Airbnb, the controversial service that lets homeowners temporarily rent out a room or a whole house, has been in Georgetown for at least a year. But listings in Georgetown suggest that Airbnb is becoming a way for real estate managers to rent out investment properties at much higher rates than they’d get with long-term tenants.
Specifically, among the dozen or so Airbnb listings in Georgetown, I found four that were recently sold (i.e. within the last two years). The service advertises itself as a way for homeowners to “rent out some extra space effortlessly.” But now, it looks like investors are buying properties with the sole intention of renting them out as an Airbnb.
The numbers make sense. One house was bought in 2013 for about $1.3 million. It rents out on Airbnb at over $6,000 a week. In the spring and summer, it charges $1,000 a weekend night. A similar house rented on a long term basis would attract no more than about $7,000 a month (for what it’s worth, Zillow estimates only a $5,800 per month rent). Airbnb obviously has more risks since the property could remain empty most of the time, but it has significantly more upside.
Clearly many properties in Georgetown are already purchased simply as investment properties. They run the gamut from run-down rentals to upscale rowhouses. But these are generally rented out on a long term basis. Airbnb rentals are essentially unregulated hotels. The guests stay for a few days, then leave.
This is hardly a phenomenon isolated to Georgetown. The New York Times recently reported on the profit that New York City renters can make by subletting their apartments on Airbnb. One entrepreneur started out by listing just his extra bedroom. Soon he realized that he could rent out a second apartment solely for the purpose of “subletting” it to Airbnb customers. He reported a $6,000 month profit. A report by the New York attorney general found that a small number of commercial operators represented the vast bulk of the Airbnb business in the city.
This is not necessarily a bad thing. I have a house around the corner from me that converted from a yearly rental property to an Airbnb. On the plus side, the property is kept-up better than it was before since it gets a thorough cleaning after every guest. But the house is also empty most of the time. We’ve essentially lost a neighbor.
If landlords now see more profit in Airbnb than long-term rentals, that might be an unfortunate development both for renters (who will face higher rental costs on fewer available units) and homeowners (who will have fewer full-time neighbors). And that’s not even considering the lucrative hotel taxes that the city is not likely collecting (Airbnb leaves it up to the owner to collect and report the taxes).
Most people probably could not care less what happens to the market for Georgetown homes that rent for $7,000 per month. And rightly so. But there’s no reason this pattern could not be occurring at lower price points and in other neighborhoods.
Many Airbnb listings probably already run afoul of DC’s zoning laws. But I’m of the opinion that as long as they are not causing a problem for the neighbors (say, for example, a house that pitches itself as a party-hosting venue) then there’s no reason to complain.
Maybe this will be a self-correcting trend. A handful of Airbnb listings can demand high fees. If dozens of landlords tried that, though, the market would likely collapse. Other than the city ensuring basic safety and the collection of taxes, laissez faire may be the best general approach to Airbnb for now. But at some point the city is going to have to get its arms around the phenomenon. Investors flipping properties into Airbnb listings will likely accelerate that day’s arrival.
A version of this article originally appeared on the Georgetown Metropolitan