While she’s studying for a master’s degree at Northwestern University, Christine Kaya Hewitt and her husband, Jason, have been renting out three of the four bedrooms in their house outside Kansas City through Airbnb.
The self-proclaimed “empty nesters” have done a brisk business, bringing in a mix of business travelers from around the region who need a place to stay and some longer-term renters. Those recently including a home health nurse with a temporary assignment in the area and a medical student taking a nearby course. But that all changed with the coronavirus pandemic, which Hewitt says left them suddenly facing a largely empty calendar for the short-term rentals that had come to represent 50% of the couple’s take-home income.
“My husband is I guess what they call underemployed,” Hewitt says. “He’s got a full-time job, but he’s not really working at the level for which he’s trained to work because there just haven’t been enough jobs.”
The family has some savings—”We’re a Dave Ramsey family, and we have an emergency fund,” Hewitt says—and her adult daughter may move into one of the bedrooms and pay some rent. But the sudden, dramatic shutdown in travel has deprived the family of what was a steady income stream that Hewitt had assumed would support her through her schooling and further training.
“This might be our new normal for a while, and I don’t know what we’ll do,” she says. “It’s a big house. We have a $1,000 a month mortgage, which I know is much better than many people in our neighborhood.”
“A flood of cancellations”
As the coronavirus pandemic has spread around the world, travel has come to a record halt, striking the entire hospitality industry, including big hotel brands and major commercial Airbnb landlords who have been forced to lay off or furlough staff.
As for how online vacation rentals will fare in the long-term, experts say the shutdown has raised questions that are still too early to answer. The pandemic may change housing supply in cities and vacation towns where activists say Airbnbs have depleted a limited housing pool, driving up rental prices. Some activists are already seeing conversions to longer term rentals, though the ultimate impact remains unclear. But in the short-term, the crisis may be a particular shock to individual hosts who use money from short-term rentals to attend school, fund startup businesses, or simply pay living expenses.
Christine Kaya Hewitt
This might be our new normal for a while, and I don’t know what we’ll do.”
“The Airbnb helps to pay our mortgage so I can play in the studio and make art that I can sell to the galleries,” says Matthew Barter, an artist who advertises that his Airbnb listing in Brunswick, Maine, helps to subsidize his onsite art gallery. “It’s worked out really well until now.”
With travel halted, Airbnb drew the ire of some of its hosts after allowing guests to cancel many reservations with no penalty during the virus outbreak, even if properties normally had stricter cancellation penalties.
“A flood of cancellations came through,” says Scott Shatford, CEO of AirDNA, a company that analyzes the short-term rental market. He estimates an industry-wide cancellation for the next month of about 80%.
Airbnb, which Reuters reports has lowered its own internal valuation by 16% amid the drop in bookings, has since said it will offer $5,000 grants to some hosts and pay 25% of normal cancellation fees to hosts who had guests drop out during the pandemic. But that still leaves many with an unexpected income gap as bookings slow to a trickle.
“It pays the mortgage, which is about a half to two-thirds of our expenses,” says Eshyah Selig, founder and president of the Crescent City Cat Club, a New Orleans facility that offers cats for adoption and rents an onsite cottage through Airbnb.”If we can get $2,000 [per month] from the Airbnb unit, then we’re good,” she says.
Some have pulled or suspended listings altogether out of fear of contracting the virus or spreading it to guests. Others are attempting to find longer-term tenants at least until travel returns to normal, but that can mean a steep drop in income. The Cat Club, for instance, has its studio-size cottage listed for rent at $900 per month, a fraction of typical Airbnb revenue.
“It’s really too bad because April and May were totally booked,” Selig says.
A return to traditional rentals?
While Airbnb and its rivals normally help hosts pay the bills, affordable housing activists have long said these platforms contribute to the country’s housing shortage and urban gentrification, especially when they’re used by big landlords offering multiple units. That means that apartments that would have been available for year-long leases are only available for short stints, causing the rental market to contract and overall prices to go up. One consequence of the sudden travel downturn could be a surge in units available for traditional rentals, which could potentially lower rental prices. However, experts caution it’s still too early to know how the market will shift in the long-term.
“I’ve heard a lot of anecdotal stories about landlords converting into long-term rentals,” says Breonne DeDecker, program manager at the Jane Plane Neighborhood Sustainability Initiative in New Orleans, which has criticized the proliferation of short-term rentals in the city. “New Orleans is a city that’s been dealing with a housing crisis for a very long time, and anything that delivers units back onto the market is potentially a very good thing.”
Breonne DeDecker, Jane Plane Neighborhood Sustainability Initiative
Anything that delivers units back onto the market is potentially a very good thing.”
In Dublin, local media have reported a sharp rise in traditional rental listings on the Irish property listing website Daft.ie amid the pandemic. Judy Goldman, cofounder of Keep Neighborhoods First, which advocates against what it calls “commercialized short-term rental abuse” in Los Angeles, says she’s heard of similar phenomena in that city.
