Oxford Economics releases housing affordability crisis report

US: Research firm Oxford Economics has released its latest in-depth report highlighting the extent to which short-term rentals are leading to the housing affordability crisis facing American communities.

The deep dive analysis covered more than 2,500 counties over a four-year period leading up to 2018 and included model extensions on urban areas and vacation destination areas. The dataset included over 70 local variables, including average household income and the number of residential building permits in each county.

The report was commissioned by Vrbo—a member of the Expedia Group family of travel brands.

In a press statement, Expedia Group vice president of government and corporate affairs, Amanda Pedigo, said: “Expedia Group believes fair and effective short-term rental policies are not only achievable but vital to the long-term health of our communities. Those policies are built upon a foundation of fact-based dialogue and collaboration.”

The report is being officially released at the 2019 National League of Cities City Summit in San Antonio, Texas on Thursday.

Among the key findings in the report was that increases in household earnings and improvements in the work market are the key drivers of the housing affordability challenges affecting many U.S. municipalities.

Key Report Findings:

1. Short-term rentals account for a fractional .2 percentage point of the 4.3 per cent increase in real rents over the course of the last four years.
2. Rent prices would have been only $2 cheaper per month in 2018 if short-term rentals had remained at 2014 levels.
3. Real house prices increased by 14.9 per cent between 2015 and 2018, but short-term rentals only contributed to one per cent of that increase.
4. The average mortgage payment would have been $105 cheaper per year – or around $8.75 a month – in 2018 if rentals had remained at 2014 levels.
5. The presence of short-term rentals has not substantially driven the U.S. house price and rent increases over the past few years; A crackdown on rentals would not help address housing challenges.

Pedigo added: “We commissioned this study to gain a cleareyed and accurate understanding of the impact short-term rentals have on housing and rental prices in American cities.”

Oxford Economics found that, in terms of house prices and the rental model, there was no significant difference in the long-term impact of short-term rentals on prices and rents between urbanised and rural areas.

Oxford Economics senior economist and project lead, Alice Gambarin, said: “Adopting stricter regulations on short-term rentals is unlikely to solve the housing affordability crisis faced by many American households, in both the rental and homeowners’ market.

“It is important to weigh these potentially modest affordability benefits against the associated negative consequences for the local economy, including lower levels of tourist expenditures and tax receipts,” she added.

Pedigo added: “While the data concludes that the impact of short-term rentals on housing affordability is minimal, we remain committed to partnering with local governments to develop policies that balance the concerns of some community members with the important role vacation rentals have played for generations of homeowners and travelling families.”

For more information, visit the Expedia Group website here and the Oxford Economics website here.