But while increasing housing shortages have created an environment where lavish apartments and hotel rooms are begging to be rented out, and a slew of unfair housing rules for foreign homebuyers are adding to the housing supply shortage, it’s somewhat less clear exactly how this has affected the rental market for Londoners.
In July 2017, a British consulting firm started crunching the numbers from Airbnb.com to find out exactly how many of the hosts who rent out rooms through the site are providing a temporary source of income to people in the capital.
Intermediate Returns for Booking a Room
Here’s what the data found: Airbnb hosts make around half of their gross earnings from Airbnb bookings. More specifically, Airbnb hosts make around €7,520 a year on average ($9,650) from renting their home online to travelers. That makes these hosts slightly better-off than renting an apartment for £2,800 ($3,730) per month or a hotel room for £350 ($452) per night. So why then, if renting out your home is so popular, why are so many Londoners not signing up for Airbnb? The answers are twofold.
During times of economic recession, people tend to cut back on discretionary spending to save money, and, arguably, taking a short term contract abroad is considered a discretionary expenditure, since even if the host cashed out, the costs of obtaining insurance, planning permission, and renting out an entire home may outweigh its return. Homeowners have also experienced significant pressure in recent years from housing agencies to reduce how much they rent out, and the site Airbnb itself has been caught up in the Department for Communities and Local Government’s (DCLG) “hot property policy.”
In other words, hosts who listed their properties on Airbnb generally found themselves dealing with a whole lot of different parties, ranging from host to landlord, building management company, tax inspector, and local government, to name but a few. And whilst the site is now said to be working with all the big players to cut some of the red tape, this is likely to continue to put some degree of pressure on how much owners will make.
The “new rich” may be having a harder time making ends meet in this economic climate. According to the most recent census, London’s working population has shrunk for seven years straight. As Daniel Liou, a policy researcher at the UCL/CDP Institute, told The Guardian, the “bust-bust” effects of the financial crisis means that “the majority of income is, for the first time, not coming from the jobs of the previous generation.”
Anyone who has managed to make it past the barriers that contribute to longer rental times in London will also have noticed a rather pronounced drop in prices, fueled by austerity measures that have prioritized measures that impact on living standards for ordinary Londoners.