Lisa Richards’ Lyndale neighborhood Airbnb typically books up every weekend of the year. She bought her house in 2015, and stayed with friends and family on weekends when guests arrived.
“By the summer, it was booking up so much that I was kind of homeless,” she said.
So she bought a second house a block away in 2017. Shortly before Final Four guests arrived, she walked through the house and peeked at the bar fridge under the bathroom sink. (The amenity was featured on a home improvement show titled “Cocktails in the Crapper.”)
In the busy summer months, Richards said her Airbnb income adds up to three times her mortgage, and in the slower winter months, she roughly breaks even. She most often rents to housefuls of women visiting for bachelorette parties or weddings.
“I’m happy that people can make their memories [here]. My house is a part of their wedding,” she said.
Minneapolis is not currently a fast-growing market for short-term vacation rentals, according to AirDNA, which tracks Airbnb, VRBO and HomeAway data. The number of Minneapolis market listings that offered an entire home for rent decreased by 63 percent from 5,246 in February 2018 (spiking near the Super Bowl) to 1,963 in February 2019, according to AirDNA data that includes Minneapolis and surrounding suburbs. Minneapolis licenses 137 unoccupied properties for short-term rentals, according to the city’s open data portal, joining more than 23,000 rental license holders who are always free to list apartments on Airbnb.
Local investors said short-term rentals can fetch double the rate of traditional rents, although it’s partially offset by added costs like electricity and cable.
The founder of Minnestay, which hosts an independent platform for Minnesota vacation rentals, discovered this firsthand at the Kingfield duplex where he lives. Lance Bondhus said he previously collected traditional rent of $1,300 per month on a two-bedroom, one-bath unit. When he converted the apartment to a short-term rental, however, gross annual revenue essentially doubled, growing to $36,000, he said.
Bondhus said he thinks short-term rentals have a positive impact on property values.
“In order to be successful in Airbnb or any short-term rental industry, it is very much review-driven, meaning there is no real place for slumlords,” he said. “In order to get those great reviews and to continue to get them, your properties have to be very well taken care of, and that’s from the outside to the inside.”
Some property listings highlight the potential for Airbnb. One current $549,900 listing at 3449 Hennepin Ave. states: “Location, location, location! Updated duplex currently run as AIRBNB and averaging $5,000 per month.” Another property at 3136 Pillsbury Ave. S. is listed with a Zillow “Make Me Move” price of $450,000: “Basement apartment with separate entrance rented out over 130 nights on Airbnb with 5-star reviews! Just wash sheets & cash checks.”
Realtor Jason Reed said he thinks Airbnb is most likely to impact property values for smaller homes under 1,000 square feet. Several of Reed’s clients buy small homes to rent as an Airbnb, he said, and he’s seen their prices rise significantly. A number of his clients buy duplexes, using one unit to rent out to year-round tenants and the second for Airbnb.
“Predicting the effect of Airbnb on housing values seems to be limited,” he said in an email. “I have known a number of investors that tried Airbnb and have since quit. They were receiving two to three times what they would have with a yearly lease, but they found that the hassle of dealing with constant turnover and the higher expectations with the clients weren’t worth the trouble. I believe it is a great way to make money, but it is like you’re running a hotel, not a typical rental property. There is a lot more involvement in property management.”
Even small changes in housing supply, including converting apartments to Airbnb units, can significantly raise housing costs, according to a January 2019 analysis by the Economic Policy Institute, a nonprofit, nonpartisan think tank that formed in 1986 to include low- and middle-income workers in economic policy discussions. The institute pointed to studies in New York City that indicate Airbnb may have raised average rents by nearly $400 annually for city residents.
In response to such concerns, Airbnb spokesman Ben Breit pointed to a piece by Bloomberg opinion columnist Noah Smith, who said it’s hard to measure Airbnb’s impact. Smith said Airbnb guests enjoy staying in hip, gentrifying neighborhoods where skyrocketing rents may be a coincidence. Relying on 2017 research on the sharing economy, Smith said doubling the number of Airbnb listings would raise rent by less than 2 percent overall.
While some cities like Edina have banned short-term rentals altogether, Minneapolis started regulating short-term rentals in the run-up to the Super Bowl. Bondhus said Minneapolis did a good job making the regulations easy and fair. The city only requires registration for owners who rent out an entire property and leave during the stay; rental licenses are required at properties listed for rent that are never occupied by owners.
Bondhus said he’s seeing growth in short-term rentals. Five to seven years ago, he was listing on two platforms and booking at 75 percent occupancy, competing with about 250 other properties.
“That same property today, I have to hustle to fill it,” he said, explaining that his units are listed on about 30 different websites and he’s competing with more than 1,500 Minnesota listings.
“I don’t see it as any different than all the luxury apartment complexes being built downtown and no Section 8 homes,” he said. “We can’t all be Airbnbs in Minneapolis, because there isn’t enough people coming. At some point, it’s going to be a supply and demand issue.”