Could Airbnb Actually be an Affordable Housing Solution?

By Brent Woodcox

One of the primary arguments opponents of short term rentals and Airbnb use against the service is that it negatively affects the housing supply even though studies have shown the effects of short term rentals are a relatively minuscule factor in that equation.

But now comes this article from The Wall Street Journal showing how mortgage lenders are shifting towards counting rental income when considering homeowners looking to refinance their loans. This is game changing because it means that families struggling to make ends meet or afford to send a child through college may not get the benefit of home equity from the rental income generated by being Airbnb hosts. It may even help families who would be unable to secure a loan do so with a plan to rent out a portion of that home on a short term basis. 

With an affordable housing crisis ongoing in Raleigh, I'm anxious to see how new lending practices might help families afford to secure a mortgage that they can afford. Hopefully, this also encourages city policymakers to join the 21st century and recognize that the sharing economy is not a fad and is helping families to build for themselves a better future.

Homeowners soon will be able to count income they earn from Airbnb Inc. rentals on applications for refinance loans.

A new program—expected to be announced on Thursday by Airbnb, mortgage giant Fannie Mae and three big lenders—will allow anyone who has rented out property on Airbnb for a year or longer to count some or all of that money as income.

Refinancing can be a way for a homeowner to tap home equity for renovations, college tuition or other big expenses, or to reduce their monthly payments.

Lenders have been tougher on income from side businesses and part-time work since the mid-2000s, when poorly documented income claims on mortgage applications helped fuel the housing bubble.

Airbnb, which launched in 2008, argues that its service includes reliable technology to track income, and that it is helping middle-class Americans stay in their homes by giving them a way to generate additional cash.

“The whole big idea behind Airbnb … was how could people unleash or capture the value of the home that they were in. Typically it’s the greatest expense for any family,” said Chris Lehane, head of global policy and public affairs for Airbnb. “I do think this announcement is a next chapter in that process.”

The mortgages will be backed by Fannie Mae, an acknowledgment that Americans today increasingly are earning money through the “gig economy,” such as renting out rooms or ride-sharing.

Initially, three lenders, Quicken Loans, Citizens Bank and Better Mortgage, will participate in the program. Fannie will evaluate the initiative and could decide over time to back mortgages from any lender that chooses to count Airbnb income in a refinancing, as long as the short-term rentals aren’t against local laws.

“Rental income on your own home is something that 10 years ago we almost never saw,” said Jonathan Lawless, vice president of customer solutions at Fannie Mae. “The fact is that we’re seeing this much more commonly across the country.” ...

He added the company has seen demand from homeowners who have been renting a room out on Airbnb and want to refinance and use the money to upgrade the guest quarters.

Vishal Garg, chief executive of Better Mortgage, said the program could be useful for empty nesters who rent out their children’s bedrooms and refinance to help pay for college tuition.

Mr. Lawless of Fannie Mae said Airbnb gives homeowners greater flexibility to cope with unexpected financial hardships.

“I can just increase the number of days that I’m renting out this room and increase my income,” he said. ...
— Laura Kusisto - WSJ
Brent Woodcox