The Impact of Airbnb on Affordable Housing and Neighborhood Dynamics: A Comparative Analysis of Seattle and New York

1. INTRODUCTION

1.1. Background on Airbnb

Airbnb is a company that was formed in 2008 which provided a service allowing people to rent their extra room or their entire house for temporary lodgers, typically tourists. It developed fast and became a threat to conventional forms of hospitality as it offered an accommodation alternative to hotels. In subsequent years, Airbnb went international and today it has spread to over 220 countries, hosting millions of listings (Ekeroma, 2023). However, as the company grew in popularity, so did its unintended effects on local housing markets hence creating what has become to be referred to as the “Airbnb effect.”

The “Airbnb effect” is the impact that the short-term rentals bring about in terms of housing accessibility and prices. Critics say that companies, like Airbnb, lead to a decline in the number of apartments for mid to long-term rent, which then pushes up the price and can fuel a housing crisis (Hoffman & Heisler, 2020). This impact has turned into a debate in various cities in the world where the cost of rent is a problem. Besides the economic impacts, Airbnb can change cultures and social structures in neighborhoods including introducing new populations of people who are often temporary and can replace the local residents and change their cultures, beliefs, and practices.

1.2. Purpose of the Study

This study aims to explore the extent of Airbnb’s effect on affordable housing and neighborhood dynamics in two major U.S. cities: Seattle and New York. This report will assess two facets of how Airbnb affects urban environments and neighborhoods. This research explores the ‘Airbnb effect’ on housing affordability and the actions local authorities are taking to reduce its impact on the housing rental market.  Thus, it will assess how Airbnb influences the social and cultural context of these cities’ neighborhoods.

1.3. Research Questions

1. What efforts have local governments made to combat the “Airbnb effect” and increase the availability of affordable housing?
2. How does the Airbnb phenomenon affect the cultural and social living environment of neighborhoods?

1.4. Research Focus

This research focuses particularly on Seattle and New York, which have experienced major growth in Airbnb listings and have taken different actions to deal with the challenges short-term rentals present. the selection of these cities was because of their disparate characteristics. With a booming tech sector, Seattle, a city that is relatively smaller, has experienced fast urbanization and an uptick in tourism, positioning it as an important case study of how Airbnb affects a growing urban environment. The large, densely populated, and longstanding tourism and housing issues in New York position it as a unique case study revealing how Airbnb can exacerbate current challenges in established urban locales.

1.5 Methodology

To perform this study, the analysis of both the qualitative and quantitative information was used. The method used in the research was the consideration of scholarly resources, city housing reports, and case studies pertaining to the effects of Airbnb on housing markets, culture, and social relations. Some of the sources used were journals, both peer-reviewed and government publications, and market research papers on the Seattle and New York housing economies. Further, the newspapers’ articles and other policies that focus on public policy within the cities were also considered important in ascertaining the regulations adopted by City authorities and the efficacy of such measures. The comparison of the housing affordability issue, neighborhood change and social effect in both cities provided a fair and diversified understanding of the Airbnb impact based on quantitative data collected from different sources.

2. LITERATURE REVIEW

2.1. The “Airbnb effect” on Housing Markets

The so called “Airbnb effect” has generated a number of theories with aims at describing its effects on housing markets and cities. The term “Airbnb effect” emerged around 2010 as a shorthand for the complex and multifaceted impacts of short-term rental platforms like Airbnb on housing markets, neighborhoods, and cities. However, it is difficult to pinpoint a single author or specific date for the term’s origin. These theories range from the negative impacts of displacement and housing commodification to more positive arguments around urban revitalization and economic growth through tourism. Among the theories, there is the displacement theory which posits that the conversion of long-term rental units to short-term letting results in the displacement of long-term occupants. When property owners want to get more returns from short-term rentals, they take units off the long-term rental market leaving many residents with no option other than to move out, often to sub-standard units (Jiao & Bai, 2020). There is evidence that Airbnb listing growth is directly linked to raised housing prices mainly in cities that attract a lot of tourists (Ekeroma, 2023).

Another important theory is the theory of commodification of housing, which says that platforms like Airbnb are making housing a commercial asset instead of a basic need. From this perspective, Airbnb’s impact is detrimental and exploits the residential spaces for the sake of monetary gains rather than for the main societal purpose of providing shelter. This shift results into a situation whereby housing becomes a market commodity for generating income rather than being a necessity for accommodation (Marsella et al., 2024). This theory also reflects the general culture of commodification of housing where the property is mainly seen in terms of its financial value rather than a place to live thus deepening housing inequalities.

