[REN #880] Real Estate: COVID-19 Impact on Short-Term Rentals

Airbnb has set up a fund to help hosts dealing with coronavirus cancellations. Travelers ditched plans for vacations, work trips, and family get-togethers when the virus spread. And then, Airbnb promised full refunds. Airbnb’s “Host Relief Fund” will help cover some of the lost revenue, but many hosts are coming up short.

We don’t know yet how the coronavirus will impact the overall housing market, but for Airbnb hosts, the impact was felt almost immediately. Big events that draw huge numbers of people to destination hot spots were cancelled, and along with them, Airbnb reservations.

Hosts Hit with Cancellations, Refunds

The South by Southwest festival near Austin, the Coachella and Stagecoach music festivals near Palm Springs, the Kentucky Derby and the Boston Marathon are just a few of the events that have been cancelled or postponed. Hosts relying on that income have gone from fully booked to an empty reservation calendar and refunds.

Airbnb announced on March 14th that guests would get full refunds despite individual host policies. (1) But Airbnb is hoping to offset some of that lost revenue with a $250 million host relief program. The home-sharing company announced on March 30th that hosts would be eligible for a portion of their anticipated income for reservations made before March 14th. That covers dates that extend through the end of May. The amount that Airbnb will give them is 25% of the amount that hosts would keep under their own cancellation policies.
For one host in the Austin area, that’s 1/8th of the amount he was expecting.

Jason Martin told the Wall Street Journal that he was expecting $120,000 in short-term rental income from 15 condos and homes near the South by Southwest festival. (2) When he lost all those reservations, he refunded everything according to Airbnb’s policy. Under his own cancellation policy, he would’ve kept half, or $60,000. Now, he’ll get 25% of that $60,000 or $15,000 from Airbnb. He says, it’s not much but it will help.

The Wall Street Journal also mentioned another host in the Austin area who had recently gotten into the Airbnb business. Josh Reed had quit a job as an investment adviser just a month before this all happened, and started a business buying and managing short-term rentals. He expected about $18,000 in rental income for the festival for two short-term rental homes that he owned. He bought one for $720,000 in October and another one for $900,000 last month. His father co-signed, and now he’s getting 90 days of forbearance on the two loans because of the lost Airbnb income. The skipped payments will be added to the back end of the loans.

Temporary Bans on Short-Term Rentals

In some areas, like Palm Springs, Airbnb hosts have been ordered to stop renting their units with some exceptions. Officials in Palm Springs and other Coachella Valley communities banned short-term rentals to prevent a flood of outsiders seeking refuge and potentially bringing the virus with them. There’s concern everywhere about how contagious this virus is and hospital capacity. Under local rules, hosts were forced to cancel all new bookings for April. Violators face fines but city rules may differ slightly.

La Quinta, which is East of Palm Springs, will levy a $5,000 fine and yank a person’s short-term rental permit and license for one year. Guests who were already renting when the ban went into effect are not being kicked out, but they are being asked to return home once the term of their occupancy ends.

As I mentioned there are exceptions, including current guests who can’t return home for some reason. Hosts can also rent to essential service or city infrastructure workers if housing is needed. That includes health care workers providing services related to the virus, police, fire fighters, and others. They can also rent to local individuals who need to stay away from an infected family member or to self-isolate to protect other family members. Temporary housing for the homeless is also allowed.

Help for Short-Term Rental Hosts

Airbnb hosts suffering a financial hardship because of this may qualify for emergency financial relief from the federal government. That includes small business administration loans and grants to cover payroll, mortgage payments, rent, utilities, and other obligations. Some of those loan amounts may also be forgivable. Hosts looking for help should check the “Paycheck Protection Program” and the “Economic Injury Disaster Loan Program.” Hosts may also qualify for unemployment under the $2 trillion Cares Act. Airbnb is also offering fee discounts to hosts who rent to people associated with the virus response.

Links:

(1) Airbnb COVID-19 Refund Policy

(2) Wall Street Journal Article

The post [REN #880] Real Estate: COVID-19 Impact on Short-Term Rentals appeared first on RealWealth.

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