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Can Airbnb be blamed for all housing issues? – The case of Ljubljana

By Tadej Rogelja, Miha Bratec, Dejan Križaj from University of Primorska

 

Slovenia is among the EU countries with the highest rate of housing shortage. We have focused on the capital Ljubljana and examined the causes that have led to such a situation. The reason on the one hand is the relatively old and poorly maintained housing stock and, on the other hand, the short-term-rental platform Airbnb. But what did the COVID-19 pandemic reveal?

 

Slovenia is among the EU countries with the highest rate of housing shortage. We have focused on the capital – Ljubljana and examined the causes that have led to such a situation. The reason for such a situation is, on the one hand, the relatively old and poorly maintained housing stock and, on the other hand, the sharing platform Airbnb.

 

The Slovenian capital of Ljubljana, with a population of around 300.000 is one of the smallest capitals in Europe and arguably on Europe’s most sustainable destinations, experiencing tremendous growth in terms of visitor numbers and press recognition within the last 10 years. The city is located in the Osrednjeslovenska Region (Central Slovenia) and it is the strongest area in terms of economic development, and is the administrative, economic, cultural, and scientific centre of the country. On the other hand, Slovenia is also among EU countries with the highest housing deprivation rates. In 2018, more than a fifth of its population lived in poor housing conditions. One of the reasons for the high housing deprivation rate is the relatively old and poorly maintained housing stock (IMAD, 2020). The state also abolished systemic sources of funding, did not develop new supply institutions and hindered the construction of public housing stock. National policies are also reflected in municipal policy, which has neglected the housing topic for the last 30 years since Slovenia’s independence. This played a major role in the housing policy when the socialist real estate market was privatized, and inhabitants had the right to purchase the apartments in which they were living for a price way below the market value. Due to this policy, 80% of Slovenians live in their own properties today and only 8% in rental flats. Consequently, the share of public housing in Ljubljana owned by the municipality fell from 42% (42,000 dwellings) in 1992 to 3% (4200) as of 2019 (IŠSP & FDV 2019). With the stagnation of the housing policy, Ljubljana has reached a point where few people can afford to buy an apartment while renting one equally puts a comparatively high burden on one’s disposable income.

 

Let us now add Airbnb to the whole story. Historically, Ljubljana has not been a prime tourist destination, but between 2014 and 2018, tourist demand increased significantly, leading to a sudden shortage of suitable accommodation. Peer-to-peer accommodation was a perfect solution at this time. The market was flooded with tourists so quickly that the government did not have time to take regulatory measures to prevent externalities. As a result, locals today experience very high prices and cannot afford long-term rentals. According to Milič (2021) from Capital Genetics which focuses on corporate finance, capital growth, valuation of business and real estate in Slovenia and other countries in Southeast Europe, prices have gone crazy. Currently, the average price of a used apartment in Ljubljana is already over € 3100 per square meter. Second-hand housing prices have risen by 50% in the last five years. Official statistics did not capture the additional supply of beds because many locals did not report their short-term rental activities. Figure 1 illustrates the large discrepancy between the number of beds in private accommodation reported by the official statistics of the Statistical Office of the Republic of Slovenia and the number of beds listed on Airbnb according to AirDNA. Thus, in 2018, approximately 2,038 beds were not registered on Airbnb and so failed to pay taxes from their commercial activities (Dolnicar, 2021).

Figure 1: Number of arrivals and overnight stays in Ljubljana (Source: Statistical Office of the Republic of Slovenia, 2019)

 

In addition to that, many Ljubljana residents reported the lack and high price of parking spaces as negative consequences of tourism. On the other hand, according to Airbnb˙s data, most apartments listed offered parking, which can be quickly combined into a meaningful whole. Moreover, a more detailed investigation revealed that Ljubljana’s accommodation listings on Airbnb often recommend that tourists use the public parking spaces near the property, which puts a significant strain on the public infrastructure and results in locals not finding parking spaces in front of their homes (Dolnicar, 2021).