An opposing theory is the urban revitalization theory which postulates that Airbnb and similar platforms can transform deserted neighborhoods for the better by bringing in investment and tourists. The proponents contend that the temporary or short-term letting of homes generates economic growth and results in the revitalization of what might be dormant or forgotten neighborhoods or towns (Mody et al., 2021). Nevertheless, this theory is usually criticized as failing to provide for the social consequences of gentrification such as provisions of accommodation to the poor (Jiao & Bai, 2020). 

In combination, these theories capture the complex nature of the “Airbnb effect” and how it offers both benefits as well as negative impacts on urban neighborhoods. It is therefore important for policy-makers to fully appreciate these different views in order to begin to strike the right balance in regulating short-term rentals for all the ill effects that they pose, while at the same time fully harnessing their benefits in support of local economies.

2.2. Seattle’s Housing Market

Airbnb has disrupted housing in Seattle for several reasons, with a big effect on some specific neighborhoods that attract tourists. The housing market has further tightened and rented space prices have gone up, while availability to these services has gone down in the city (Negi & Tripathi, 2023). Because of the growing number of property owners who change their units into short-term rentals, there is a further reduction in the housing stock that is available for ordinary residents in the city – “a problem that the city already faces,” while “exacerbating what is already a severe housing shortage.” This trend tends to be more significant in towns such as Seattle within which the hi-tech sector has led to an unprecedented increase in housing costs; forcing many residents to live in substandard housing facilities (Richards et al., 2020). This pressure has been compounded by the presence of Airbnb, which continues to drive up rental prices and make it nearly impossible for those in low and middle wage jobs to find accommodation.

Apart from increasing rents, Airbnb listings in Seattle have led to the gentrification of several neighborhoods.  Areas like Capitol Hill and the Central District have seen an influx of short-term rental properties, which has driven up property values and displaced long-term, lower-income residents. As a result, these once-diverse communities are experiencing demographic shifts, with rising rents and home prices, making it harder for existing residents to remain in the area. Neighborhoods that used to be mainly cheap and diverse have become more gentrified with top end demographics, thus forcing out many people (Sarkar et al., 2020). The transition from a long-term rental system to the short-term arrangement has changed the population in the areas in a negative way, specifically losing the cultural and social structures of a neighborhood. What used to be neighborhood shops that primarily served the residents have since been supplanted by tourist-oriented shops which alter the nature of these areas. Seattle’s experience shows how Airbnb’s multifaceted social and economic impacts on urban housing systems present significant difficulties for cities as they attempt to promote economic development without negatively affecting housing affordability and social cohesion.

2.3. New York’s Housing Market

New York City’s housing market has also not been spared the big blow by Airbnb, most especially in areas that are already congested in terms of housing. For a long time, this city has been impacted by a high population density, and huge demand for houses, making it prone to short-term rental impacts (von Briel & Dolnicar 2021). There have been many cases in which Airbnb has been accused of contributing to the hike in rents and shortage in the supply of affordable accommodation as landlords shift from low-cost, long-term rental housing to high-yield short-term rental properties. With these changes, the already existing housing affordability problem in the city has further worsened, forcing residents to struggle to find decent homes to rent or even buy (Laskin, 2020). There is high competition in the housing market and Airbnb is part of the problem as it causes displacement of residents and a change of demographics in previously affordable neighborhoods.

2.4 Governmental Efforts to Combat the “Airbnb effect”

Due to the increasing importance of the affordable housing problem, Seattle has succeeded in implementing new strategies to control the use of short-term rentals. In December 2017, the city put in place new regulations that took effect in January 2019. In most regions of the city, these rules set the limit on a host’s units to two properties. The design of this cap limits how many short-term rental units commercial operators can own, thus preserving the amount of affordable housing for long-term residents. The intention of these regulations is to restrict the shift from long term accommodation towards short term rental to resolve the housing supply problem for residents (Marsella et al., 2024). In conjunction with these policies, Seattle intends to grow the production of affordable housing by offering developers incentives to include affordable units in their developments. Still, the performance of these actions is uncertain, and some critics say the approaches are not adequateto resolve the problem. They propose that the policies do not completely meet the economic pressures behind rising housing prices and create loopholes that still promote short-term rentals, thereby hindering their potential to solve the affordable housing crisis.

