Why Airbnb needs to be present in major cities like London

A presentation of the benefits Airbnb brings to London with the use of utilitarian property theory.

Hardin claims in his theory of the Tragedy of the Commons that people consuming the commons creates more costs than it generates benefits, alongside stating ‘the waste of the resource under the “tragedy of the commons” is common.’ Thus he would probably hold that Airbnb leads to a waste of resources, as he would most likely argue that the properties listed on Airbnb’s website could be used for better purposes, such as permanent housing. Yet, it seems that Airbnb helps ensure that excess property capacity is actually not put to waste, due to being put to use by others who are willing to pay a fee in order to use it. Additionally, this use and consumption by guests is only granted at a cost guests are able to afford or are willing to pay.

Airbnb also poses a challenge to traditional hospitality, in which they must respond to effectively to ensure their revenue isn’t severely affected. For example, hotels have to ensure their prices are not excessively high in comparison to the price of Airbnb’s available in the same area or city. To eliminate the risk of their revenue drastically decreasing. This is because whether guests prefer Airbnb or not, potential guests are still likely to compare prices between the two platforms to find the most affordable and cost-effective accommodation. Therefore Airbnb would be likely to receive all of the clientele if hotels chose to overlook such a risk. It can then be said that Airbnb causes hotels to pay close attention to Airbnb’s listings, to assess when and how the platform may affect their ability to raise the prices of their rooms during peak periods, and consequently affect their desired revenue.

Image: Airbnb London Office – Pinterest

The advantage of this for those seeking any kind of short-term accommodation, is that it prevents hotels from setting excessively high prices for tourists and guests to utilise them. Overall this benefits all citizens, regardless of social class, by making hotels in major cities such as London, much more affordable for all members of the public who may intend to use them for short-term accommodation. Therefore Airbnb should be seen as as a means of pursuing a basic good under Utilitarian Property Theory, by helping to increase societies utility of property, by ensuring it is not only the wealthy who can afford to use hotels as a form of accommodation, over Airbnb.

Utilitarian Property Theory would hold that Airbnb raising rent and distorting the housing market by compelling landlords to switch from providing supply for the long- term rentals markets to short-term in the hopes of gaining more profit, as a result of Airbnb having allowed homeowners to gain a profit from surplus housing space, creates an obstacle to the utility of property by all social classes. This is because it could be said that Airbnb makes it much harder for those with lower incomes to gain housing, owing to less long-term tenancies being available; therefore failing to enhance the utility of property for society as a whole.

In support of this, a research paper carried out by Kyle Barron and Edward Kung, which assessed the impact that the sharing economy of Airbnb has on the affordability of housing in light of statistics gathered between 2012 and 2016, showed a correlation between an increase in Airbnb listings and the increase in annual rent and housing rates. 2 Hence there have been concerns expressed towards the fact that property owners in major cities where housing is already expensive and difficult to find, have been switching from long-term residential tenancies to short term Airbnb lets.

However, this should instead be seen as a way that Airbnb contributes to the welfare of society and the utility of property by society as a collective. This is firstly because Airbnb having such an effect means those looking for short-term accommodation and shorter leases are provided with more affordable and accessible options. Secondly, long-term residential tenancies tend to be quite expensive and difficult to
find in general when being sought for in major cities. With this being the case, property owners switching their properties to short-term Airbnb lets means that those searching for long-term residential tenancies who are less wealthy, and therefore will find it harder to find an affordable property available for long-term tenancy will also benefit from Airbnb. This is because they will be able to utilise Airbnb for short-term residential tenancies instead.

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