The Wall Street Journal recently published this article talking about how the young and educated are flocking to high-density urban areas all across the United States. Here’s a set of charts from the article:
There are many people who will point out – probably rightly – that despite the “return to cities” that we are currently seeing, the world is still suburbanizing. But, it doesn’t appear to be suburbanizing in quite the same way as it did for prior generations. There’s also a socioeconomic shift taking place.
As an example, and to drive home the point that it’s not just the expensive coastal cities that are seeing rising home prices, the WSJ article focuses quite a bit on Ohio City – a neighborhood in Cleveland. Here’s what has been happening:
In the Ohio City neighborhood, the median income skyrocketed to $93,000 from $23,000 since 2006, according to Ohio City Inc., a local nonprofit development group. Median home values shot up 800% since 2000 to $270,000, according to Ohio City Inc. Median rental prices in downtown Cleveland as a whole jumped 47% from late 2010 to late 2015, according to the Center for Population Dynamics at Cleveland State University.
These are pretty dramatic increases – though $270,000 feels cheap to someone from Toronto. Still, it speaks to a trend. You and I both know that Ohio City isn’t the only neighborhood seeing those sorts of numbers.
Conor Maguire introduced me to an interesting site today called Airbnb vs. Berlin. The site does a deep dive into Berlin’s Airbnb market with the hope of answering the question: Is Airbnb contributing to a shortage in affordable housing?
The site is very well done. It’s filled with lots of great market stats and diagrams such as this one here:
Of course, the impetus for a site like this is that cities all around the world, from San Francisco to Berlin, are grappling with rising home prices. If you happen to live in a successful, growing city, that’s probably what is happening.
But when this happens, we seem to want to look for something or someone to blame. In San Francisco it’s the tech workers. They’re the ones driving up homes prices. In Vancouver, it’s the foreign Chinese buyers. And in Berlin, it’s those Airbnb users who are just out to make a profit. In all of these cases, we like to tell ourselves that if we could just get rid of “X”, everything would be much better.
But I think sometimes we forget that this is also the result of doing many things right.
If Berlin wasn’t a brilliantly cool place to visit, then tourists wouldn’t come. And if tourists didn’t come, then Berlin wouldn’t have, by far, the largest Airbnb market in Germany. If Vancouver wasn’t one of the most enjoyable places in the world to live, you wouldn’t have the same attention from overseas buyers looking to snatch up properties.
So in a way, we should be asking ourselves: How do we, as a city, manage our own awesomeness?
The other thing that Airbnb vs. Berlin reminded me of is the viewpoint that profits are some dirty little secret. I hear it all the time in the real estate development business. People will say: “That developer is just out to make money.” Of course she/he is! They operate a business. And like all for-profit businesses, one of the objectives – it may not be the only one – is to make money.
I say all this not as a direct response to the website. They remained fairly neutral in their analysis. Instead, I raise it as an alternate viewpoint in the seemingly universal battle against “X.”
In case you’re wondering about Berlin’s Airbnb market, the site estimates that there are roughly 11,701 Airbnb listings in the city out of a total of about 1.9 million flats. Of these listings, it is estimated that somewhere around 30% are by “professional users” who are only out to make a profit and are not participating in the “sharing economy” in its purest sense. That equates to about 0.18% of all Berlin flats.
Based on this number, I’d say that Berlin’s cool factor probably has a lot more to do with the city’s rising rents than do the profit seeking Airbnb users.