One of the pioneering cities in taking serious action to regulate short-term rental services, New York City, has put into effect some of the strictest laws across the United States. In 2010, the amendment to the New York State Multiple Dwelling Law banned rentals lasting less than 30 days in almost all apartment buildings, unless the permanent tenant is also on the premises during the rental. The goal behind this law was to diminish unlawful hotel operations through services like Airbnb. As of 2016, further rules came into effect with Local Law 146, which necessitated that Airbnb, along with other platforms, supply the city with listing information. In 2018, Local Law 18 was passed, enforcing stricter penalties for illegal short-term rentals and requiring more transparency from hosts. These laws collectively prevent individuals from listing entire apartments for extended periods, and hosts must reside in the unit for any rental under 30 days (Jiao & Bai, 2020). The city has also sued some hosts who have infringed on these laws, resulting to hefty fines being charged on the culprits. These steps are taken in line with increased efforts to save affordable housing and mitigate long-time inhabitants from eviction. Such regulations have had some impact in the reduction of Airbnb listings, although they have not been without their problems; for instance, property owners have resisted these laws and fight legal battles against the enforcement of such laws.

2.5. Impact on Cultural and Social Living Environment

It is clearly proven that having short term rentals in residential areas has a ripple effect on the way a community is formed. Specifically, short-term rentals disrupt the social fabric by replacing long-term residents with transient occupants, which undermines community stability and cohesion. Also, short term occupancy displaces long-term occupiers, thus undermining the social structure of the community, and erasing the shared community identity (Hoffman & Heisler, 2020). At times, tourism may lead to the development of negative effects, such as gentrification, where locals are forced out and the cultures of communities are changed. This occurrence is especially prevalent in places where hosts offer many Airbnb spaces for rent, and the locals’ organic community nature is eroded by tourism.

Some neighborhoods in Seattle have been profoundly affected by Airbnb, while others have undergone more moderate change. For instance, areas such as Capitol Hill and Ballard have been found to be effectively experiencing a form of gentrification as more and more of them are becoming subsumed into the world of short-term lets, thereby raising questions on the disintegration of social bonds. Old timers, residents who have lived in the neighborhood for most of their lives, complained of feeling alienated from their own communities by the ever-flowing fury of tourists (Mody et al., 2021). Moreover, it arose that some of the previously local-oriented stores are changing their target, turning into tourist-oriented ones, and thus changing the culture of the district.

In New York the effects of Airbnb on neighborhood characteristics are even more apparent. On the outskirts of New York’s boroughs, such as Williamsburg and the Lower East Side, which are renowned for their ethnical diversity and nightlife, the rise of short-term rental has hugely been realized. This outcome has caused a dramatic decrease in the production of housing units that are reasonably affordable, along with an increase in tensions between residents and tourists (Nieuwland & Van Melik, 2020). A number of longtime residents in these areas have identified the influx of tourist shops and services along with the vanishing of traditional business staples as proof that gentrification is currently underway. The social bonds of these neighborhoods have worn thin due to resident displacement caused by costs that have become unaffordable.

2.6. Comparative Analysis: Seattle vs. New York

Similarities in the “Airbnb effect”

Seattle and New York recognize similar problems with high rent and shortages in longer term accommodation because of the impact of Airbnb. In each city, there are grumbles about the consequences of short-term rentals, which frequently displace established residents and redefine some areas into high-end tourist hotspots (Jiao & Bai, 2020). The results of this include housing costs, availability, and neighborhood connections; all of which have led to official interventions. In both municipalities, there is local community unease about the diminishing neighborhood character and its effects on social relationships. In spite of these activities, the effectiveness of regulatory measures continue to be a matter of debate, with sustained conflicts between the rise of short-term rentals and the affordability of housing.

Differences in Governmental Response

The two municipalities have striven to create measures to control the impact of short-term rentals, but they have done so in disparate manners. In addition to tough regulations regarding the number of properties a host can register, Seattle encourages affordable housing (Marsella et al., 2024). New York, alternatively, is more proactive and has  banned most short-term rental platforms and sanctioned only owner-occupied homes for short-term rentals, legitimizing the rules through legal power and potential consequences. These differences can therefore be attributed to the specificities of each city’s coping strategies, as well as the political and economic realities it presents. Critics who argue that these cities have not gone far enough often suggest more stringent measures, such as capping the number of short-term rental units, imposing higher taxes or fees on Airbnb hosts, or increasing enforcement mechanisms to ensure compliance with existing laws (Ekeroma, 2023). They believe these steps could help mitigate the impact on local housing markets and preserve affordable housing for long-term residents.

