Airbnb’s Economic Contribution to the City of San Francisco

Airbnb Spreads Like Wildfire; Hotels Panic

[Alvin Brickman for Metrosetter Wire]

A study commissioned by Airbnb on the effect of their listings on the city of San Francisco has just been published which seems to indicate that the vacation rentals listed on the site have had a positive impact on the city’s economy.

Some of the data was visualized in an infographic to illustrate the distribution of Airbnb’s properties vs hotels in the city, which you can view to the left. As you can see, vacation rentals seem to be overtaking hotels by sheer number and pervasiveness. If I were a hotel owner, I might be a little worried!

There has been a rather heated discussion recently around the topic of Airbnb’s legality, but now Airbnb and their users are bolstered by economic data. In addition to finding that $43.1 million was spent by Airbnb’s users on local businesses over the course of a year, the study found that:

  • 60 percent of San Francisco Airbnb hosts make below the median income for the area.
  • 56 percent say they use their income from Airbnb to pay their rent or mortgage.
  • 20 percent of Airbnb hosts are freelancers, compared to 8 percent of the San Francisco population.
  • Airbnb guests spend $1,100 per San Francisco visit, compared to $840 for hotel guests.
  • 60 percent of that spending is in the neighborhoods where guests stay, and Airbnb guests stay all over town instead of just in the main tourist districts.
  • Over the past three years, the San Francisco hotel occupancy rate and average daily rate are both trending upward.

The finding that 60 percent of Airbnb hosts make below the median income for the area and that 56 percent are using the additional income from Airbnb to pay their rent or mortgage seems to suggest that, for many, the practice is very much a financial necessity. Renting out their property or a spare room allows many of San Francisco’s residents to continue living in the city, which counters one of the stronger arguments by those who are supportive of taxing the activity — namely, the argument that short-term rentals discourage people from living in the city by reducing the available options for those shopping for permanent housing. (But equally preventative of permanent residency in a city is if the city is too expensive to live in!)

Precisely what value does an Airbnb property offer?

With the purpose of comparing Airbnb’s properties to a traditional hotel/motel, we’ve looked at two options available to a consumer looking to spend $100 dollars (or so) on housing in the neighborhood of North Beach in San Francisco for one night.

For $89 + a 14.5% hotel fee of $12.90, totaling $101.90, a traveler can purchase a room at the San Remo Hotel with a full-sized bed and a sink, and an external shared bathroom and shower across the hall.

For a mere $4.10 more at $106 ($95 + $11 Airbnb service fee), a traveler can purchase, on Airbnb, the master bedroom of a 3-bedroom apartment, with a queen-sized bed, private bathroom and shower, kitchen access, and a walk-in closet.

Needless to say, most would probably pay the extra $4.10 for the additional amenities and the comfort of staying in a room that feels more like a home than a hotel.

While city officials have concluded that short-term rentals’ exemption from the hotel tax is detrimental to the city’s well-being, the results of Airbnb’s study above is irrefutable evidence that short-term rentals do contribute palpably to San Francisco’s economy, even if city officials aren’t collecting revenue directly with an official tax. Whether the contributions are worth the risks is another matter.

There are strong arguments on both sides of this debate, but ultimately, the city will have to formulate an effective way of enforcing any regulation of Airbnb’s inventory because simply “placing” a hotel tax on them has already proven to be ineffective in other metropolitan cities in the country.

As an aside, how much more revenue does the City of San Francisco need? They already exact an exorbitant amount of money from individuals through other means; for instance, through parking meters and traffic fines. In 2011, the San Francisco Municipal Transportation Agency collected $41.5 million in parking meters revenues, and about $86.3 million in traffic fines — CRIMINAL, — and yet they still receive too many complaints about lackluster enforcement of residential parking zone rules, blocked driveways and abandoned vehicles to satisfy.

However, it’s important that we do not conflate the symptoms with the causes. I’m of the opinion that all of these financial issues the city of San Francisco is faced with are symptoms of a larger problem than one that can be solved by simply increasing or decreasing a number in a lawbook.

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