December 30, 2019
Bermuda is too small to accommodate businesses like Airbnb because of the impact they have on the property rental market for residents, according to an expert who works in the real estate business.
Ambika Scott, chief executive officer/broker of Moongate Realty, said: “I believe that Airbnb and other companies offering vacation rental services have had a significant negative impact on the current residential rental property market.”
She added: “In my professional opinion, Bermuda is not large enough to offer these services due to the available amount of rental inventory. Bermuda has to be mindful of the business models they adopt/mimic from other countries as some of them are not designed as a one-size-fits-all plan.”
Ms Scott’s reservations are similar to concerns about the number of properties available for short-term tourist rentals, and the impact that has had on full-time residents of a locale, that have been expressed in numerous other places, including Barcelona, Toronto, and Reykjavik.
Ms Scott was among four agents who were asked what impact, if any, short duration residential rental property operations such as Airbnb and other similar companies have had on the residential rental property market in Bermuda.
Susan Thompson, agency manager for Coldwell Banker Bermuda Realty; agent Jasmine Smith of realtors Kitson & Company; and Allison Settle, assistant rental manager at Rego Sotheby’s International Realty, also addressed the issue.
There was general agreement that there are fewer properties on the market for rent by long-term residents, while two experts said that some landlords are tiring of the considerable workload involved in managing short-term tourist rentals.
Ms Thompson said discussions with the company’s rental agents indicate there has been a shortage of studio and one bedroom apartments since Airbnb, and similar operations, were introduced on-island.
“I’ve heard that 150-plus one beds are off the market because of this,” she said, adding that she has no hard data to support that observation.
Ms Thompson’s statistical research shows that prices for long-term one-bedroom units have increased slightly on average, while the days they stay on the market have decreased.
She said: “When we do get one bedroom properties in central locations, they do go very quickly. We have a lot of people looking.”
Ms Thompson said landlords are turning garages and houses into Airbnb rentals, or specifically designing their homes for that purpose, and are “making twice as much” as they would with long-term rentals.
However, she said that running an Airbnb operation is labour intensive, and some properties are being returned to the long-term market.
Ms Thompson said: “People are making good money, but it’s a huge amount of work and some people are saying ‘I don’t want to do it any more’.”
Ms Smith said there was a “swift uptick” in short-term rentals during the 2017 America’s Cup, including properties managed by agents as well as those offered on sites such as Airbnb or Homeaway.
She said: “During this time, most locals found their rental units were fully booked, making twice as much as they would make for a long-term rental.”
While some long-term properties have been taken off the market to be rented for shorter periods, Ms Smith said some properties were never earmarked for the long-term rental pool.
She said: “Many properties, if not more than 50 per cent, were created for short-term rentals.
“Property owners who had units on their property that may have been sitting empty — used for overseas guests, their children back from university, etc — took advantage of the high demand for short-term rentals.
“There were also many units started by owners converting areas of their house into short-term rentals.
“Some of these units could not be rented long-term because they don’t have kitchens beyond a mini-fridge and a coffee pot.”
Ms Smith echoed Ms Thompson’s observation regarding the demands placed upon landlords by short-term rentals.
“Many property owners found that, while it appeared like easy money, running a short-term rental requires a lot of work,” she said.
Ms Smith added: “Most owners cannot take the time to clean, check-in, review, etc, especially with high turnover. The only real solution to this problem is to pay 15 per cent to a property manager, which some owners cannot justify.”
She said a sharp downturn in bookings in the fall will result in more properties being transitioned back into the long-term market.
“While this hopefully results in more properties, and importantly more affordable properties, we still have to consider the many properties that continue to sit empty affect the market, and we cannot expect landlords to turn away potentially higher profits.”
Ms Settle said “there is no doubt that the increase of vacation rental businesses in residential properties has affected the supply/demand economics of the long term residential market”.
She added: “The most notable impact is the decreased supply in one bedroom long-term rentals. As the supply has decreased, the market price of a one-bedroom apartment has stayed stable, or increased.
“The condominium market has not been impacted to the same extent as the one bedroom residential market, partly because most condo board rules and regulations do not permit owners to sublet on a short-term basis.”
Ms Scott said restrictions should have been placed on the number of properties available in the short-term tourist rental pool.
She said: “Prior to the decision being made to allow these services to be offered by homeowners/companies outside of the hotels/guesthouses, Government should have stepped in to determine how much of the available inventory can be used for this purpose, eg, if there are a certain number of rental units available island-wide a set amount should be allocated to these operations with the remaining units left for permanent residents.
“Although said operations may be profitable for many at this point in time, I believe it to be another short-term/band-aid approach that will fizzle out due to it not being sustainable from a long-term standpoint.
“I’ve also given much thought to the hoteliers and guesthouses that have been working hard and weathering the storms of this industry during the off-seasons for years and have day-to-day high operating expenses only to be impacted by this new platform with no restrictions on the number of homes that can offer this service.
“It reminds me of the taxi industry whereby locals/guest workers complain during the summer months about being unable to get a taxi and when the off-season arrives, the taxi drivers are able and willing. You have to ensure that your own are covered first and then make room for other possibilities as housing has been a crisis in Bermuda for a number of decades.
“As there are no present plans in effect for additional, and affordable, rental housing to be built for the island’s residents, there must be measures in place to ensure that housing is available primarily to those living in Bermuda on a permanent basis.”
Year-end figures for 2018 showed that 23,700 people booked vacation rentals in Bermuda through Airbnb, staying on-island for an average of 4.7 days. Airbnb said more than 400 registered hosts listed more than 600 properties on the site. Hosts made an average of $18,800 annually, the organisation said.