“Airbnb is really quite a common strategy for people trying to make ends meet and pay their mortgage,” says Professor of Urban Planning Peter Phibbs from the University Of Sydney.
And now the share economy service is advertising that fact.
An Airbnb poster advert in the middle of Martin Place boldly states: “Our Granny flat helps pay our mortgage”, picturing two young 30-somethings laughing and smiling in their own home.
But it’s not all grins and giggles.
“The risks of using Airbnb to pay your mortgage are simply the uncertain nature of your future income,” Phibbs notes.
"Everyone might decide your suburb’s not fashionable for tourists, you might get a lot of competition from your neighbours, someone might say something pretty terrible about your house on the Airbnb website.
"Tourism might just subside because of an international crisis. All those things make the income from Airbnb very uncertain.”
Phibbs has been studying the Sydney housing market for 25 years and thinks “it’s a jungle out there”.
First-time buyers and veteran homeowners alike are being forced to use the sharing economy service just to get a foot up on the property ladder.
“If I wasn’t doing Airbnb I would certainly be under mortgage stress,” says Neil Galbraith, one of many new hosts who are using the service to try to make their mortgage disappear.
“I think Airbnb is absolutely something other people should be doing to pay off their mortgage. In my case, I live alone and I have a spare room so it totally makes sense.”
Data shows that Airbnb listing in Sydney have increased by 7000 since last year and on average, 45 percent of the income that hosts make from renting is spent on paying off their mortgage.
Hosts make a lucrative $7100 dollars a year on average, according to the company.
Pot luck
Source: Airbnb
But that’s not the figure everybody ends up with.
Galbraith, despite being an advocate of using Airbnb to pay the mortgage admits: “For me, Airbnb is not as regular an income as I’d like, but that’s really due to the location of the property.”
For Wally Salinger, luck was on his side. When Salinger was made redundant and left with a $1.5 million dollar mortgage to pay off, Airbnb came to his aid.
“While it wasn’t the only way to pay off the mortgage, some of the other options didn’t appeal,” says Salinger.
Hosting allowed Salinger to keep his luxury four bedroom home, which his partner had designed, and to “have greater control” over what the house looked like.
The house was an instant success on the hospitality website: “From the word go we were covering our mortgage payments within 45 days."
Plus the couple was making up to $80,000 dollars a year.
The law
Short-term holiday rentals in NSW are overseen by councils and zoning usually determines whether a home can be let out as a holiday rental.
Salinger’s could not. He received a letter from Leichhardt council and was threatened with a fine of up to $1.1 million dollars.
Eventually Leichhardt council settled on a fine of $750, but the order left Salinger with a much bigger deficit.
“The mortgage is still not paid off, and we’ve agreed with the council we’ll stop. We’ve just sold the property.”
Minister for Innovation and Better Regulation (NSW) Victor Dominello has been tasked with coming up with new policy which expected to weigh in Airbnb and its hosts favour, but until then Salinger’s ordeal is a stark reminder of the uncertain risks of using the service to pay off your mortgage.
Salinger thinks for most people it’s not worth the risk: “I wouldn’t necessarily say Airbnb is a great way to pay off your mortgage, because mortgages are much more regular than the income most people will be able to generate.”
Despite this, Salinger does intend to continue hosting at any future properties he owns.
Part of a wider context
While Professor Peter Phibbs believes that Airbnb is “very much going to be a part of the future”, he thinks using the share economy to pay off mortgages and get people onto the property ladder is “just another quick fix”.
Phibbs believes it’s not just a bad strategy for individuals to rely on but also hopes it's not something state governments should see as a viable strategy to combat an increasingly unaffordable housing market.
“If there was an Olympic event for government making housing unaffordable, [NSW] would win gold year after year,” he stated.
Instead, he advocates for the government adopting a policy of establishing a certain proportion of new dwellings at a particular, affordable price.
Phibbs says: “It might not be world’s most glamorous or large dwelling but that’s where we need to actually be proactive about not just leaving it up to the market.”
