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HOMEAWAY IN SEATTLE
July 2016
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DISCLAIMER
Key Terms
Introduction
Rising prices in the Seattle housing market are resulting in conversations and analysis regarding
policy tools to address housing affordability. Seattle Mayor Ed Murray convened the Housing
Affordability & Livability Agenda (HALA) advisory committee to evaluate potential housing strategies
and deliver a set of recommendations to the Mayor and Council.
The HALA committees recommendations were published in July 2015 and included a
recommendation to regulate short-term rentals such as Airbnb and HomeAway. In January 2016,
Councilmember Tim Burgess announced that the Committee on Affordable Housing, Neighborhoods,
and Finance plans to explore a regulatory framework for short-term vacation rentals.
As the City Council prepares to consider regulation of short-vacation rentals, a key policy question
is the extent to which different types of short-term rentals affect the supply of housing in Seattle, and
more specifically, the supply of market-rate affordable housing. These questions are at the heart of
the analysis contained in this report.
To address these questions, this report provides a data-driven, market-based look at how HomeAway
affects Seattle housing prices and affordability. It presents findings on:
1. The role of short-term rentals in the Seattle housing market
2. Characteristics of HomeAway rentals
3. The observed effect of HomeAway on Seattle housing prices and affordability
4. Impact of HomeAway properties on low-income and vulnerable populations
2 | ECONorthwest
498
Percent of hosts
renting out an
entire property
Average cost
per night
Median nights
rented per year
Types of
properties
rented
1-4
1 - 250
5 - 10
251 - 500
Number
of Active
HomeAway
Properties
HomeAway
Properties
No
data
zero
1-4
501 - 1000
1001 - 2941
Number
of Nights
Booked
Number
of Nights
Booked
(May(May
2015-May
No
data 2016)
2015-May
2016)
zero
1-4
fewer
4.1
Average nights
per stay
5 - 10
5 - 10
11 - 18
11 - 18
19 - 29
19 - 29
more
No data
No data
1fewer
- 250
1 - 250
251 - 251
500 - 500
501 - 501
1000- 1000
1001
-1001
2941- 2941
more
No data
No data
100%
$207
100
Apartment
(28%)
Other
(1%)
Source: ECONorthwest analysis of HomeAway Seattle bookings (April 2015-April 2016).
HomeAway property locations were aggregated to the hex-bin level. Each hex-bin is 0.25 square miles.
House
(54%)
Condo
(17%)
HOMEAWAY HOUSING AFFORDABILITY ANALYSIS | 3
Rising incomes bid up home values and rents, which in turn creates an
incentive for the development of more housing. The complexity, diversity,
and evolving nature of demand for housing leads to challenges in the
provisioning of housing services.
480,000
460,000
2011
2012
2013
2014
Vacancy Rate
10.0%
9.0%
7,000
8.0%
6,000
7.0%
5,000
6.0%
4,000
5.0%
3,000
4.0%
3.0%
2,000
2.0%
1,000
2016
2015
2014
2013
2012
2011
2010
2009
2008
2007
1.0%
0.0%
8,000
4 | ECONorthwest
2010
2006
420,000
Developing new housing products takes time. For even the simplest
projects, assembling land, acquiring permits, arranging for financing, and
constructing buildings takes many years. Often by the time substantial new
supply comes on the market (in response to a surge in housing demand)
the growth in demand has already subsided. When this happens, property
owners can be left with substantial new inventory that remains vacant,
resulting in a subsequent drop in housing prices.
440,000
2005
The Internet has changed how people engage in housing markets. In the
case of the short-term rental market, web-based listing services provide
a means of marketing and facilitating transactions between renters and
property owners and managers. In particular, the costs of coordination
(searching for price and quality, scheduling, contracting, etc.) are lowered
for all parties.
These web-based short-term rental services have made it easier for
property renters and owners to find each other, and has led to significant
benefits to both consumers and producers of goods and services of all
kinds.
Can the market for short-term rentals increase the demand for
long-term rentals?
This seems at first like a contradiction, but there are circumstances under
which this might happen. If being able to sub-lease a rental unit on a
short-term basis or temporarily rent ones owner occupied housing lowers
the total costs of securing housing in the first place then this drop in price
could result in growth in demand for long-term housing in Seattle. This
increase in demand represents households that would be priced out of the
Seattle housing markets without the ability to rent their housing on a shortterm basis. This result is a theoretical possibility, but it also represents a
mixed result in terms of housing affordability in long-term housing markets.
Can the market for short-term rentals decrease the effective supply
of long-term rental housing?
In other words, if the short-term rental market did not exist, would the
supply of housing units available for long-term rental and ownership be
larger? Prices in the long-term rental and ownership markets can only
change if there is a corresponding change in the supply. If the supply of
short-term rental units increases it must do so because of one or more of
the following reasons:
There is a shift of supply into the short-term rental market from other
parts of the housing market.
