St. John’s is in the midst of a housing crisis. Across the city, apartments available for long-term rentals are scarce all the while short-term vacation rentals–largely offered through the Airbnb platform–are taking off. Is this a strange coincidence, or is something more going on? It’s time to take a closer look at Airbnb’s impacts on rental housing in St. John’s.
Recent data indicates that there has been a decrease in the supply of long-term rentals and an increase in rent prices in the city.
Facebook rental groups are flooded with people looking for places to rent, with many members expressing that they have no hope of finding a spot in their desired areas. A quick look at the Airbnb website meanwhile, reveals many short-term stays are available in St. John’s.
According to AirDNA.co, a short-term rental data analytics site, 597 active short-term vacation rentals are offered in St. John’s alone, through Airbnb and a similar site called Vrbo, that cluster towards the downtown area. 80% (477) of these rentals are entire homes, with an average nightly cost of $172.
For some St. John’s renters on social media, the increase in Airbnbs in the city seems like one of the more obvious reasons why they can’t find apartments to rent.
Facebook users blame Airbnb
Facebook groups have provided a perfect outlet for frustrated prospective renters to vent. The Independent talked to Sherwin Flight, the admin of the long-running Newfoundland Tenant and Landlord Support Group. He said that he has noticed a big change in the past year in terms of the availability of rental units. Flight also helps run other rental groups across the province, where landlords can post rental properties they have available.
“It used to be common for someone to post they are looking for a unit, and get a handful of comments from landlords and people giving them options,” he noted. “But now, we see posts of people desperately looking for somewhere to rent, and even though a couple of thousand people have seen the post, there are no comments underneath with anything available.”
For Flight, the activity in the Facebook group makes it clear that something has changed in the rental market. He said that the number of people making posts looking for somewhere to rent increased when in-person classes returned to Memorial University and the College of the North Atlantic.
Flight will also remove any posts made in the group that recommend Airbnb to landlords. “The support group is our way to make renting better for the people that live here,” he maintains, “and short-term renting doesn’t help that, so we remove comments that encourage Airbnb because that doesn’t help people who want to be here and live in the community.”
While short-term vacation rentals may appear to be creating issues for those looking to rent, as Flight pointed out, long-term rentals also have created issues for landlords. “Just looking at the way things have gone,” he said, “there are some issues with the landlord-tenant process, and those problems have meant that some landlords no longer want to be in the long-term rental market.”
Landlords have valid reasons to choose to rent out their properties to short-term guests rather than long-term tenants. After all, they do stand to make significantly more money that way. Especially given that there are more and more people looking for places to stay. Come Home Year, the provincial government’s effort to reignite the tourism industry, is drawing many returning expats to the province, and the city especially. And, since in-person classes have resumed there has been an influx of students seeking per-semester housing.
However, the question remains: are Airbnbs actually impacting the rental housing market in St. John’s?
The AirDNA.co map dotted with a multitude of Airbnb locations certainly makes it seem that way. The screenshot made the rounds on social media, where it was treated as supporting evidence of Airbnb’s takeover. One Facebook user made a post that now has 140 shares, showcasing the map with the caption, “Sad that no one can get an apartment, but these are all Airbnbs and no one can find rental space.” The image also circulated around rental groups like Home for Queers Newfoundland where another user commented, “No wonder it’s impossible to find a place to rent/live downtown Look at all the air bnbs [sic].”
Are Airbnbs really to blame, then, or does it just seem that way? The answer is: sort of.
What is Airbnb?
Airbnb was originally built around the idea of home sharing. Home sharing refers to the secondary use of a home by its owners to house visitors for short periods of time. While Airbnb started as a small company that allowed people to make extra cash by renting out a spare bedroom or basement apartment, it is now worth billions of dollars. Airbnb hosting has become big business, as evidenced by Canada’s top Airbnb host owning a whopping 266 listings.
Setting up vacation rentals is not just a popular “side-hustle” for people looking to supplement their income or make a small profit off of their properties, it has also become a full-time enterprise.
According to a McGill University study conducted in 2018, “almost 50% of all Airbnb revenue [in 2017] was generated by commercial operators who manage multiple listings.” Therefore Airbnb, rather than a humble home-sharing platform, has become a place for property owners to turn a big profit.
How do Airbnb hosts make money?
Airbnb seems attractive to prospective property owners because of its potential to generate more revenue than long-term renting. The website advertises that in St. John’s an entire place for 4 guests can earn you up to $3340 a month. As a popular tourist destination, a host is essentially guaranteed to have their place booked for the summer.
According to AirDNA, in June 2022 in St. John’s, the average revenue collected from entire home listings was $3094, and $2349 for private room listings. The Airbnb market revenue for June 2022 was the highest since before the pandemic: a market total revenue of $1,943,111 in June 2022, compared to $2,278,648 in August 2019.
In St. John’s, the average nightly rent for an entire home is $172, and $132 for a private bedroom. The occupancy rate was 83% for the month of June, meaning that if you had an Airbnb listed for that entire month you could have expected roughly 24 days out of the whole month to be booked.
