Exclusive: Airbnb says hosts earned $7 million in apartment-rental program’s first year

Partners include Greystar, UDR Inc.
UDR,
+0.24%,
Equity Residential,
EQR,
+0.31%
Starwood Capital Group
STWD,
+0.63%
and several other real-estate investment trusts that let its renters host nightly rentals.

Airbnb is in the early stages of this new line of business, but expects to grow and monetize it into something big.

The apartment-share program currently includes about 400 buildings in about 40 metro areas, with a typical renter earning about $3,500 in the past year, according to Jesse Stein, Airbnb’s global head of real estate.

“We are actively adding markets every day,” Stein told MarketWatch, adding that Airbnb sees a “massive” opportunity in the U.S. “We hope to grow those markets around the U.S. and expand outside of the U.S.”

Airbnb is taking aim at the estimated 45 million units of multifamily properties in the U.S. as of 2022. While affordability has been further stressed by the pandemic, Stein thinks Airbnb can help owners attract renters to buildings now competing with a wave of new rental inventory added since 2020. The competition has heated up as financing costs also sharply increased for landlords since the Federal Reserve began raising interest rates.

See: Commercial real estate a top threat to financial system in 2024, U.S. regulators say

Beyond New York

Airbnb has come under fire for its short-term leisure rentals, including in New York City, as critics say it exacerbates America’s housing crisis.

“Yes, there is a housing crisis,” Stein said. But he also sees Airbnb-friendly apartments as giving people a way to cope with surging rental costs.

Typical multifamily rents in November edged 0.3% lower to $1,845 a month from October’s levels, but still were 23.3% higher since the pandemic began, according to Zillow.

“This is not taking away from the housing stock,” Stein said. “This is helping to ease the burden,” he said, referring to rents. “There is no other way to get out of this housing crisis than to add more supply.”

New York City’s crackdown in September on Airbnb and other short-term rental platforms has been called a “de facto” ban of their leisure-rental business in the city after a decade of explosive growth.

Local Law 18 requires hosts to be registered with New York City when someone is staying for less than 30 days, and for the host to be present for their visit, among other restrictions. The rules have depleted Airbnb listings in the city.

A report from New York state’s attorney general a few years ago estimated that Airbnb generated $61 million in fees in New York City from 2010 to 2014, as revenues from short-term rentals exploded to $500 million in less than five years.

Airbnb typically charges hosts a 3% fee for bookings on its platform, while guests at leisure properties pay it a roughly 12% fee. For the apartment-share program, landlords earn a “revenue share” fee from hosts, which often is 10% to 20%, Stein said, plus the 3% Airbnb fee.

An Airbnb apartment listing in Hoboken, N.J., which is across the river from Manhattan, was $3,128 a month for a studio, with a 25% revenue share and the option to rent up to 90 nights per year. It estimated a host could earn $963 a month.

Despite New York’s strict restrictions taking hold this fall, a record travel season helped Airbnb in November report revenue of $3.4 billion for the third quarter, up 18% from a year before.

Brian Chesky, chief executive and co-founder of Airbnb, said hosts earned more than $19 billion in the third quarter alone, during the company’s November earnings call.

The apartment-friendly program comes as Airbnb looks to expand its product offerings beyond leisure rentals. Stein said the company wants to attract more smaller landlords to the program too, and has been actively talking with condo developers.

To participate, renters must agree to terms set out by participating landlords to act as hosts. Landlords have visibility and oversight into the host’s activities. Hosts can rent their apartments only for the maximum amount of days a year allowed under local laws, which in some cities is less than 30 days.

Related: Homes are expensive right now, but these mortgage bonds look cheap

Shares of Airbnb are up 71.5% year to date.