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Airbnb to Blame for Steep Rise in Tel Aviv Rent Prices

Airbnb to Blame for Steep Rise in Tel Aviv Rent Prices

September 13, 2017

Business & Management

Haaretz–Airbnb is responsible for the steep rise in Tel Aviv rents, as seen in the market for 1.5- to two-room apartments – the most typical property offered by the San Francisco-based company. This is according to a new study by Dr. Yoav Kerner, an expert on statistics and operations research in the Department of Industrial Engineering and Management at Ben-Gurion University of the Negev.

Dr. Yoav Kerner

The study was done at the request of the Israel Hotel Association and the Social Congress. The latter group, made up of veterans of the 2011 social protest movement, studies the origins of Israel’s housing crisis and suggests solutions.

In the study, Dr. Kerner compares the rise in rental rates in Tel Aviv to that in various parts of the country. He examined only apartments 1.5 rooms to two rooms large, the most popular apartments in Israel’s shared economy, as he put it. Kerner studied the period from the first quarter of 2007 to the first quarter of 2017.

“The results indicate that from 2013 to 2016 and in the first quarter of 2017 there was an increase in rental rates in Tel Aviv that exceeded the increase in rental rates in the city in the preceding years,” Kerner writes.

As expected, he found that the rate of increase is higher for Tel Aviv than for the national average, at a ratio of 1.38 to 1. That is, for every one-shekel rise in apartment rents nationally, Tel Aviv rents will rise 1.38 shekels.

But Kerner also found that rental rates for the 1.5-to-two-room apartments in Tel Aviv increased between 2013 and 2016 by 325 shekels ($92) a month. He believes this factor is Airbnb’s entry into the market in 2013, which has reduced the supply of apartments for traditional rentals.

“The fact that the additional factor was of greater influence in the smaller apartments, which are more common in sharing-economy initiatives, reinforces the assumption that the factor causing the increase is in fact these sharing-economy initiatives, the most prominent of which is Airbnb,” he writes.