PPG's Comments on Proposed Airbnb Tax in Erie County

Date: July 17, 2023

On July 13, 2023, the Erie County Legislature held a public hearing on the proposed Occupancy Tax Modernization Act. PPG staff were not able to attend this hearing, but Director of Community Research, Sarah Wooton, submitted the following comments to the Erie County legislature.

Thank you, Erie County Legislators, for proposing to expand the occupancy tax to non-traditional short-term and vacation rentals, such as Airbnb. At Partnership for the Public Good (PPG), we agree that a tax like this is necessary for the long-term health of our community. However, we urge you to allocate this tax revenue to our community’s expansive affordable housing needs rather than tourism. We think this is critical because: 1) Erie County is currently experiencing a catastrophic housing crisis and 2) Airbnb and other non-traditional short-term rental programs reduce affordable housing supply and increase rental prices. Airbnb and other sites like it are exacerbating the housing crisis. Therefore, we should use funds derived from Airbnb and services like it to counterbalance the detrimental effect it’s having on our local housing market.
Erie County is experiencing a housing crisis. We know that rents are increasing at a rate that is untenable for many of our residents. According to a 2021 report by Jason Knight and Russell Weaver, the square footage for housing has increased at 4x the rate of wages between 2012 and 2018 in Buffalo Niagara.[i] We’re now seeing the effects of this mismatch between wages and rents. According to the Homeless Alliance of WNY’s point-in-time count of homelessness, homelessness in Erie County has nearly doubled since just last year.[ii] Further, our supply of affordable housing is woefully inadequate relative to the need for affordable housing in our region. Knight and Weaver found that we need 75,000 more affordable units (a 75% increase from our current supply) to fill the gap. If we don’t divert funds to swiftly address this housing crisis, the health of our housing market will continue to suffer, and we will continue to see drastic increases in homelessness.
Unlike hotels, Airbnb and other non-traditional short-term rentals uniquely exacerbate the housing crisis. A 2021 study found that Airbnb reduces the long-term rental supply in a given area, especially the supply of affordable housing.[iii] That is, Airbnb is reducing the very thing we need—more affordable housing. Airbnb also increases local rents and house prices.[iv] These programs are making our affordable housing crisis worse.
Given our existing affordable housing emergency and given the negative impacts that rentals like Airbnbs have on affordable housing, we should allocate any tax revenue gained from this source to affordable housing creation and repair. Currently, the legislature intends to allocate these funds to tourism promotion. While we understand that this was likely done to mirror the revenue use from hotel taxation, hotels do not have this same detrimental impact on our local housing market. And in this case, feeding Airbnb-derived revenues back into tourism will simply compound the problem; the more tourists that come to the county, the more that the market for Airbnb rentals will grow, and the fewer long-term rentals will be available. We must use the revenue produced by these short-term rentals to combat the destructive effects that they have on our affordable housing supply.
Thank you for your consideration.  

[i] Jason Knight, Russell Weaver (2021) Engaging the Future of Housing in the Buffalo-Niagara Region: A Preliminary Exploration of Challenges that Lie Ahead, https://ppgbuffalo.org/files/documents/housing_neighborhoods/general/housingneighborhoods-_engaging_the_future_of_housing_in_the_buffalo-niagara_region.pdf, 60.
[ii] “2022 Point in Time: January 26, 2022,” Homeless Alliance of WNY, https://wnyhomeless.org/app/uploads/PIT-By-County-2022.xlsx-PIT-by-County.pdf; “2023 Point in Time: January 25, 2023,” Homeless Alliance of WNY, https://wnyhomeless.org/app/uploads/2023-PIT-by-Counties.pdf
[iii] Li, Hui and Kim, Yijin and Srinivasan, Kannan, Market Shifts in the Sharing Economy: The Impact of Airbnb on Housing Rentals (July 1, 2021). Management Science, Available at SSRN: https://ssrn.com/abstract=3435105or http://dx.doi.org/10.2139/ssrn.3435105
[iv] Kyle Barron, Edward Kung, Davide Proserpio (2020) The Effect of Home-Sharing on House Prices and Rents: Evidence from Airbnb. Marketing Science 40(1):23-47.