The Airbnb Effect

Why are Madrid’s apartment rental prices skyrocketing?

Some people attribute this change to the “Airbnb Effect”. This is when there is a density of tourist holiday rentals it drives up the cost of long-term rentals when landlords prefer to let their property for short-term rentals and earn more money.

Everywhere around the world people are rallying against this phenomena. In previous years it has been most notable in Barcelona when residents turned out to protest against Airbnb and graffiti stating “Tourists go home!” started appearing in popular tourist areas of the city.

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An Airbnb spokesperson rejected the concept of the “Airbnb effect” stating that the prices would have risen with or without the presence of Airbnb, they stated that “In Barcelona there are a million apartments, we only have 17,000 rental apartments in the city, a number too small to have an impact on the general prices of rentals in the city.”

Here in Madrid, a report carried out by Airbnb and the Ayuntamiento of Madrid in 2016 showed that 1 in 5 apartments in Sol are available for rent on Airbnb. In the centre, the numbers are around 1 in 10 homes. This has contributed to the lack of availability of homes in the centre of the city.
Rising rents
Even outside of the centre in areas such as Tetuán, Retiro, Salamanca, Chamartín, Centro, Chamberí, Arganzuela, Moncloa, Fuencarral y Barajas, rental prices have surpassed even the highest prices before the crisis according to Idealista.
Rental prices have risen by 14% since 2015 leaving young people in Spain floundering in an uncertain future. Most properties for long-term rent require at least three months of deposit and prices for small apartments have risen so much that it makes it almost impossible for “mileuristas” (young people on salaries of 1000 euros or less a month) to be able to rent in the centre.

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EL MUNDO newspaper gives several reasons for the rising rent: one is the end of the three-year maximum contract length, coupled with the new Urben Rental Law (Ley de los Arrendamientos Urbanos) from 2013 which allows landlords to increase their rents on a yearly basis. Another reason is the tough requisites for mortgages and finally the loss of aquisitional power with salaries only increasing by 10 euros since the beginning of the crisis. According to the website Fotocasa, madrileños spend 41,6% of their paycheck on rental costs.

Spain does not have a house-sharing or rental culture and most young people are encouraged to move out of home only when they are able to purchase their own property. With the crisis and growth of income and contract instability, this has made it impossible for many young people to purchase their own homes and the high cost of renting has made it difficult for people to survive in the city.

Spanish people and foreigners complain about the lack of homes for rent, in an interview with El Pais, Álvaro Sánchez, a 29-year-old self-employed architect says “sometimes we don’t even get to see the houses when we call they are already taken. I’ve seen people renting apartments by telephone, without having even seen the apartment. Landlords are increasing their demands before agreeing to rent their properties (demanding paychecks, months and months of deposit and insurance etc.). I’m sure that his experience resonates with the experiences of many frustrated auxiliares and expats moving to Madrid, only to find themselves paying for Airbnb while frantically searching for affordable accommodation.

Residents of neighbourhoods affected by Airbnb are petitioning the Community of Madrid to enact tougher restrictions on Airbnb, requiring homes to be fitted with heating, fire extinguishers and to have civil responsibility insurance as essentials, with a fine of 300,000 euros for not complying with these regulations. Furthermore, the Ayuntamiento de Madrid have limited the days for tourist rentals to a maximum of between 60 and 90 days (still to be confirmed) and landlords must obtain a license for third-party use of their property.

Residents hope that these measures will increase the number of properties available for long-term rental and bring balance back to the rental property market but its effects remain to be seen.

Gentrification

Another phenomenon brought about by the increase in Airbnb properties is gentrification. This has been happening for the last few years and has seen the transformation of run-down neighbourhoods such as Chueca and Malasaña turned into trendy, expensive neighbourhoods by attracting more affluent residents to the area.

The next predicted trendy area is going to be Lavapies, which has become “the hotel of Madrid” according to Fernando Encinar, co-founder of Idealista. He believes that this will regenerate the neighbourhood and provide value to those who want or have bought properties in this area.

Gentrification means that neighbourhood businesses that were once tied to the residents are replaced by businesses that only focus on tourists, this results in the loss of small grocery shops, small businesses and no-frills bars that once catered to locals. These have now been replaced by hipster bars, restaurants and designer shops. This along with rising rent prices also drives away locals who may have spent their whole lives in the same neighbourhood but can no longer afford to live there.

Studies reveal that in the centre, the local resident population has decreased by 9% due to rising prices. Lavapies and Embajadores reflect a loss of 11% of the population.

So what does the future hold? Will government restrictions impede the rise and growth of Airbnb? Will controls on the number of tourist rental properties stabilise the rise of rental prices by ensuring more available properties? Or will this trend continue to escalate pushing people further and further out of the cities as in the case of London and Paris?
What are your thoughts?
Sources:

El Pais

El Mundo

Expansion

The Guardian

Idealista

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6 thoughts on “The Airbnb Effect

  1. What an interesting article!! As someone in the tourism and hospitality industry – I can see how the two end up fighting each other although they’re so closely related. Things like gentrification can definitely be seen in major metropolitan areas, especially in my hometown of Washington, DC!

    I think the Air BnB effect is VERY real and it’s causing a rise in prices, as well as, having a significant effect on hotels, small business lodging, etc.

    Great article!

    Liked by 2 people

  2. Great article I just wanted to point out one thing….

    “Most properties for long-term rent require at least three months of deposit.”

    I don’t think this reflects the majority of apartments in Madrid. Most people I know (myself included, I’ve been here for going on 5 years) have had to pay 1 month and MAX 2 months deposit. I think it’s even strange for 2 months, but not uncommon. And perhaps you might be asked for three months deposit these days with the “locura” that is apartment hunting and renting in Madrid. But 3 months deposit is certainly not the standard…

    Liked by 2 people

    1. Madrid Insider

      I agree. I’ve been here for more than 5 years and this wasn’t the case for me but with the recent shortage of available properties, landlords are asking people to jump through a lot of hoops. Asking for months of deposits or guarantors (avales)

      Liked by 1 person

    2. Bea

      In our case this is true. My boyfriend and I live in between Cuzco and Plaza Castilla and had to put down three months rent plus a safety deposit. That’s close to 6k just to move in to our apartment. I think Madrid in general is pretty ridiculous when it comes to finding housing.

      Liked by 1 person

  3. Thank you for sharing your perspective about airbnb from Madrid! I think many cities with a tourism-based economy will continue to experience the same effects. I used to live in Newport, Rhode Island and I know that it has made it difficult for students and long-term renters to find a place to live

    Liked by 1 person

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