The Housing Bubble

A weekend topic starting with Fast Company. “In competitive real estate markets like Seattle, prospective homeowners like Erik and Rafaela find saving for the recommended 20% down payment difficult. There are some established options, like Federal Housing Administration loans that push down payment requirements to as low as 3.5%. But the government-backed mortgages usually come a lot more strings. It was while researching FHA loans that Erik and Rafaela came across a creative new financing option. Loftium, a Seattle-based startup, will contribute to a buyer’s down payment in exchange for Airbnb income.”

“So far, they have no regrets about their unusual arrangement. ‘It pushed us to go for something that was maybe more expensive than if we didn’t have Loftium, because we did want that extra privacy,’ Erik says. ‘[It] was kind of a good thing, given the way the market is. It might seem expensive now, but it seems like everything is going up and up.’”

From Louisiana Weekly. “Just over a year and a half ago, former New Orleans Mayor Mitch Landrieu and his City Council engaged in a legislative experiment: the wide-scale legalization of online Short Term Rentals of private residential properties. New Orleans became one of the first cities to both make online homeshare platforms widely legal – as well as to provide permits for property owners to engage in ‘whole house rentals’ in historic residential neighborhoods. Last Thursday, the New Orleans City Council sought to pare back those regulations.”

“Four years ago, as online Short Term Rentals began to expand into New Orleans, District ‘C’ Councilwoman Kristen G. Palmer admitted in an interview with The Louisiana Weekly, ‘Airbnb didn’t seem like a big deal. We are all about the shared economy.’ However, in the intervening time, and particularly after the Landrieu’s widespread legalization of STRs, ‘I started to get really frustrated because we started feeling it within these core neighborhoods. You started hearing ancillary stories about what was going on, and I have family members who live in other parts of the city in historic cores. You started seeing property values going up, and then you started seeing property values and house sales in and around these areas going for prices that we’ve never seen before. And we are like, ‘Who the hell are buying these houses’, right? We don’t have that kind of income around here.’”

“A small group of high dollar investors from outside of New Orleans have created a commercial hotel market out of residential properties. For example, she observed, ‘The Sander company, which is based in San Francisco, has 124 listings,’ and thanks to shell companies also getting permits, Palmer added, ‘We think that they have that many, if not more, actual permits, but they [take advantage] of multiple listing data.’ ‘Airbnb pretends they are home-sharing service, that their users are homeowners who are making ends meet by renting out their homes,’ Jane Place Initiative program manager Breonne DeDecker said. ‘But our report exposes that lie. What is happening in New Orleans is not home-sharing, but the hotelization of residential housing.’”

From Bisnow on Massachusetts. “Bostonians who list their properties on Airbnb may be forbidden to continue doing so under a proposed city regulation on short-term rentals, and City Hall says Airbnb only has its cyberbullying to blame. ‘For me, they bullied themselves off the table for negotiation,’ Boston City Councilor Lydia Edwards said. ‘In a total failure to read the room, they popped off and did that email about my colleague Michelle Wu. They have shown they will go down fighting with propaganda.’”

From the Los Angeles Times in California. “That classic Midcentury Modern home you’ve been eyeing on Airbnb might not be listed for much longer. On June 5, Palm Springs is scheduled to vote on Measure C, a ballot initiative that proposes to ban short-term renting of single-family homes. Of the city’s 21,246 single-family homes, 1,525 have permits to operate as short-term rentals. If the measure passes, about 75% of vacation rentals would be eliminated once the ban takes effect in two years.”

“Movie Colony East homeowner John Ferrante describes a cycle of noise that starts with early-morning screams from pool-loving kids and ends with late-night cocktail chatter, and worse, on patios. He said most of that is acceptable neighborhood ambiance, but explained that it’s unusually pervasive and amplified given that vacationers rent seven homes surrounding him. ‘All day long you deal with this,’ said Ferrante, 58, who has seen rentals on his U-shaped block double since he bought his home five years ago. Half the homes on that block are now rented to vacationers, according to city data.”

“Mike Paonessa and husband Mark Steffen illustrate the classic Palm Springs homeowner story. ‘I don’t think we would have even bought the house if we couldn’t rent it,’ said Paonessa, 55. ‘Having it sit empty 75% of the time would be uncomfortable.’”

The Denver Post in Colorado. “As Airbnb and other vacation home rentals continue to grow in Colorado and across the nation, Jefferson County is shaping up as the state’s next flashpoint for communities intent on getting ahead of an industry often perceived as flying under the radar. Golden this week passed a set of short-term rental rules that calls for licensing homeowners who rent out a room or house in the city for 30 days or less. One of the biggest and the most controversial among them is a stipulation that the property for rent must be the owner’s primary residence.”

“Tourist-heavy Golden, viewed by many as the gateway to the Rocky Mountains, began receiving inquiries — and some complaints — last year about neighbors renting out their homes on a short-term basis, said Amber Wesner, city planner for Golden. ‘There was concern that it might be getting out of control,’ she said.”

