Protests in Spain against renting homes to tourists. Is the genie out of the bottle?
Protests against the misuse of homes (renting to tourists), high rental prices, and nuisances are currently spreading rapidly in Spain. What is going on?
Recent developments
El Pais reported three days ago that 15,000 residents in Malaga took to the streets to protest against "the sellout to tourism." There were already large protests in the Balearic and Canary Islands. And last week, Barcelona announced that it wants to completely ban the renting of homes to tourists ("Airbnb'ing") by the end of 2028. In short, the genie seems to be out of the bottle.
The underlying issues
Aside from the influence of Airbnb on prices and housing availability, renting homes to tourists is under heavy scrutiny. Although I often find this to be an oversimplification, it is somewhat understandable. Over the past ten years, Airbnb has grown enormously, and renting out living spaces has boomed, far beyond the original concept of "Invite people to your home." However, during the same period, other significant developments have also taken place:
▪ The ECB kept interest rates at 0% for years, making real estate an attractive investment category.
▪ This made it appealing for investors to buy homes and rent them to tourists, as it yields more than long-term rental (and local authorities were caught off guard by this development).
▪ The rise of the single-person household. In Barcelona, for example, this group grew from 14.5% to 24.7% of all households between 1991 and 2011.
Ban does not solve broader problems
The severe housing shortage is a much broader issue and is not only occurring in cities where Airbnb is popular. Earlier this year, the Harvard Business Review published a study showing that the influence of Airbnb on overall housing prices and availability is very limited. In Barcelona, the number of homes currently rented out is 0.7% of the total supply. If that volume were to return to the market for long-term rental, prices would hardly change. Nevertheless, rental platforms like Airbnb and VRBO will closely watch these developments.
New business model needed?
Whether an announced ban, as in Barcelona, will hold remains to be seen. But it seems certain that the heyday of renting homes to tourists in its current form is over. Public resistance is growing to such an extent that local politicians have to take action. Restrictions or bans are then likely. Whether such decisions will ease the tight housing market is unlikely. They are certainly harmful to the business model of platforms. And this will undoubtedly lead to significant headaches in reinventing the business model.