6 | ECONorthwest
Internet makes it
easier for renters
and hosts to nd
each other
Lower search
costs also bring
new short-term
renters into the
market
Internet facilitates
short-term rentals
where the costs of a
long-term rental
transaction are high
A technical
innovation is
developed
Lower search
costs benet
existing
consumers
It creates
opportunity for
social benefit
No
Prices
in the shortterm housing
market
increase?
Lower
transaction
costs lead to
development of
new housing
People capitalize
on benefits
Lower
search costs lead
to a transfer of value
from hosts to renters
Yes
New economic
exchange may
produce initial
price changes
Lower costs to
suppliers and higher
prices in the shortterm market leads to
new housing supply
and new equilibrium
prices
Summary of Findings
All policy changes should be based on the
weight of the evidence. In the analysis of
HomeAway properties that follows, a number of
facts emerge:
8 | ECONorthwest
HomeAway properties are a very small share of Seattles total housing stock
A major reason why HomeAway properties do
not produce meaningful impacts on housing
affordability is because they represent a
miniscule share of Seattles overall housing
market. Single-family housing is the largest
single share of the HomeAway inventory and
represents less than 0.2% of Seattles supply
of single-family units. For multifamily housing
(which includes condos and apartments)
HomeAway properties represent an even
smaller share, at 0.13%.
Single-family housing
Number of units
in Seattle (2014)
Number of
HomeAway
properties rented
at least once
Percent of total
units rented on
HomeAway
Multifamily housing
154,500
169,900
272
226
0.18%
0.13%
Sources: Seattle housing unit data from American Community Survey (ACS) 1 year estimates Table B25024.
HomeAway properties data from ECONorthwest analysis of HomeAway Seattle properties with at least one
booking between April 2015 and April 2016.
Note: Single-family includes attached (e.g. townhouses) and detached.
HomeAway properties tend to be located in areas that have added the most housing units
HomeAway properties are in areas of Seattle that are adding net new residential
units to the housing supply. The fact that HomeAway properties are in areas that
are adding new housing units should help alleviate concerns that HomeAway is
removing housing units from either the ownership or the rental market.
Net new
Seattle
Housing
Units,
1 - 49
residential
units
Census
Tracts
2010-2014
50 - 99
The chart and map show that very few HomeAway properties are in areas that
added no housing units between 2010 and 2014, while most properties are
located in census tracts that added significant numbers of new units in response
to the demand for new housing options.
-23
100- -0199
1>- 200
49
50 - 99
100 - 199
> 200
250
200
150
100
50
0
-23 to 0
1-49
50-99
100-199
200 or
more
10 | ECONorthwest
Year 1
Of properties
rented on
HomeAway in
Year 1...
Year 2
Year 3
Year 4
were also
rented in Year 2
were also
rented in Year 3
were also
rented in Year 4
long-term rents.
more
120
100
80
60
40
20
-
Less than
$500
$1,500$1,999
$2,000$2,499
$2,500 or
more
long-term rents.
140
fewer
20%
15%
10%
5%
0%
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
12 | ECONorthwest
A sizable share of HomeAway hosts occupy the property for a portion of the year
Many HomeAway properties are occupied by the HomeAway host for a
portion of the year. If short-term renting were not an option, then these
properties might remain vacant for the remainder of the year. Likewise, if
income from the short-term market were not available to these hosts, some
may have struggled with their own housing affordability challenges (or
financial duress) through an inability to make rent or mortgage payments.
This further underscores that HomeAway listed properties are composed of
a wide diversity of property types under various ownership and management
arrangements located in various neighborhoods throughout Seattle. It is
difficult to determine the reasons that hosts choose to participate in the
short-term market, which makes it extremely challenging to determine whether
a particular unit would actually be available to the long-term rental market in a
situation where short-term renting were not available.
Host lives at
property part
of the year
(28%)
Property
Manager
(44%)
For Rent
By Owner
(28%)
14 | ECONorthwest
building variables
bedrooms
age of
building
bathrooms
recent
renovation
lot variables
stories
views
HomeAway variables
# of properties # of nights
within 1/8,
booked within
1/4, and
1/8, 1/4,
1/2 mile
and 1/2 mile
size of lot
distance
to schools
neighborhood variables
hex bin
zipcode
area of
nearby parks
distance
to transit
waterfront
distance
to food
120%
Workforce Reserved
and Market
Market
Environment
100%
Moderate Income
80%
Low Income
Tools:
60%
Very Low
Income
Federal programs
30%
Extremely Low
Income
Incentive zoning
0%
Income as a
percent of median
family income
Most HomeAway properties are located where home prices are less affordable
Home ownership affordability is based on a number of factors in addition to the actual
sales price of a home. These factors include the households income, the down payment
35% - 79%
required, property taxes, and current interest rates. The map shows the percent of
Percent of
the regions median family income of $89,500 required to purchase a home without
80% - 99%
area MFI
spending more than 30% of income on housing (the U.S. Department of Housing and
needed
to
Percent
of
MFI
Required
100% - 149%
afford
home
Developments threshold for cost burden). Areas shaded in green are considered
to
Afforda Housing
150% - 199%
affordable for a household making less than the areas median family income.
