Is the growth of short-term rentals fueling the region’s housing crisis?

Two decades ago, STRs, vacation rentals or house sharing were a minor portion of the housing market. The rise of online platforms, such as Airbnb and Vrbo, drove significant growth in STR businesses and users. In 2023, there were over 2.4 million STR listings in the U.S. Over the last decade, the impact of these businesses has been dubbed the “Airbnb effect.” The increase in STRs directly impacts rents in surrounding neighborhoods by pushing it higher and affects affordability across the region as supply is removed from the long-term rental or purchase market. The challenges presented by growth in the STR market are compounded by sluggish housing development which is hampered by rising costs and limited opportunities due to outdated zoning regulations. These supply side pressures accelerate the rise in rents and home prices. 

Most studies on the impact of STRs focus on large cities. A 2018 study by the Office of the New York City Comptroller found the growth of Airbnb units accounted for 9.2% of the citywide increase in rental rates and 20% in neighborhoods with high concentrations of STR units. The report estimated residents paid an additional $616 million in rent in 2016 due to the presence of Airbnb units. A 2020 study found a 1% increase in Airbnb listings had significant impact on rents and housing prices nationally, accounting for one-fifth  of rent growth and one-seventh of housing price growth. The study also found absentee landlords taking advantage of potentially higher profits in STRs by moving their properties out of long-term rental and for-sale markets.  

STRs in Kansas City
In the Kansas City region, monthly profits for Airbnb’s outpace median rents by a significant margin. In all but two of the region’s 10 largest rental markets, monthly gross revenues for STRs outpaced median long-term rents by 75% or more. This calculation accounts for an average occupancy of 56% per month for regional STR units.  

Between 2018-2022, median rent in the region increased by 25-30% and the number of units available for less than $750 continued to decline. Over 46% of rental households in the region are cost burdened, meaning they pay more than 30% of their annual income on rent and utilities. Prior research by MARC found that there are 64,000 households in the region that cannot find a rental unit for less than 30% of their annual income. Regionally, rents have risen faster than wages while the growth in STR businesses and institutional investor activity in the single-family housing market contributes to higher prices. 

The highest STR activity is in the central portion of the region, particularly in the two primary job centers from downtown Kansas City to the Country Club Plaza and centered around College Boulevard in Overland Park, Kansas. These are central sites for business-related travel as well as tourism. The highest concentrations of Airbnb’s are in Kansas City, Missouri, Overland Park, Kansas and Kansas City, Kansas. The largest disparity between median rents and gross revenues from STRs is in Independence, Missouri, due to its proximity to the Truman Sports Complex. 

Research examining the impact of STRs on local rents and prices primarily focuses on entire units for rent as these are most likely to have moved from the long-term rental and for-sale markets to the short-term market. Entire units account for 77.3% of all Airbnbs across the region.

Data availability and lack of transparency make it difficult to gauge the full impact of STRs on the region. It is unlikely the effects of STRs locally would diverge from the increasing body of evidence that growth in this market limits housing supply, pushes rents and housing prices higher, and increases cost burden for low-income families within neighborhood hotspots and beyond. MARC’s analysis of STRs in the region examines data from Airbnb from September 2024. Airbnb accounts for nearly 89% of the local STR market, according to tracking by data and analytics provider AirDNA. A limiting factor within this analysis is the “geographic masking” of property. When an individual is booking property on Airbnb or another site, the site hides the exact location until one makes a purchase. In the case of the data MARC was able to obtain, the coordinates for a location were within 100 meters of its actual address. This “masking” in the data limits confidence in neighborhood level analysis. It also prevents incorporating data from other sources, such as property ownership, code violations or emergency service calls, all pressing questions for communities but beyond the reach of the data currently available. This analysis examined the top 10 rental markets in the region identified through Census data, incorporated AirDNA data to calculate STR profits by expected occupancy and utilized American Community Survey data to understand changes in rents in these communities over the past five years. 

These data issues, beyond limiting research questions, also raise challenges for local governments seeking to regulate STRs. Kansas City, Missouri has the most comprehensive STR regulations in the region. In September, there were 565 registered STRs and, at the same time, there were 658 Airbnbs for rent in Kansas City. How to address the discrepancy is complicated without better data or greater cooperation from STR platforms like Airbnb and Vrbo. 

The rapid growth of the short-term rental market has opened new streams of income for homeowners and new options for travelers. Over time, as the business has matured, the number of high-volume operators in the STR market has increased. The maturation of the STR market means fewer units are available for long-term rentals and for sale. This pushes up rents and prices. In a region missing nearly 24,000 units, with over 64,000 households unable to find a place they can afford, the growth of STRs is another factor pushing housing in the region out of reach for a growing number of households.