 

But can Airbnb be so easily blamed for most of the housing issues in Ljubljana? Though the discourse went into such a direction, the pandemics showed a rather different picture. When tourism and especially short-term rentals plummeted in 2020, this only led to short term effects such as more offers on the long-term rental market, yet the prices for both housing rentals and purchase kept growing and reached record numbers by spring of 2021. All these leads to indicate that the housing issues in Ljubljana are much more complex and the growth of tourism within the last decade and Airbnb-related short-term rentals only played a minor role in sky-rocketing real estate prices. The real reasons behind them need to be further explored, but most likely have to deal with failed restructuring of the sector following the abortion of socialism and inefficent state and local housing policy formulation.

Rents for students

Housing the student population after Covid. Inclusive recovery strategies or business as usual?

by Loris Servillo and Samantha Cenere from Politecnico di Torino

Student mobilities present interesting similarities to touristic ones, such as their relevance for urban economies and their distorting effects on the housing market. The Covid pandemic has shed light on the dependence of some cities on university students, forcing them to implement ad hoc recovery strategies.

The housing market of major European cities has been undergoing major reconfiguration processes, for which an important driver of change is the impact that mobile populations (tourists, students, temporary workers) exert on long-term residents’ access to decent and affordable housing. Albeit rarely acknowledged, in particular university students represent for many European cities a relevant segment of the market whose effect in this respect could be considered partially similar to the ones of tourists.

Two main trends of urban transformations are triggered by student housing dynamics, which eventually may produce conflicts and negative externalities for local communities. On the one hand, the role of competitors played by students in the long-term housing market. On the other, the increasing relevance played by PBSAs (Purpose Built Student Accommodation) as a major real-estate investment.

The Covid pandemic has made evident the increasing level of dependence on mobile populations (especially tourists) characterising some urban economies and it has shown the vulnerability of a housing market dominated – particularly in some cities in the global touristic circuits – by short-rental accommodations. The exceptional stop to mobilities is showing interesting process of reconfiguration as well as unexpected windows of opportunities to implement positive reforms for local residents. First, strategies that broadly addressed these two types of categories (tourists and students) are becoming sharper through market operators’ shift of attention. Short-term accommodation platforms like Airbnb have supported their clients in reconfiguring their offer toward medium-term rent while it seems most likely that students are the first mobile group that will be back in town.

Second, declared intentions of reforming the housing supply seems floating around. A recent article in the Guardian listed a series of initiatives (or rather good intentions) to take advantage of this opportunity. The case of Lisbon made headlines, due to the city’s launch of a programme aiming at converting touristic flats into affordable housing and the very strong tensions caused by tourism in the housing accessibility for local residents, even if its size of intervention was very soon downscaled.

In this frame, looking at various initiatives currently popping up in many Italian cities, another trend seems to be at work; namely, the effort to implement strategies to bring students ‘back in town’.

Indeed, many Italian cities have been working to either expand or sustain the offer of student accommodation. In Parma, an important university town, the City has launched a rent support programme for low-income students, thanks to a partnership with the Region and the University that enabled to create a dedicated fund. The Piedmont Region launched a public tender to convert tourist accommodation facilities into student halls, aiming at increasing by 260 units the offer of bed places allocated to students in need in Turin. In Bologna, a partnership between the City and the University aims at transforming tourist accommodation facilities into student halls and, in the meantime, providing financial support to low-income students. Venice has gone further, directly involving the renown short-term rental platform Airbnb in the conversion of flats formerly rent to tourists into student accommodation. Indeed, the Country Manager of Airbnb has expressed interest into the possibility of expending the company’s offer to medium-term rents. Pursuing a different path, Milan looks at the business of PBSAs to build a city attractive to students. The city’s strategy to bring back students (especially international ones) while paying attention to provide spaces that are compliant with the social distance prescriptions consists in the provision of 13 new PBSAs, for a total amount of 5,000 new bed places for students.