03 May 2018

How the Sharing Economy Makes Our Lives Better

A study by the New York City Comptroller has shown that Airbnb led to significant rent increases in New York City:
Airbnb’s growing influence caused rents to increase significantly in tourist areas and gentrifying neighborhoods in Manhattan and Brooklyn, where the majority of the company’s rentals are concentrated, according to a report released on Thursday by the city comptroller’s office.

In Manhattan’s Hell’s Kitchen and Chelsea neighborhoods and the Midtown Business District, which accounted for about 11 percent of all Airbnb listings in New York City in 2016, average monthly rents increased by $398 between 2009 and 2016, of which $86, or 21.6 percent, was a result of Airbnb’s presence, the report said. In Greenpoint and Williamsburg in Brooklyn, the study said, rents went up 18.6 percent in those years because of Airbnb listings.

Airbnb makes it easy to rent apartments to tourists, taking units off the market for full-time residents, the report said.

“For years, New Yorkers have felt the burden of rents that go nowhere but up, and Airbnb is one reason why,” the city comptroller, Scott M. Stringer, said in an interview. “It’s just simply supply and demand. Fewer apartments to rent means higher prices, and that’s the Airbnb effect.”

The report said that Airbnb’s influence cost New Yorkers $616 million in additional rent in 2016 as a result of price pressures.
The term for this is negative externality, the imposition of a cost on a third party not directly involved in the transaction.

It's the same as the trucker polluting your air, or the dry cleaner who dumps his chemicals down the drain.

In this case, Airbnb and its "Hosts" make money, and everyone else pays for it, to the tune of about $1000.00 a year in added rent. 


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