Mexico City Residents Bemoan Rent Hikes, Gentrification Driven By Airbnb Rentals

The accommodation rentals platform is blamed for rent increases that affect locals, with observers eyeing the need to adopt measures implemented in other cities around the world

Airbnb has faced restrictions in some cities, such as Barcelona, Berlin and Paris, in a bid to prevent rents from rising for local residents. Photographer: Gabby Jones/Bloomberg
November 04, 2022 | 04:10 PM

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Mexico City — The proliferation of accommodations offered through Airbnb is setting off alarm bells for some tenants in Mexico City, who argue that the platform has led to higher rents and an increasingly scarce supply of rental housing for local residents.

The discussion has heated up after the Mexico City government and UNESCO signed an agreement with Airbnb on October 25 to promote the Mexican capital as a global hub for remote workers, commonly known as digital nomads.

The objective of the alliance, according to those involved, is to turn Mexico City into the capital of creative tourism in Latin America, seeking to promote new tourist attractions and encourage the emergence of micro and small-scale entrepreneurs in non-traditional areas and corridors.

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However, Latin American civil organization Habitat International Coalition AL, which works for human rights related to habitat and social justice, assures that this dynamic drives processes of segregation and gentrification.

This organization considers that the growth of Airbnb and the arrival of digital nomads is fostering the phenomenon of gentrification, as depressed or deteriorated areas are rehabilitated and urbanized, increase the cost of rentals.

Gentrification is one of the factors driving out local inhabitants in cities around the world. This is compounded by speculation on housing prices and large investors profiting from rents.

Worldwide, gentrification increases the rental price of a property by up to 50%, as estimated in the documentary Push, directed by Swedish filmmaker and journalist Fredrik Gertten, who investigates why it is no longer possible to live in some cities as a local.

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According to a manifesto promoted by Habitat International Coalition AL, this incentive for Airbnb will cause rental tenants to be displaced by the high costs of housing, as a result of the demand of digital nomads, or by their landlords, who begin to show a preference for renting their properties to digital nomads and earn more money than if they rented them to their current tenants.

Luis Felipe González Huerta, a professor and academic at the Universidad Panamericana’s School of Business, told Bloomberg Línea however that it is not possible to speak of a generalized gentrification phenomenon, given that digital nomads tend to gravitate to certain areas of the city.

“If we zoom out, these short-term stays are totally concentrated in the vicinity of Paseo de la Reforma and that is not the total of Mexico City, they are not in the Portales or Narvarte - two lower cost neighborhoods of the Mexican capital,” he says.

However, Habitat International Coalition considers that the alliance with Airbnb could be “a tough blow” to the fight for legislation that considers housing as a human right “and not as a mere commodity”, and it is calling for regulation such as that implemented in some cities around the world.

Airbnb vs. regulation in other cities

Since 2012 cities such as San Francisco, Paris, Berlin, Amsterdam and Barcelona have seen how a proliferation of accommodations available through Airbnb has increased rentals and displaced local inhabitants, as the proliferation of short-stay rental spaces prevents the supply of long-term rentals.

Rosalba Loyde, an academic at the National Autonomous University of Mexico (UNAM), and an expert on housing and urban issues, told Bloomberg Línea that in Mexico the phenomenon of high rents because of Airbnb is becoming more widespread and that with the new alliance with the city government it could accelerate.

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The initiative to attract digital nomads, says the also academic of the Tecnológico de Monterrey, university will increase the competition for apartments among long-stay tenants, and between traditional rentals and short-stay rentals, and costs will increase more in areas where housing is already expensive in downtown Mexico City.

The areas likely to be most affected are the Cuauhtémoc, Miguel Hidalgo and Benito Juárez districts, where there is a higher concentration of Airbnb stays.

Germany was one of the first countries to regulate the short-stay market. Berlin clashed with the California-based accommodation rentals company when apartment rents increased by 8% between 2012 and 2013.

Since April 2016, it has not been possible to rent entire apartments in Germany, only rooms, and only with the apartment’s owner present. Those violating the rules were liable to fines of up to 100,000 euros. Two years later, in 2018, the law was changed and it is now possible to rent an apartment to tourists for short-term stays and other properties, but only for a maximum of 90 days per year.

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In 2018 Paris also introduced legislation to curb the proliferation of Airbnb rentals, and which stipulates that personal housing can only be rented to tourists for a maximum of 120 days per year. In addition, a person who owns more than one property in the city must either rent it for a minimum of one year to a single tenant, or register it as a commercial premises and make the same declaration as an entrepreneur.

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A year later, Spain also put rules into place for Airbnb to avoid making housing more expensive.

A study by the Barcelona Institute of Economics revealed that the presence of Airbnb in the Catalan city had had a direct impact on the residential market, making purchase and sale prices 19% more expensive and rental prices 7% more expensive between 2012 and 2016 in the areas where Airbnb has the largest presence.

Barcelona has been one of the cities that has battled rental platforms the most.

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Loyde said that the regulations in the Spanish city prohibit a building from having more than 20% of apartments destined for Airbnb, and believes that such regulations should be considered in Mexico City.

In 2019 the City Council of Madrid approved the so-called Plan for Lodging Uses (PEH) to preserve the residential use of the urban center and control economic activities related to lodging located in buildings in the city.

Spain now requires a license to be an Airbnb host. In addition, the Spanish plan also set out concentric rings in a number of zones to decentralize tourist apartments.

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Such regulations have kept rental price inflation in check in big cities.

In Mexico City, says Loyde, the market needs to be regulated, as more than 50% of the stays offered on Airbnb are full apartments and houses in areas where digital nomads compete with tenants seeking traditional, long-term rentals.

Regulations would have to be formulated without neglecting the economic spillover that these types of platforms have on individual landlords and local commerce, Loyde added.