Sharing Economies Stabilize Markets

The sharing economy is transforming the way people view high-value underutilized assets. The residential housing industry holds the optimal asset for the sharing economy. For those fortunate to have more than one residence, Airbnb allows higher streams of income while the property is not owner-occupied. An owner can realize a higher rent roll with shorter-term leases than committing to a long term tenant.

The Airbnb platform provides greater efficiency and flexibility for asset owners and short-term tenants. The disruption of Airbnb has forced hasty regulation in cities where rent control determines the CAP rate rather than market rent rates. For example, in San Francisco, a property owner is not able to rent their property on the Airbnb platform for a term of fewer than 30 days if the property is non-owner occupied.

Residential buildings constructed in California prior to 1965, face tenant rent control regulations that reduce long-term potential income for an asset owner. Airbnb provides the opportunity for market stabilization in cities where rents are bifurcated in a barbell distribution.

As interest rates continue to rise in the coming years, it will be more difficult for people to purchase a home. Therefore, the demand for rental property will increase in correlation to interest rates. The sharing economy will be in higher demand and continue to challenge the fundamentals of capitalism as inflation increases. Airbnb is positioned for success in the future economy.