A quick search on Airbnb for a short-term rental in Auburn returns over 300 results in Auburn and surrounding areas. In the city of Auburn itself, there are more than 150 active Airbnb hosts.
While Airbnb may be a lucrative opportunity for many homeowners, as well as a convenient rental option for visitors to the city, it’s important to consider how Airbnb has impacted the housing market.
Airbnbs Drive the Economy in Alabama
According to a 2018 article published in The Auburn Villager, during the 2018 graduation weekend in Auburn, Auburn residents earned approximately $42,100 through Airbnb rentals. And if that sounds like a lot, consider that the following year, in 2019, hosts earned more than double that – $103,000. And in 2017, the state of Alabama collected approximately $1 million from Airbnb (paid by about 4,500 guests) in the form of a lodging tax booked for each rental.
Earning income by renting one’s property is certainly a draw. Indeed, Auburn City Councilman Brett Smith explains that short-term rentals like Airbnb can have a beneficial economic impact, allowing low-income property owners an opportunity to increase their financial revenue.
Airbnb and the Rental and Housing Markets
While making money off of an Airbnb or another short-term rental option may seem fairly innocuous, and even beneficial for individual residents and the economy at large, research shows that when the number of Airbnb listings in a city increases, so does the average price of rent.
As reported in the Harvard Business Review, one of the reasons for this trend is fairly easy to understand: with an opportunity to make more money in the form of short-term rentals, many landlords may start converting their properties from long-term rentals to short-term ones, therefore results in a dearth of available long-term housing, driving prices up. Similarly, many landlords are also taking their homes out of the for-sale market and transitioning into short-term rentals instead.
In order to pair this conclusion with some real data, consider that a one percent increase in Airbnb rentals in a city is associated with a .018 percent increase in rental rates and a .026 percent increase in house prices. This may seem like a small effect at first; however, note that Airbnb’s average year-over-year growth is approximately 44 percent. In other words, about one-fifth of the average annual increase in rent prices across the country and one-seventh of the average annual increase in home prices can be attributed to Airbnb growth.
The Housing Market in Auburn
Airbnb has increased in Auburn in recent years. Remember, in 2019, the amount of money made through short-term rentals in Auburn was over $103,000 – just two years previously, in 2017, the amount was only $17,700. As Airbnb becomes more popular in the city, home values continue to increase.
A Zillow Market Report shows that in January of 2015, the average home value in Auburn was about $212,000. By January of 2018, that amount had increased to $238,000, and today, the average value of a home in Auburn is $261,000. Zillow predicts an additional 5.1 percent increase over the next 12 months, bringing the average home value to $279,000 by September 2020. (Note that while the median home value is in the $260,000 range, the median price of homes currently listed for sale is $319,000.)
With a housing market that’s been described as “warm,” now’s a relatively good time to sell in Auburn. However, many who may have been positioned to sell their home may be considering Airbnb rental instead as a way to increase revenue.
What’s the Best Way to Regulate Airbnb in Auburn?
Cities around the world are struggling with how to regulate Airbnbs and other short-term rentals in a way that is fair to all – short-term rentals generate income for property owners, but also limit the housing supply and drive up the price of living for locals. In Auburn, regulations have been proposed to introduce a zoning overlay that distinguishes between short-term non-primary rentals and homestays, defines short-term rentals of stays of 30 days or fewer, limits non-owner occupied rentals to 240 days per year, and requires rental operators to maintain a zoning certificate. Limiting the number of homes that can be added to the short-term rental market may be another option.
Learn More About Auburn Residential Real Estate from an Experienced Attorney
If you have questions about the legalities of residential real estate in Auburn and how to protect yourself, working with an experienced real estate attorney can offer straightforward, accurate answers. Whether you’re in the market to purchase or sell, our skilled Auburn real estate lawyers at the offices of Davis, Bingham, Hudson & Buckner, P.C. is here to serve you. Reach out to us today at (334) 821-1908, online, or stop by our office today to learn more.