“What we’re hearing here in L.A. is that the small mom-and-pop operators are quickly, many of them, converting their short-term rentals to longer term use,” she says. “It’s going to be a very helpful way to restore our housing, which has really suffered.”
But so far, a spokesperson for Zillow, which hosts apartment listings on several sites and tracks housing market data, says the company has yet to see evidence of a major trend in that direction in the U.S. And Shatford says he sees many hosts leaving properties on Airbnb and similar sites, hoping to get bookings for the summer after travel has hopefully resumed, even if they’re blocking off immediate bookings.
“We don’t see a lot of people removing their entire listings,” he says.
Looking for long-term tenants
In New Orleans, DeDecker says she’s seen apartment listings seeking medium-term tenants—perhaps 30- or 90-day leases—which she’s skeptical will see many takers. But that’s been a strategy embraced by some big players in the short-term rental world, including Sonder, a San Francisco company founded in 2012 that operates short-term rentals in multiple cities and recently drew headlines for laying off or furloughing hundreds of workers amid the virus-linked downturn.
“We’re opening our doors to those in need by offering a 40% discount for stays of over 14 days in addition to striking up partnerships with a wide range of organizations who are in urgent need of temporary housing,” wrote Mason Harrison, Sonder’s head of communications, in an email to Fast Company. Since March 10, bookings of 14 days or more have risen from 11% of the company’s revenue to 70%, he says.
Judy Goldman, Keep Neighborhoods First
It’s going to be a very helpful way to restore our housing, which has really suffered.”
Airbnb itself has reported that bookings of 28 days or more are up 20% for the past two weeks compared to the same time last year. The site has also promoted a program offering housing to healthcare workers and others dealing with the virus, which includes allowing hosts to offer their homes for free and waiving its own fees for other rentals to people fighting the pandemic.
Some hosts have also begun listing their rentals on other platforms, like the site Furnished Finder, which is popular with traveling nurses and other healthcare workers seeking medium-term housing. Amy Suleski, who rents a converted bus on her property in Portland, Oregon, says she’s enjoyed housing visitors from around the world in a space that’s in keeping with the city’s “Keep Portland Weird” ethos. But with a shortage of bookings during the pandemic, she’s exploring renting the space to longer-term tenants through Furnished Finder.
“It’s got its own restroom and shower facility and kitchenette and living area,” she says. “It’s just like an apartment.”
Renting a room during a pandemic
But while stand-alone units like Suleski’s bus are one thing, some neighbors in apartment and condo buildings in particular are concerned about sharing lobbies, stairwells, and elevators with an influx of medical workers potentially exposed to COVID-19. Bruce Kijewski is a resident in The Ellison, a Venice Beach building that long-term tenants and Los Angeles officials say is effectively being illegally operated as a hotel (the owners have argued it’s functioned as one for decades and is misclassified as a standard apartment house). Kijewski is worried that having a steady wave of travelers pass through the building is putting him and other full-time residents at risk for catching the virus.
And now, he says, the building’s management have begun promoting short-term rentals specifically to medical professionals and other “essential workers” during the pandemic, potentially adding to the risk.
“They need places to stay as well, but I’m not a really big fan of taking a rent-stabilized building like ours and turning it into some emergency accommodation facility,” he says.
For its part, Airbnb has said it has developed guidelines for keeping guests safe during the pandemic, including promoting an enhanced cleaning checklist and requiring participants in the program catering to healthcare workers to leave 72 hours between rentals.
“Airbnb takes the health and safety of its community very seriously and has worked with leading experts and officials to develop a protocol for hosts who support this collective health effort,” a spokesperson said in an email to Fast Company. “We continue to provide robust cleaning guidance to hosts in partnership with renowned epidemiologist Dr. Larry Brilliant.”
Scott Shatford, AirDNA
The Hamptons are up 400-plus percent this year versus last year.”
Coronavirus concerns have also arisen in some more remote areas, where hosts have specifically marketed their properties to urban dwellers looking for a place to self-quarantine outside the city. Rentals in places within driving distance from major cities like New York and Boston are indeed up, according to AirDNA’s Shatford. “The Hamptons are up 400-plus percent this year versus last year,” he says.
But the sudden burst of rural demand has drawn the ire of locals wary that the new visitors will spread the disease. Some jurisdictions have temporarily banned short-term rentals or even closed entirely to nonresidents, BuzzFeed News recently reported.
Once the virus’s spread subsides and stay-at-home orders lift, the future of the short-term rental ecosystem is, like so much else, unclear. While Airbnb CEO Brian Chesky has publicly predicted that people will be eager to travel after being cooped up at home, it’s uncertain how quickly tourism and business travel will recover when so many people have lost their jobs.
For affordable housing activists, there is a silver lining to the temporarily reduced numbers of Airbnbs. Municipalities may continue to impose regulations that force some short-term units off the market and prevent others from being converted, suggests Murray Cox, the activist and short-term rental critic who has compiled data about the industry on the site Inside Airbnb.
“I definitely think it will be good for housing affordability,” he says. “It’s really going to highlight how Airbnb was impacting the housing market before.”