A recent trend I have witnessed is apartment owners renting their apartments for short term stays through various websites like Airbnb. The thought is that the short term rental market pays a premium for the short term stay while also minimizing the long term wear and tear expenses on an apartment. The start up cost and management responsibility required to employ this rental plan is much higher than a "traditional" rental policy but the long term payoff seems to be well worth it.
I did a quick informal study comparing rents in certain neighborhoods of San Francisco to monthly Airbnb "rents" based on the nightly rate. I assumed that each Airbnb rental was only occupied 75% of the month, the average occupancy for hotels in San Francisco, and I did not include any applicable service or cleaning charges in the final Airbnb rents. The results of my analysis were astounding. The market premium Airbnb rents received are anywhere from 20-100% over market rent. This additional income provides a clear incentive to landlords to keep one or two apartment units off the market to enhance overall returns.
Beyond the management headache of using the short term rental policy, there is one other large obstacle; the law. Cities routinely have laws in place preventing apartment landlords from renting units on a short term basis. This prevents landlords from directly competing with hotel owners and it maximizes the amount of long term rental inventory on the market. Before Airbnb, Craigslist or other service sharing sites came along, renting a single apartment on a short term basis was much more inefficient rental system. Now that landlords can cast a broad net with minimal infrastructure and get a large premium to their monthly rents, short term rentals have become a frequent rental policy.
What does this mean for the rental market? So long as Airbnb rents offer a premium over long term rents, landlords will continue to use the service to increase their operating income. As more landlords catch on to the Airbnb trend, more and more long term rental units will be pulled off the market. The lower inventory will drive long term rents higher until they meet short term Airbnb rental rates. This works great for landlords and poorly for renters. Mitigating this movement will fall on law enforcement which will be hard pressed to stop anything as they will have very few resources to battle the trend.