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The Next Sharing Economy: Extended-stay Lodging

Long-term leases don’t make sense for certain renters. But neither do short-term rentals. Will the market be allowed to fill the need in-between?

Airbnb is among the most famous firms to emerge from the “sharing economy” trend of the 2010s: companies use the internet to let individuals provide goods and services through their own means. Airbnb lets homeowners play “host” to travelers seeking low-cost short-term rentals (STR), who don’t want to foot the cost of staying in hotels. But Airbnb’s clientele and its business model are shifting to include more stays of 30 or more days, which we will call extended-stay lodging (ESL). It amounts to a diversion from Airbnb’s original purpose, and an opportunity for other lodging brands that want to serve this market niche. The question is whether government regulations will keep up. 

A little bit more about the extended-stay market itself: according to Airbnb CEO Brian Chesky, nearly a quarter of bookings are longer than 28 days. Which means that a large segment of Airbnb guests are not mere vacationers; they are people who need to rent a room or home for longer than a few days, but shorter than the standard 6-month lease. This could include:

  • Financially-distressed people who can’t afford long-term leases, given the credit checks and deposits
  • Business travelers doing extended contractor work in a city (think nurses or pipeline layers)
  • Prospective homebuyers who need ESL during their search
  • College students in town for the semester
  • “Transitioning” types who can live anywhere. This may be people who are working from home, are in-between jobs, or may just be in travel mode, and want to stay in a destination city like Paris or Rio for a month or two.  

In each scenario, having a room that is already furnished provides added convenience.

The investment community recognizes this sizable market for furnished ESLs. A story by Bloomberg details how housing investment startup ReAlpha intends to make a $1.5 billion investment in single-family homes for use as ESLs. The company has developed software that will let it assess property values, and an app that will let everyday investors buy these properties. They intend to rent these units out through Airbnb. Chesky supports his Airbnb platform being used like this, and expects to see more such ESL bookings. 

“As people are more flexible about where they travel, when they travel, I think that what it really means is that they’re less tethered to any one location,” Chesky told Yahoo Finance

At the same time, Airbnb is not yet ideal for the ESL model. It charges major markups (one blogger pegged it at several hundred dollars more per month) compared to per-month rents in a 6- or 12-month lease. Other sharing economy home services are even less primed for this STR-to-ESL transition, such as VRBO, which focuses on vacations. However, VRBO’s 2021 trend report states that it will be focusing more on “flexcation”, i.e. people who incorporate remote work and travel into their lifestyle. 

Another option for this demographic of working transients is extended-stay hotels. But these are notoriously expensive and often of poor quality. A study of extended-stay patrons in Georgia found that the majority were living out of the hotels as their primary residence, and that the cost was significant, interfering with the patrons’ ability to save money.

It seems that the market is itching for an ESL service that can provide more competitive pricing. One such firm has already emerged, but is at this point relatively obscure. Atlanta-based PadSplit is a web platform that connects workers with temporary housing. It sets the minimum stay at one month, and requires proof of employment. PadSplit’s business model amounts to “housebreaking”, where rooms within single-family homes are sublet to unrelated strangers. In a Forbes op-ed, CEO Atticus LeBlanc specifically called extended stay hotels an inadequate solution for ESL; in metro Atlanta, they often run for more than $400/week, while his company has listings for well under $200/week.

However, the company has recently faced criticism from renters for poor living conditions; has run into neighborhood opposition; and has faced legal trouble regarding zoning codes. Regulations will likely be a burden wherever else PadSplit and other ESL providers try to operate, as there are different laws for short-term versus monthly housing. 

In some states, for example, guests that stay longer than 30 days gain tenancy rights and are harder to evict—which becomes a risk that ESL providers must price in. But in other cities, hosting tenants for under 30 days has its own legal challenges. In New York City, multifamily buildings with more than two units are forbidden from offering such rentals. Conversely, Honolulu restricts “unhosted” properties from offering stays longer than 30 days.

Government regulations, in fact, are likely the root of why there aren’t more SRT and ESL sharing economy providers. As it is, Airbnb has faced relentless opposition from NIMBY legislators and activists, who baselessly blame the service for elevating home costs. Short-term hotels have always faced scrutiny for attracting so-called “undesirables.” The dislike of transience itself is what fuels the backlash. 

But transience—which might sooner be called worker flexibility—has long been common in cities. A rising crop of entrepreneurs, from Airbnb to VRBO to PadSplit, aim to address this market need for extended-stay lodging, and future companies will surely compete. It is the responsibility of city governments to recognize that by-the-week and by-the-month workforce housing is a valid consumer need, and not regulate it away.

This article featured additional reporting from Market Urbanism Report content manager Ethan Finlan.