This November, Portlanders will face yet another referendum on short-term rentals, which would significantly raise fees associated with registering them and limit the total number of non-owner and non-tenant occupied units to either 1 percent of the total long-term rental stock or 250 units, whichever is fewer.
A recent Press Herald editorial criticizing short-term rentals (“Our View: New short-term rental commission must take a long-term, statewide view,” Aug. 11) was based on the argument that they “tie up housing stock and distort the wider market,” boldly claiming that this fact “is in no doubt.” “If only the market could keep itself in check,” it laments.
To support its assertion, the editorial board cites analysis by the Economic Policy Institute that rationalizes more regulations on short-term rentals because “any economic occurrence that provides benefits proportional to owning property is one that will grant these benefits disproportionately to the wealthy.”
This “eat the rich” mentality means causing local economic turbulence is fine if it’s borne by the wealthy. It profoundly misunderstands how markets function and it mistakes the benefits of economic growth for blind greed. Sadly, envy often overrules sound economics.
The Economic Policy Institute claims that short-term rentals must be heavily regulated because more than 90 percent of “nonprimary housing wealth” is held by the wealthiest 20 percent of Americans. If these people are super rich, wouldn’t they be better positioned to withstand the extra costs of holding on to property that isn’t in the long-term market?
While this effect may be stronger on the islands, where more units are seasonal, mainland Portlanders won’t be spared either. According to the Press Herald, 84 percent of registered short-term rentals in Portland are on the mainland, many of which support local tradespeople, not to mention spur economic impact from visitors’ spending.
Do short-term rentals tie up housing supply in a meaningful way? Of course their presence in a particular area affects the market. The question is: By how much? Researchers from the University of Southern California, California State University and the National Bureau of Economic Research attempted to answer this question in a working paper.
They hypothesize that more Airbnb activity would correspond to more long-term rentals being moved to the short-term market, thus limiting long-term supply in favor of short-term supply and driving up the cost of long-term rents. They indeed find that “Airbnb listings increase the supply of short-term rental units and decrease the supply of long-term rental units.” The more important question is whether these effects are swallowed up by more prominent effects in the market.
On this question, researchers note that “the effect of Airbnb listings on rental rates and house prices is decreasing in the owner-occupancy rate” meaning that with fewer available rentals, the effects of STRs in a particular market are diminished. For instance, “at the median owner-occupancy rate (72 percent), we find that a 1 percent increase in Airbnb listings leads to a 0.018 percent increase in the rental rate and a 0.026 percent increase in house prices.”
Is this really a strong correlation?
In the Portland-South Portland Metropolitan Area, where the supply crunch is predominantly located, the owner-occupied housing rate is 82 percent. On that basis, owners who choose to list their properties as short-term rentals play a smaller role in the rise in prices.
Portland had 468 registered short-term rentals in September 2018 and 810 in August 2022, an increase of 73 percent in just four years. Using the working paper’s formula, one could estimate that short-term rentals accounted for just a 1.02 percent increase in rent and a 1.4 percent increase in home prices over that span. Today, the median home listing is $550,000 but it was below $360,000 in late 2018. Corrected for inflation, the average home price in the area rose 38.6 percent in the same time period. If less than 1.5 percent can be attributed to short-term rentals, clearly there is much more happening in the market.
If the prominence of Airbnb in Portland has little to do with rising housing costs, are short-term rentals just an easy scapegoat? Unfortunately, narrative means more than reality. When the goal is to punish wealth at all costs, reckless policy will rule the day.
Want more affordable housing in Portland? Eliminate the Green New Deal and build up.
Send questions/comments to the editors.
