Housing and Digital Platforms: Airbnb in Puerto Rico

Housing and Digital Platforms: Airbnb in Puerto Rico

Published on September 14, 2020 / Leer en español

Research Associate

Airbnb’s entry into Puerto Rico, at least before the COVID-19 outbreak, had been very well received. This digital platform allows property owners to make their homes available for short-term rental. It has raised passions among supporters who defend the company as the standard for technological innovation, and detractors including hotel owners who allege that the competition is unfair and residents who claim that this technological platform reduces the availability of housing in their communities. Although there is much truth to the arguments of supporters and detractors, the evidence thus far appears to support the claims of detractors, particularly those of residents. However, even when it can be proven that Airbnb affects the availability of housing, addressing and regulating this situation poses an enormous challenge for local governments.

Airbnb and Digital Platforms

There is a romanticism about the economic possibilities offered by companies that provide digital platforms. These platforms are marketed as technological innovations that offer existing services more efficiently and at a lower cost, in turn causing disruptions in traditional markets. In turn, the argument is that these platforms allow any individual to access additional income by making use of their assets, be it a car or a home, to provide a service for public consumption. This dynamic, misnamed the “sharing economy”, since it there is very little sharing and does not come from a collective effort on the part of users, has instead been led by multinational companies that have abundant venture capital, which has afforded them a huge advantage to enter all kinds of markets around the world. Airbnb definitely falls within this group of companies and has managed to establish itself in international short-term rental markets.

It is important, however, to understand that the arrival of digital platforms, Airbnb in particular, has been made easier by the following factors: (1) labor precarization; (2) underutilized properties; (3) wide availability of mobile devices with internet access; and (4) traditional markets unable to innovate and offer services at the lowest possible cost. Although Airbnb poses significant disruptions to the hotel sector, the evidence indicates that its possibilities to address labor precarization and property underutilization are somewhat overstated by its supporters.

Airbnb and its Effects on Housing

Although the arrival of digital platforms in short-term rental markets is a relatively recent phenomenon, various studies have shown that these platforms, especially Airbnb, have an adverse effect on the availability and affordability of housing. Some of the cities that have been studied include Barcelona (García López et al., 2020), Palma de Mallorca (Yrigoy, 2018), New York (Wachsmuth and Weisler, 2018), Boston (Horn and Merante, 2017), and Los Angeles (Lee, 2016). Even during my doctoral studies, I found that the proliferation of short-term rentals tended to make housing more expensive in Havana, Cuba, despite having a different context than the aforementioned cities.

The degree to which Airbnb rentals drive up the cost of homes varies by city, but the dynamics are very similar. Although at first glance the markets are different, short-term rentals tend to reduce the number of properties that could be used for long-term rentals, thus reducing the housing supply and making remaining rentals more expensive for potential residents. On the other hand, there are local or international investors who have hoarded properties in order to rent them through Airbnb, which simultaneously reduces housing supply and makes it more expensive. Finally, Airbnb rentals tend to be concentrated in areas with more economic opportunities and amenities, which implies that the possibilities for any individual to rent their home in the short term are limited by their geographic location.

Airbnb in Puerto Rico

Using data from AirDNA, a Barcelona-based short-term rental market research firm, we at the Center for a New Economy (CNE) are conducting an analysis of Airbnb rentals in Puerto Rico. Our findings indicate that, between 2014 and 2020, nearly 11,500 hosts listed nearly 25,000 rental properties through Airbnb, representing nearly 6% of Puerto Rico’s total rental housing stock. The municipalities with the highest number of properties listed are San Juan, Dorado, Río Grande, Vieques, Culebra, and Rincón.

There is also a trend toward property hoarding by individual hosts: the top ten Airbnb hosts who reported the highest levels of income have hoarded 611 properties amongst themselves, for a total of nearly $18 million in revenue in the last 12 months. On the other hand, although there are many hosts who have been able to benefit from Airbnb, more than 4,000 hosts, out of a total of 11,500, failed to generate any income, thus evidencing the unequal opportunities to make money using this platform.

Implications for the Future

Cities such as Tokyo, Berlin, Barcelona, ​​New Orleans, Lisbon, and New York have been experimenting with different measures to try to address the adverse effects of short-term rentals. From implementing outright bans, setting limits on how long you can rent through Airbnb, and implementing a host licensing system, to subsidies for incentivizing affordable long-term rentals, cities have pursued all kinds of measures. Unfortunately, evaluating which of these measures have had the expected effect is still pending, since implementing any of them requires that cities have access to the most recent data and the analytical capacity to constantly monitor these types of rentals.

At CNE, through our Blueprint initiative, we will continue to research this issue, as there is still much to be learned about these rentals and their implications for housing in Puerto Rico.

The Spanish version of this column was originally published in El Nuevo Día on September 13, 2020.