> 35%
200%- 79%
80%
No
data- 99%
100% - 149%
150% - 199%
> 200%
No data
HomeAway properties are located in areas where households need much higher levels of
income in order to purchase a home. About 83% of HomeAway properties are located in
areas of the city where a household needs more than 100% of the regions median family
income in order to afford to buy a home.
DISTRIBUTION OF HOMEAWAY PROPERTIES BY
PERCENT OF AREA MFI REQUIRED TO AFFORD A HOME
Number of HomeAway properties
175
150
125
100
75
50
25
0
GEOGRAPHY
City of Seattle
Each hex-bin is 0.25 square miles.
16 | ECONorthwest
80%-99%
100%-149% 150%-199%
>200%
ASSUMPTIONS
STRUCTURE TYPE AND DATE RANGE:
Single-family homes and condos sold between
April 2015 and April 2016 (from King County
Assessors records)
35%-79%
AFFORDABILITY:
Affordable: Housing Costs=30% or less of
gross family income
Down Payment: 20%
No sales
data
INCOME:
HUD 2015 MFI: $89,500
CALCULATION:
Percent of MFI needed for housing to be
affordable = Yearly Housing Costs [Mortgage
Payment + Monthly Utilities]+Property
Tax+Home Insurance] / (0.3 * MFI)
Most HomeAway properties are located where rental housing is less affordable
INCOME NEEDED TO AFFORD A
ONE-BEDROOM APARTMENT
Income required to
afford 1 bedroom
The growth in rental housing prices in Seattle has been a much-discussed housing
affordability issue. The map shows the household income required to rent a
one-bedroom apartment without spending more than 30% of income on housing.
Areas shaded in green are considered affordable for households making less than
the median household income for renters.
REQ_INCOME
Less than $35,000
Income required
Income
required
to
to affordably
$35,000rent
- $44,999
afford
1 bedroom
a one-bedroom
$45,000 - $54,999
apartment
REQ_INCOME
Most HomeAway properties are located in areas where households need higher
levels of income in order to rent an apartment. According to the 2010-2014 American
Community Survey, the median household income for households that rent in Seattle
is about $45,700. More than two-thirds of HomeAway properties are in areas of
the city where a household needs to make more than the median renter household
income in order to afford to rent a one-bedroom apartment.
$55,000 - $74,999
$75,000 or more
$35,000 - $44,999
No data
$45,000 - $54,999
$55,000 - $74,999
$75,000 or more
No data
175
150
125
100
75
50
25
0
RENT DATA:
CoStar, June 2016
< $35,000
$35,000 to
$44,999
$45,000 to
$54,999
$55,000 to
$74,999
ASSUMPTIONS
STRUCTURE TYPE:
One bedroom apartments. One-bedroom
apartments were used because the average
household size for households that rent in
Seattle is 1.88 persons (2010-2014 ACS).
Median household
income for renters in
Seattle: $45,700
AFFORDABILITY:
Affordable: Housing Costs =
30% or less of gross household income
GEOGRAPHY
City of Seattle
Each hex-bin is 0.25 square miles.
CALCULATION:
Income required to affordably rent a onebedroom = Yearly Housing Costs [Average
Rent for 1-bedroom + Monthly Utilities] / (0.3)
Vulnerability to Displacement,
This map shows the results of a displacement vulnerability metric that highlights
1
Vulnerability
Census Block Groups with higher-than-average populations that are the least likely to
Census
Block Groups
Score
absorb the impact of increasing housing costs. Vulnerable populations are defined
2
0 low
as: households renting versus owning, belonging to communities of color, not having
3
a college degree, and being lower income. This metric is employed by other cities
1
examining displacement issues stemming from economic growth.
4
2
3
4 high
Most HomeAway properties are located in areas that score low on this vulnerability
index. This is driven by the fact that many HomeAway properties are located in high
income and traditionally unaffordable areas of Seattle. More than 60% of HomeAway
properties are located in block groups categorized as at low risk of displacement.
100
50
18 | ECONorthwest
Risk Factor
Evaluation Criteria
% Renters
% Non-White
% without
Bachelors degree
% Households
with income at or
below 80% Median
Household Income
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1218 Third Avenue, Suite 1709 | Seattle, Washington 98101 | 206-823-3060 | www.econw.com