Comparative Impact on Neighborhoods

Although the cultural and social significance of Airbnb is the same in both Seattle and New York, many aspects of the phenomenon are city-specific. In Seattle, the changes appear to be a lot more focused and can be felt at the neighborhood level, with some areas experiencing dramatic shifts in community demographics (Jiao & Bai, 2020). In contrast, New York’s neighborhoods face more widespread disruption, with entire communities being reshaped by the influx of short-term rentals. This effect is manifested to a greater degree in New York since there are significantly more Airbnb listings concentrated in this area and their adverse effects on the availability of housing and the overall cohesiveness of communities are even more apparent.

2.7. Discussion

Synthesis of Findings

Observations made in Seattle and New York demonstrate that both markets have been changing due to the presence of Airbnb: rental prices are going up, and options for affordable housing are shrinking. Seattle hosts are using Airbnb to generate income while increasing housing costs and making it harder for residents to find affordable housing. Because the city’s market size is relatively small, the consequences of short-term rentals have affected this area more. While this is an issue in many cities all over the world, New York’s housing stock has been further stressed, and Airbnb has acted as a vehicle for gentrification which has led to the evictions of longer-term residents. These outcomes suggest that the “Airbnb effect” is present in various markets, and is not unique to small towns or cities.

At the same time, the cities have significant differences in the scale and nature of Airbnb’s impacts. New York has a larger population, and the population density is higher; therefore, the impact is felt even more as the effects are more drastic in the neighborhood and the cohesiveness of the community. Still, these changes have happened in Seattle too, albeit somewhat smaller in scale. The responses from the local governments of both cities while differing in the extent show that managing the sharing economy is not easy. Nonetheless, despite the attempts to regulate short-term rentals, their regulation remains weak and relative, and both cities continue to share concerns about Airbnb’s economic advantages and detrimental effects on community stability and affordable housing.

Implications for Policy and Practice

The implications of these findings for policymakers are clear: It is supposed to underline the necessity of developing more profound and proactive models to tackle the issue connected with Airbnb. Currently, the regulation performed in Seattle and New York has failed to address negative effects on affordable housing and community stability. The law makers should ascertain the possibility of enforcing more strict measures; not just restricting the essence of short-term rental but also increasing the consequences of violation of the set laws. Further, providing higher incentives to property owners to focus on long-term rental accommodations rather than short-term ones can also relieve the housing market pressures.

However, it is also crucial for the cities to take a more active role in tracking the impact of Airbnb and other similar services. This may include monitoring the capacities of the housing market and the socio-economic effects of short-term rentals so that changes can be made to the existing policies if necessary. The findings from the Seattle and New York cases are therefore noteworthy as they illustrate how different cities can deal with similar issues. It is imperative to achieve equilibrium in the sharing economy that protects rights of residents but encourages innovation towards making housing more affordable in the future.

Future Research Directions

Further studies should examine the consequences of Airbnb regulations in the long run concerning housing markets and neighborhoods. Also, it would be useful to compare the current state of affairs with other cities that have different legal frameworks so that the results can then show the efficacy of different methods. Additional research may also seek to analyze other areas of life in cities affected by short-term rental operations, including mobility, economy, and fairness.

Limitations

This study focused on Seattle and New York, two large, economically prosperous cities. The findings may not be directly applicable to smaller cities or those with different economic conditions. Additionally, the study focused primarily on housing affordability and neighborhood dynamics, and further research may be needed to explore other potential impacts of Airbnb.

3. CONCLUSION

3.1. Recap of Key Points

In this analysis, we explore the effects of Airbnb on affordable housing and community change in Seattle and New York. The conclusions presented in the paper show that, over time, Airbnb has led to the increase in rent and the decrease in housing stock and community cohesion in both cities. Governmental actions were discussed in the study along with the differences of success when it comes to facing these challenges.

3.2. Final Thoughts

Airbnb has both potential benefits and drawbacks for cities. While it can offer economic opportunities, it can also contribute to housing challenges. Cities need to find a balance between regulation and innovation to ensure that Airbnb benefits residents while mitigating its negative impacts. Comparing the progress of Seattle and New York can give insights into other cities that experience similar problems with the sharing economy and the importance of enhanced and rational regulation.

REFERENCES

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Laskin, K. (2020). Is Airbnb Polluting the Big Apple? The Impact of Regulating the Short-Term Rental Service in New York City. Journal of Civil Rights and Economic Development, 33(3), 5.

Marsella, A., Wagner, G. A., Melo, V., Anastasi, S., & Stephenson, F. (2024). The Political Actors Behind Airbnb Bans: Evidence from New York City. Available at SSRN 4873434.

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Von Briel, D., & Dolnicar, S. (2021). The evolution of Airbnb regulations. Airbnb before, during and after COVID-19. University of Queensland. https://doi. org/10.6084/m9. figshare, 14195972.

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