The Federal Reserve chairman said short-term rentals were partly to blame for the lack of housing on the market.
and blog post On rising housing costs in New Jersey, Philadelphia Federal Reserve President and CEO Patrick Harker said more people are buying homes and turning them into vacation rentals, making U.S. housing more expensive. He said supplies were constrained.
“Short-term rentals are eating up a significant portion of the housing supply, especially on the Shore,” Harker said.
recently announced that Ocean City, New Jersey is the most booked American destination. (Did I mention we have the best beaches?),” he added.
To be clear, Garden State home prices have skyrocketed due to rising median wages and the proximity of Jersey residents to high-paying jobs.
“New Jersey has the highest percentage of people aged 18 to 34 living with their parents of any state.“
Additionally, New Jersey has the highest percentage of people between the ages of 18 and 34 living with their parents of any state, and “the state needs to build more affordable housing.” added Harker.
However, the emergence of Airbnbs in residential neighborhoods has hit housing supply, shifting properties from the long-term housing market to the short-term travel market, and in 2019 report said the Economic Policy Institute.
And that, in effect, has pushed up home prices, EPI added.
one home shopper told MarketWatch Her last home was sold to an Airbnb investor.
When Erin Piedmont, who is looking for a home in Savannah, Georgia, went to an open house, she was told that there was a potential buyer looking to turn the house she was looking at into an Airbnb.
“It’s the cutest little family home. …and all these people are going to have to deal with Airbnbs in neighborhoods where similar families have lived for a really long time,” she said. I think it’s destroying the housing market.”
Her former home in Piedmont, Alabama, was also sold to an Airbnb investor.
Short-term rentals are the ‘important part’ of vacation destinations
There’s another side to the story, an Airbnb spokesperson told MarketWatch. Airbnb hosting, or short-term rentals, offers a way for homeowners to make money during a time when inflation is still high, they said.
They added that only 0.4% of New Jersey home stock is listed on Airbnb.
They acknowledged that while the country is not building enough housing for its citizens, it is not entirely fair to blame short-term rentals for the housing shortage.
“The reality is that home sharing has been an important part of the vacation destination fabric for decades,” they added.
Other solutions to boost housing
Jenny Schuetz, a senior fellow at Brookings Metro and author of the new book Fixer-Upper: How to Repair America’s Broken Housing Systems, explains Harker’s review of short-term rental housing that is taking market share away from potential homeowners. He said the ratings were “conflicting.”
In a blog post, Schuetz said Harker amended local zoning rules to allow homeowners to rent out garages and basements and create attached housing units (ADUs) to improve housing supply. He pointed out that he also suggested that
In California, a building boom continued after a law allowed homeowners to build ADUs, or grandma’s apartments and backyard homes. As of last year, According to M. Nolan Gray, director of research for California YIMBY, a neighborhood community, found that 1 in 7 homes permitted to be built in California was ADU. In Los Angeles, the percentage is even higher, with ADUs accounting for a quarter of the homes built in Los Angeles last year.
“Encouraging homeowners to create these types of attached housing units is one important way to increase overall housing supply,” Schuetz said.
Changes in zoning laws
More broadly, Harker also spoke about reforming overall zoning laws to pave the way for more multifamily units, such as townhomes and apartments, to be built.
By that, he referred to local zoning laws across the country that prohibit developers from building multifamily homes or apartments, instead forcing them to build only single-family homes. Many towns in … are zoned for single-family homes,” he said.
Schuetz pointed out that New Jersey actually offers a variety of approaches to addressing housing affordability.
Jersey City and Hoboken, for example, are building a number of apartments, and “this helped offset some of the pressure in the larger New York City neighborhood,” she explained. But, as Harker said, many wealthy suburbs have very restrictive zoning that drives down prices for middle- and low-income households.
Construction of workers’ housing
Harker also suggested developing housing for workers near their employers. “Tourism-dominated areas like the Jersey Shore lack housing for workers,” writes Harker.
“Incentivizing employee housing could alleviate these supply shortfalls,” he added. “And in the same tourist-heavy areas, local governments could consider limiting the number of short-term rentals to ensure that local residents have places to live.”
Efforts are underway to address the housing shortage.
There is a record number of homes under construction that will eventually hit the market. According to the US Census Bureau, there were 1.7 million homes under construction as of August, up 20.5% from last year’s level, as shown in the chart below.
Also, by chance all-time record.
Thinking about the housing market? Write to MarketWatch reporter Aarthi Swaminathan ([email protected]).