The Citizen Times in North Carolina. “In this top-destination tourist town, there’s a lot of money to be made renting a house or apartment to weekend visitors. Except it’s illegal in almost all cases. And doing it can mean big fines, according to stringent city rules passed three years ago in response to concerns over neighborhood disruption and exacerbation of Asheville’s housing shortage. Most of the time, property owners caught running a short-term vacation rental, known in common parlance as an ‘Airbnb,’ stop before the $500 a day fine is imposed, city officials say.”

“Reid Thompson isn’t one of those. As of May 10, Thompson had racked up $850,000 in fines. He ignored letters from the city, which he said disrupted his neighborhood and pushed him into the short-term rental business by allowing a grocery store to turn his street into a commercial truck corridor. ‘I guess my thinking is, ‘Yeah, that’s a huge risk. But I don’t think their fines are collectible because I think they are outrageous and capricious,’ he said. The city, meanwhile, is suing Thompson to collect the money and make him stop the rentals, which Asheville’s rules make illegal in nearly every part of the city.”

From the Calgary Herald in Canada. “There are 3,780 short-term rentals listed in Calgary as of April, according to new data compiled by the city. The vast majority, about 88 per cent, are listed on Airbnb. Complaints range from mild to disastrous, according to city councillors: confused visitors banging on suburban doors late at night searching for their rental, a guest parking their boat obtrusively in a cul-de-sac, condo dwellers irritated by noisy renters taking over the building’s pool; and, of course, Calgary’s now-infamous case of an Airbnb in Sage Hill that was declared a ‘biohazard’ after nearly being destroyed by weekend partiers.”

“Coun. Ward Sutherland urged city staff to begin looking at options to regulate such rentals in late 2017 after hearing about a dozen complaints in his northwest ward. ‘What we’re obviously concerned about is the safety of those buildings and the people using them,’ Sutherland said. ‘At least when you have a hotel or a bed and breakfast, there’s fire codes, there’s smoke detectors in every single room, the requirements are very strict. Right now, you go and use these other places and there’s zero rules for safety.’”

From the Agence France Presse on Spain. “Spain may be one of the world’s top tourist destinations, but many people in its biggest cities have grown exasperated with Airbnb-style rentals. And now, their city councils are taking action. Complaints have abounded in Spain that greedy landlords are throwing out long-term tenants in order to cash in on the tourist flow, and that the short-term leases are pushing up rent. ‘We are aware that this is a very restrictive condition and that is our intention,’ Jose Manuel Calvo, Madrid’s city councillor for sustainable urban development, told AFP.”

“He said certain Madrid neighborhoods have reached ‘the same saturation level’ as Barcelona, where a boom in holiday rentals has drained the city’s housing supply and pushed up rents, sparking a backlash against tourists that saw protesters take to the streets. There are now around 9,000 flats in Madrid that are rented out to tourists, six to seven times more than in 2013, Calvo said. Of these, about 2,000 operate without a license.”

“In some buildings, landlords have evicted all local residents in order to rent their flats to tourists for more money, Calvo explained. ‘The consequence is that these neighborhoods end up emptying out gradually and this must be prevented. There is still time,’ he said.”

From The Real Deal on Portugal. “Portugal’s reputation as a vacation spot and a deal for real estate investors has been steadily growing, but the dark side to its successful strategy is chaffing on locals. Evictions of long-time residents are on the rise as foreign buyers and tourists flood the country, according to the New York Times. The 2011 lift of a rent freeze liberalized the market and so, in combination with Portugal’s program to offer property investors who pour in €500,000 or more a residency visa, prices have risen by about 50 percent over three years.”

“As of 2011, before rental laws changed, of Lisbon’s nearly 323,000-unit housing stock, about 50,000 homes were vacant. Now, tourists outnumber residents by a ratio of eight to one, and about 30 hotels are supposed to come online in 2018. Last year, Portugal was listed as one of the top countries to buy real estate overseas.”

From Domain News in Australia. “The Airbnb gold rush appears to be ending, with fed-up landlords returning to the long term rental market after the short term becomes more trouble than it’s worth, agents say. Difficult and hands-on management, less-than-ideal profits, and a saturated market were turning investors from the one-time disrupter, which was no longer seen as easy money.”

“Talia Besser got her start in the real estate industry managing two Airbnbs for her father two years ago. It initially seemed like a fun venture, but the reality quickly became apparent. ‘I think the first two to three months I found it fun,’ she said. ‘Unless you’re going to do it full time and you have all the time in the world, it’s not worthwhile.’”

“The two units required near-daily attention, from booking cleaners to ensuring the keys were ready to be picked up. But for long stretches of time, the Balaclava short-term stays didn’t attract visitors. ‘There are those periods in winter where people weren’t coming to Melbourne, and we’d have them empty for weeks at a time,’ she said.”

“At the peak of the boom, the disrupter was a zeitgeist among buyers but many have now come back to the rental books. ‘A lot of the properties we were selling we had people buying them to turn them into Airbnbs,’ said Harcourts Melbourne City director Dionne Wilson. ‘We were losing a few [rental] managements to Airbnb but a lot have since come back to us.’”