Airbnb is Investing $250 Million in Building Homes and Ranking Cities

Uvika Wahi (0:00)

If you followed any housing debate in the last 10 years, chances are you've heard Airbnb's name come up. It comes up in city council meetings, it comes up in policy papers, it comes up in think pieces about why nobody can afford to rent anymore.

And the accusation is roughly the same. It's that Airbnb is taking homes off the long-term rental market, and that that's a big part of why your city has a shortage. And that that's a big part of why your city has a housing shortage. Welcome to RSU by Pricelapse Weekly Podcast. Subscribe now. Of course, Airbnb and the short-term rental industry at large has been hearing that for quite some time. And Airbnb has been pushing back for a decade. It has commissioned studies, economic impact reports, commission papers. And one of the arguments Airbnb has always had this entire time is that we are not the reason your rents are high, or by no means the only significant factor. Airbnb has maintained that one of the biggest reasons of these housing shortages is that there simply aren't enough homes being built.

This argument has not changed and it does not come in isolation. And there are enough studies out there that point to the same exact argument. Studies that are not commissioned by Airbnb, by the way.

So this argument has not changed, right? But what's changed this month is that Airbnb is putting its money where its mouth is. Airbnb has just committed $215 million to building housing in the United States. And in case you are not in the United States, don't scroll away just yet because this applies to beyond what's happening in the United States of America. So of course, that's not the whole story. And in fact, there's a great deal more in the Airbnb Housing Accelerator. And taken together, it gives you the clearest view you can have into how Airbnb intends to fight this argument from here on out.

And if you're a short-term rental manager, this matters to you. Because of course, when people say Airbnb, often they mean short-term rentals. The two are used frequently, interchangeably. So when Airbnb gets blamed for a housing shortage, it's really the entire short-term rental market that's put into question. So what Airbnb does next is also going to have an impact on your short-term rental business. Hi, I'm Uvika Wahi from Rental Scale-Up by Pricelabs, your go-to source for short-term rental news and analysis. Every week, we break down the most important stories in short-term rentals for professional short-term rental managers like you, and not just what happened, but what it practically means for you.

Today, the topic is Airbnb Housing Accelerator. So here's what Airbnb has announced first. The program has four parts. Number one, $150 million in what Airbnb calls last dollar financing. The first investment of this is a $6.4 million investment towards 201 affordable apartments in Austin, Texas. Second, money for pro housing campaign groups in five US states this year, working on zoning, permitting, building codes and development fees. The third part of the Airbnb Housing Accelerator is a $5 million innovation prize, which is basically five annual awards of a million dollars each for innovative construction technology. And fourth is the Airbnb City Index. Now really hold on to that one and I'm going to come back to it later because this is this is the part that I would argue matters more than you might initially think. Separately from all of that, and if you remember, I said before, this is not just a United States thing. Is that Airbnb is also committed $50 million over three years to restoring homes in small villages in Spain. And Airbnb has confirmed it will expand this program to more countries. What is last?

Let's get into the first thing. What is last dollar financing? That phrase sounds like jargon and it is, but underneath the idea is fairly simple. So imagine a housing project that has already cleared planning permission. It has raised most of the money it needs to be to go ahead.

It's ready to go basically. Yet it's short one final slice of financing and nobody will put that slice in because the returns just don't work out. So the project just sits there. Last dollar financing is the money that unsticks it. This particular project in Austin is a good example of how stuck things can get, even when most of it has already worked out. The city had an agreement with its developer where a fully affordable 201 unit building had to be finished before a companion building of 325 mixed income homes could go ahead. So the affordable block was a gate standing in front of a bigger scheme. That gate stayed shut for five years because interest rates went up, and interest came down, and the financing gap opened. What Airbnb's 6.4 million does is closes that gap and releases more than 500 homes in total.