communities that have voted on the STR rules that reflect the type of community they wish to promote. These voices need to be respected by our State legislators.

Here’s a Summary of The Economic Policy Institute Report

If one grants that 2 to 4 percent of the output supported by Airbnb in host cities is net new spending, this spending is just a redistribution away from other, presumably less-Airbnb-intensive, localities. Given that Airbnb has tended to grow in already rich and desirable cities, it is unclear why inducing the transfer of even more economic activity away from other cities toward thriving cities would ever be viewed as a positive policy outcome. In short, the results of the NERA study should be ignored by policymakers seeking an accurate sense of the scale of Airbnb expansion costs and benefits
  • The economic costs Airbnb imposes likely outweigh the benefits. While the introduction and expansion of Airbnb into U.S. cities and cities around the world carries large potential economic benefits and costs, the costs to renters and local jurisdictions likely exceed the benefits to travelers and property owners.
  • Airbnb might, as claimed, suppress the growth of travel accommodation costs, but these costs are not a first-order problem for American families. The largest and best-documented potential benefit of Airbnb expansion is the increased supply of travel accommodations, which could benefit travelers by making travel more affordable. There is evidence that Airbnb increases the supply of short-term travel accommodations and slightly lowers prices. But there is little evidence that the high price of travel accommodations is a pressing economic problem in the United States: The price of travel accommodations in the U.S. has not risen particularly fast in recent years, nor are travel costs a significant share of American family budgets.
  • Rising housing costs are a key problem for American families, and evidence suggests that the presence of Airbnb raises local housing costs. The largest and best-documented potential cost of Airbnb expansion is the reduced supply of housing as properties shift from serving local residents to serving Airbnb travelers, which hurts local residents by raising housing costs. There is evidence this cost is real:
    • Because housing demand is relatively inelastic (people’s demand for somewhere to live doesn’t decline when prices increase), even small changes in housing supply (like those caused by converting long-term rental properties to Airbnb units) can cause significant price increases. High-quality studies indicate that Airbnb introduction and expansion in New York City, for example, may have raised average rents by nearly $400 annually for city residents.
    • The rising cost of housing is a key problem for American families. Housing costs have risen significantly faster than overall prices (and the price of short-term travel accommodations) since 2000, and housing accounts for a significant share (more than 15 percent) of overall household consumption expenditures.
  • The potential benefit of increased tourism supporting city economies is much smaller than commonly advertised. There is little evidence that cities with an increasing supply of short-term Airbnb rental accommodations are seeing a large increase in travelers. Instead, accommodations supplied via Airbnb seem to be a nearly pure substitution for other forms of accommodation. Two surveys indicate that only 2 to 4 percent of those using Airbnb say that they would not have taken the trip were Airbnb rentals unavailable.
    • Studies claiming that Airbnb is supporting a lot of economic activity often vastly overstate the effect because they fail to account for the fact that much of this spending would have been done anyway by travelers staying in hotels or other alternative accommodations absent the Airbnb option.
  • Property owners do benefit from Airbnb’s capacity to lower the transaction costs of operating short-term rentals, but the beneficiaries are disproportionately white and high-wealth households. Wealth from property ownership is skewed, with higher-wealth and white households holding a disproportionate share of housing wealth overall—and an even more disproportionate share of housing wealth from nonprimary residences because they are much more likely to own nonprimary residential property (such as multi-unit Airbnb rentals).
  • The shift from traditional hotels to Airbnb lodging leads to less-reliable tax payments to cities. Several large American cities with a large Airbnb presence rely heavily on lodging taxes. Airbnb has largely blocked the ability of these cities to transparently collect lodging taxes on Airbnb rentals that are equivalent to lodging taxes on hotel rooms. One study found that the voluntary agreements Airbnb has struck with state and local governments “[undermine] tax fairness, transparency, and the rule of law.”
  • City residents likely suffer when Airbnb circumvents zoning laws that ban lodging businesses from residential neighborhoods.The status quo of zoning regulations in cities reflects a broad presumption that short-term travelers likely impose greater externalities on long-term residents than do other long-term residents. Externalities are economic costs that are borne by people not directly engaged in a transaction. In the case of neighbors on a street with short-term renters, externalities include noise and stress on neighborhood infrastructure like trash pickup. These externalities are why hotels are clustered away from residential areas. Many Airbnb rental units are in violation of local zoning regulations, and there is the strong possibility that these units are indeed imposing large costs on neighbors.

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