Clearly, for property owners that have a house available in the summer months, there is potential to make a lot of money through Airbnb. The nightly price for an Airbnb exceeds both monthly costs and the price of rent on the long-term rental market. For example, most recent data shows that the average monthly rent for a one-bedroom apartment in St. John’s is $823. However, on Airbnb, the average nightly rate for a one-bedroom is $124, meaning a host could make a whole month’s rent in just a one-week booking.
For those struggling to pay off their mortgages and generally make ends meet, renting out their basement apartment or a second property as an Airbnb is an attractive option. With the recent increase in the overall cost of living, there is potential for more property owners to choose short-term over long-term rentals. While the interests of St. John’s property owners might align with those of visitors looking for short-term stays in desirable areas, they do not necessarily align with what’s best for local full-time residents needing access to affordable long-term housing.
What is the downside to Airbnb?
Airbnb seems like a win-win for guests and hosts, providing home-like accommodations in popular neighbourhoods for travellers and serving as an extra source of income for hosts. Nevertheless, some residents and landlords are turning away from Airbnb.
Nicole Smed from the Renters Action Network told The Independent, “Airbnb, as it seems to operate in NL, takes viable housing options away from residents in need. It often allows wealthy people to hoard available homes, leaving working-class people to fight each other for cheap apartments.”
Knowing this prompted Robyn LeGrow, landlord and former Airbnb host, to return her Airbnb listings to the long-term rental market. It has meant that she can now sleep at night.
LeGrow owns multiple rental properties. This has worked out as a successful business model allowing her to pay off her mortgages. Before COVID-19, LeGrow ran an Airbnb out of her downtown home, but after seeing the problems tenants were experiencing during the pandemic, she decided it was time to return to renting out the place long-term.
“The Airbnb market was fantastic, I made a lot of money,” LeGrow told The Independent, but when Memorial University returned to in-person classes, there was a steady stream of people looking to rent. That is when she decided to do a 1-year lease with a student in the unit.
She explained, “I have way too much of a heart to be a business person.” She decided to sacrifice some things in order to convert her properties to long-term rentals. LeGrow described the rental market as a “system” that’s causing people to struggle unnecessarily during the pandemic. “I can’t go to sleep at night knowing I’m part of that system,” she confessed.
When asked if she will ever return to Airbnb, LeGrow replied, “No – Airbnb killed me.” She added that in order to earn a profit from Airbnb, she had to do all the cleaning work, which often involved turning the whole place over in three hours. Guests often had high demands and wanted everything “with a cherry on top.” She said, “I don’t miss the expectations that came with Airbnb, I do miss the money, but not enough that I want to go back to that life.”
How has Airbnb influenced the rental market in St.John’s?
A lot of research into how Airbnb impacts rental housing has been done in major cities across the world. Inside Airbnb is a data activism project that seeks to provide information about and advocacy around Airbnb’s impacts on residential communities. They have done extensive research on Airbnb’s data from a global perspective, and have found some evidence that it can indeed impact housing. For example, in Amsterdam, 1 in 9 units are rented on Airbnb in some neighbourhoods. In Paris,15,000-25,000 apartments have been removed from the housing market for Airbnb, while in Barcelona, rent increased by 7% and property prices increased by 19% because of Airbnb.
However, St. John’s differs quite significantly from Amsterdam, Paris, and Barcelona. To get a better understanding of the rental market in St. John’s and the effects Airbnb has had, The Independent talked to Hope Jamieson, a former city councillor, who now works with the Community Housing Transformation Centre. She said that based on the numbers alone, Airbnb is not the reason for the housing crisis in St. John’s. While it is certainly a factor it is not significant enough to be the sole cause of the problem.
Jamieson contrasted the data from Airbnb with the most recent rental market data in St.John’s. Most renters are looking for one-bedroom apartments, which means the demand is concentrated on smaller units. Furthermore, 81 of the single bedroom units on Airbnb are actually hotel rooms, leaving only 210 single bedroom units being taken from the long-term market. For Jamieson, this indicates that Airbnb has not caused any significant loss in units in the rental market. On the other hand, she thinks the housing crisis is coming from somewhere else, such as the fact that there hasn’t been nearly enough rental development in years.
The previously mentioned McGill study aimed to analyze Airbnb in Canada and find out if the short-term rental market influences the long-term one. This study looked primarily at metropolitan areas including Toronto, Montreal, and Vancouver. The study found that in Canada “between 17,000-43,000 entire homes were rented frequently enough last year, that they are unlikely to house a permanent resident.”
And yet, despite the growth of entire home Airbnb listings, they still only take up a small fraction of total housing. The study found that Airbnbs do not exceed more than 0.5% of the total private housing units in Canada’s largest metropolitan areas. The researchers suggest that there is more potential for Airbnb to remove full-time housing in rural areas, more so than in major cities, where Airbnb has not yet largely dented the housing market supply.
