Airbnb and ADUs – Will it Help or Hurt Rental Incomes!

Airbnb and ADUs (granny flats) are not new concepts; however, people are starting to take notice of them due to their increasing popularity. They are alternative housing models that allow for homeowners and users to capitalize on unused space. With the number of foreclosures over the last decade, there are also many vacant homes. Thus, these models can provide an additional source of revenue when used wisely.

Municipalities all over the U.S. are starting to allow Airbnb and ADUs; however, they have not yet figured out how to regulate them properly. Issues with these alternative housing models include short-term stays, zoning issues and property tax collection, among others.

Many jurisdictions in California that have approved ADUs still require a permit. In Los Angeles County, an ADU permit costs $400 and requires a land-use review by the city, which takes one to two months. Because of this, homeowners are less likely to apply for permits or build ADUs in areas with stricter application processes.

Short-term rental platforms such as Airbnb have also been in the news recently for being controversial. Neighborhoods and cities are trying to figure out how they can be regulated without limiting their growth. City officials are trying to figure out how much money they can generate from the platform while still making sure that residents aren’t being displaced.

Many homeowners are turning to Airbnb since their rental incomes have not kept up with rising housing costs and property taxes. Instead of working long hours as a landlord, they choose to open their doors for additional income by listing their homes on Airbnb and ADUs.

However, with all the controversy surrounding short-term rentals platforms, will they help or hurt rental incomes? We think that over time, as these short-term rental platforms are regulated properly with regards to property tax and zoning laws, homeowners will still be able to generate additional income from their unused space via Airbnb or ADUs. It will just be a matter of how they do it and in what capacity they do it.

With regards to Airbnb, as the market grows and more people discover the platform, there is going to be increased scrutiny from all stakeholders so that we can find a way to balance safety with growth opportunities for hosts and guests. The other issue is that with the amount of people looking to rent short-term, there will also be a lot more competition. Thus, hosts will have to figure out ways to stand out from all the other properties on Airbnb and increase their appeal/quality so they can rent for higher prices (and maybe even charge more than hotels).

On top of this, as the market becomes saturated with vacation rentals (and if Airbnb is regulated properly), homeowners will have to find ways to differentiate themselves and their space. You will still be able to make money renting out your home on Airbnb; it’s just going to be a matter of how much you are willing to spend in marketing or moving costs.

All in all, if Airbnb and ADUs are used properly and regulated with regards to zoning laws (i.e., property tax), homeowners will still be able to make money from them even as the market becomes more saturated. It’s just a matter of how residents use these platforms and where they decide to list their properties. 

As Airbnb continues to grow in popularity, more and more homeowners are taking advantage of the opportunity to list their properties on it. However, with increased competition for rental guests, Airbnb hosts will have to figure out ways to stand out from all the other homes listed on the platform.

Because of this new demand, we predict that owners will continue renting out their properties on the platform, but as more people continue to discover Airbnb and list their homes on it, there will be increased competition for guests. Thus, hosts will have to figure out how to differentiate themselves from all the other listings on Airbnb so they can attract rental guests.

Another issue with added competition is that once people discover Airbnb or if they’re already using it, the number of guests on Airbnb will continue to increase. As more and more people use the site, there are going to be even more users in the future that want to stay in properties other than their own.

Will homeowners stop renting out their properties once more people discover Airbnb?

However, with a saturated market, people will still be able to rent out their homes on Airbnb even as there is increased competition. It’s just a matter of how much homeowners are willing to spend on marketing or how much they’re willing to lower their prices (or maybe it’ll just be about quality).

If all else fails, you can always improve your property so that it stands out from the rest and attract more rental guests. You can start by fixing up your curb appeal so that you at least have a chance to get a guest in front of your home. (For Airbnb, this seems like it would be more important than for people renting out their properties through traditional means because it’s what potential renters see before they even reach out to Airbnb hosts.)

However, if you’re not willing to put in the effort or money into fixing up your property, it’s better for you to get a tenant who will stay for at least a year and is looking for long-term residencies since they’ll be more likely to keep paying rent (and thus lower turnover). (Since turnover is a huge cost in the real estate industry, you’ll want to avoid it unless you’re desperate.) 

On the other hand, if you’re willing to fix up or improve your property and spend some money on marketing or moving costs, then perhaps Airbnb might be for you. With a little extra effort, homeowners can still make money from their properties even as Airbnb continues to grow in popularity. It’s just going to be a matter of how much effort you’re willing to put into making your property stand out from the rest.

However, if you’re not able to differentiate yourself and your space then Airbnb might not be for you. As more people discover Airbnb or start using it, there are going to be even more users who will want to stay at properties other than their own. This is where the competition becomes intense.

But despite all of this, we predict that homeowners will continue renting out their properties on Airbnb as long as they are properly using it and regulated with regards to zoning laws. (i.e., property tax) As stated above, it just depends on how owners decide to market themselves and spend their money. If they’re willing to put a little extra effort in, then they’ll still be able to rent out their properties on Airbnb even as competition increases. Whether it will help or hurt your rental income, well that is truly up to you and how you use the information provided in this article. 

360Builders is a Los Angeles based construction company specializing in new construction and multi-family ADUs. We pride ourselves on providing safe, cost-effective solutions to all our customers’ construction needs.


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