The study also found that frequently rented entire home listings are proportionately more common in rural areas, which is essential to note, considering Newfoundland and Labrador’s many outport communities which have become popular tourist destinations.
While Airbnb is not significantly depleting housing supply in St. John’s, Jamieson believes “Airbnbs are absolutely a major driver of housing unaffordability in areas of Newfoundland where tourism is a major economic driver.” This is evident in areas such as St. John’s, Bonavista, and communities around Gros Morne that see higher levels of tourism.
Also, as Jamieson noted, there is potential for Airbnb to increase rental prices in certain areas, such as popular tourist destinations and major cities; and this has proved true in other countries. A study done in the United States in 2017 found that Airbnb impacted house prices and rent prices. The study found that a 1% increase in Airbnb listings in an area, leads to a 0.018% increase in rent and a 0.026% increase in the cost of a house.
It is safe to assume that St. John’s, with its many tourist attractions, restaurants, and bars, is susceptible to experiencing rent price increases if more owners choose to convert their homes to short-term rentals.
When The Independent reached out to Municipalities NL for comment on this issue, they stated that “Short-term rentals are a contributing factor to the affordable housing challenges being experienced in Newfoundland and Labrador and elsewhere – nationally and internationally – according to recent Canadian research.” In the meantime, they are “monitoring ongoing research and experience in other jurisdictions in order to support our members as they seek right-sized approaches for addressing emerging issues specific to short-term rentals.”
Why the heck isn’t this regulated?
When Airbnb began, short-term rentals were illegal in many places. As an online platform, it was able to operate under the radar. As the site increased in popularity, more and more hosts were free to list their homes as vacation rentals, raising the stakes of an unregulated market. Airbnb still sits in a legal gray area in most jurisdictions. Prior to Airbnb, normal bed and breakfasts had to be licensed, but regulations for Airbnb are still relatively new in most cities.
In November 2020, the provincial government did begin to regulate Airbnb by introducing the New Tourist Accommodations Bill. This Act requires that all accommodations in the province must now be registered with the province, and that includes short-term rentals.
Bonavista is one municipality on the island that has enacted such regulations. In 2019, the town implemented commercial zone tax rates for Airbnbs. This was done, according to the mayor, to regulate Airbnbs, after they saw significant growth in short-term rentals. The mayor believed that Airbnb is a high-value business and that operators need to pay their fair share.
Ophelia Ravencroft, St.John’s city councillor for Ward 2, shared her thoughts with The Independent on the growing number of Airbnbs. Noting stories coming out recently about long lines of people waiting for basement apartments in some parts of the metro area, Ravencroft explained, “We at the city are concerned about putting people in a position where they cannot find a home that is affordable.” She asserted that “we are aware this is happening and our role is multifaceted, therefore an affordable housing working group is currently working to produce creative solutions.”
Ravencroft believes this multifaceted approach is needed to make sure Airbnb is handled correctly. Right now it is hard to say if Airbnb is increasing rental prices. She explained that the province is currently working on regulations for short-term rentals since Airbnbs should be registered with the province, but she could not say how well that is being enforced.
“The focus of the city right now is providing affordable housing in as many ways as we can, particularly through the affordable housing working group,” she adds, “but we can’t restrict private property owners from converting their properties into Airbnbs. I–as a councillor, as the person who has heard from people looking for housing, and has had these experiences of housing insecurity–have seen the damage this stuff can do.”
“Right now,” she continues, “the city is not interested in putting in restrictions and will say that the onus is on the province to put in restrictions, and I would agree with that. We need to have these conversations and we have to understand the needs of the people who are lined up for an apartment because, at the end of the day, the tenants are the ones who need a place to live.”
In order to deter a substantial rent increase in popular Airbnb areas like downtown St. John’s, the provincial and municipal governments need to consider regulations. Airbnb has been sitting in ambiguous territory for so long that even when governments introduce laws requiring Airbnb to be registered accommodations, many Airbnbs still run unregistered. For example, in Quebec, after they created laws requiring Airbnb to register with the province in 2016, they found in 2017 fewer than 5% of short-term rentals were actually certified and paying Quebec’s provincial accommodation tax.
With the massive potential for hosts to get away with running unregistered short-term rentals, and in doing so, avoiding higher taxes, more work needs to be done by governments to enforce regulations. As for Newfoundland and Labrador, there is no evidence indicating that registration with the province is being enforced. There also lies the potential for more landlords to convert their homes to Airbnbs, removing homes from the market and increasing rent prices, and lack of regulation makes that look even more attractive.
While Airbnb is not making a major contribution to the housing crisis in St. John’s just yet, there is promise for it to do so. It is already affecting housing in other parts of the island if Bonavista’s crackdown is any indication. In the current economic climate and the late-pandemic rise in tourism, there are more and more incentives for short-term rentals to become landlords’ first choice for the use of investment properties. The conditions of possibility are here to further devastate the city’s ongoing housing crisis.
Follow Abby on Twitter.
Did you enjoy this article? Fund more like it, and support the future of journalism in Newfoundland and Labrador.