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Tourism Slump in Dublin Lays Bare Airbnb’s Damage to Rental Markets

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The modern one-bedroom Dublin apartment featured an open-plan living space, a sun-soaked balcony, solar panels, ample storage space and parking for two cars. The location was ideal, as was the price: about $1,800 a month — $300 less than the previous tenant had paid.

In a city where lines to view rental properties have regularly trailed around the block, the new tenants could hardly believe their luck.

“We were not going to get this place,” Aoife Brannigan, 25, said of the months of fruitless searching that she and her partner, Shaun Gribben, 25, had undertaken before landing the apartment. “I couldn’t see it happening had this not happened. We 100 percent benefited from this.”

The “this” she was referring to was the coronavirus, which has sent a chill through Ireland’s once-frenzied housing market, particularly Airbnb listings, which have been hit by a collapse in tourism. That drop, along with an exodus of people from overseas leaving Dublin because of the pandemic, has created a surge in available rental properties in the Irish capital — a shift that underscores how Airbnb’s presence continues to influence housing prices in popular cities.

For Dublin, the change has relieved a crunch that in recent years sent rents skyrocketing and left many people struggling to afford a place to live. The situation was so fraught that in February, voters in search of affordable housing and greater tenant rights set off shock waves in national elections by ousting the traditional governing parties.

When Ms. Brannigan and Mr. Gribben began their search in earnest at the start of the year, he said, “I remember every day I was given around 60 properties — and once this kicked in, it literally doubled.”

ImageAoife Brannigan, left, and Shaun Gribben in the Dublin home they found during the pandemic. “We 100 percent benefited from this,” she said.
Credit…Ruth Connolly for The New York Times

For years, homes rented out on Airbnb for short-term stays drained the supply of the Dublin area’s rental market, rising from about 1,700 full-home listings in 2016 to over 4,500 early this year just before the coronavirus crisis, according to Inside Airbnb, a site that tracks listings in cities around the globe.

But during the pandemic that trend has reversed, with such listings declining to about 3,900 during August, a deceptively small shift that has had an outsize effect. From May to July, long-term rental listings in the city were nearly 50 percent above the same period last year — an increase of over 1,000 rental homes — despite a 1.5 percent fall in the rest of the country, according to a report by Ronan Lyons, an assistant professor of economics at Trinity College Dublin, for the Irish real estate website Daft.ie.

Because they operate on short-term leases, Airbnb listings can flood the rental market in a way that longer-term rentals cannot.

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Updated 2020-09-19T12:39:40.109Z

“The Dublin market in normal conditions could easily take 3,000 properties without necessarily batting an eyelid,” Mr. Lyons said in an interview. Of the recent increase in listings, he said: “That’s quite a lot compared to what it has seen coming through. That’s about one and a half months’ additional supply that came on, and at a time when people aren’t moving to the city.”

The Irish government tried to cool the Airbnb market last year, introducing regulations to move short-term rentals in areas with rapidly rising rents back into the long-term market. But without an effective method of enforcement, the effort was largely fruitless.

Similar approaches have been taken — with mixed success — in Amsterdam and Paris, which have limited the number of days people can rent their apartments; in Barcelona, which in 2014 fined Airbnb over breaches of property rental rules; and in London, where investigations by The Times of London and Wired magazine found that thousands of the site’s listings appeared to violate the city’s limit on short-term rentals.

Credit…Ruth Connolly for The New York Times

“Airbnb is knowingly allowing people to advertise properties that are not legally compliant on the platform,” said Eoin O Broin, the housing spokesman for Sinn Fein, a left-wing opposition party that made large gains in the February election on a platform that included proposals to freeze rents and build 100,000 homes. “And when those properties are let as they were before Covid-19 restrictions, and will be afterwards, Airbnb is profiting from lawbreaking.”

An Airbnb spokesman disputed the Inside Airbnb data, saying that most hosts around the world planned to rent their units at least at pre-pandemic levels once the coronavirus subsides, and added that the share of bookings in big European cities had recently rebounded.

The company said in a statement last week: “There are as many entire home listings on Airbnb in Ireland today as there was before the pandemic. Travel on Airbnb generated an estimated €800 million in economic activity for Ireland in 2019 alone and hosts are very much focused on how they can help their local communities get back on their feet and drive the safe recovery of tourism.”

Homeownership was the subject of intense national focus during Ireland’s booming Celtic Tiger years of the 1990s and early 2000s, but the 2008 financial crash gutted the country’s economy and brought a previously hot housing construction industry to a halt. Ireland’s economy gradually recovered, but housing prices catapulted, putting homeownership beyond the reach of most people and corralling them into an already squeezed rental market.

Then came the pandemic, which brought a nationwide lockdown in the spring, a 6.1 percent drop in economic output in the second quarter and an unemployment rate that by August was measured as high as 15.4 percent.

Credit…Ruth Connolly for The New York Times

And while some workers have moved out of urban areas while working-from-home practices are in place and some from overseas returned to their native countries during the pandemic, experts attribute much of Dublin’s abrupt rise in listings for long-term rentals to the drop in Airbnb listings.

The evidence, they say, is that availability has spiked in parts of the city where short-term listings were concentrated — something that has not happened evenly across the city or in the rest of the country.

The shift has been most pronounced in central Dublin, where owners of investment properties have been abandoning the short-term market. Jim Cryan, a retired businessman, moved his Dublin Airbnb listing onto the long-term rental market in late March. Within two and a half weeks, the four-bedroom townhouse was rented.

Mr. Cryan accepted a lease with a monthly fee of about $3,900, half of what he could have expected when the Airbnb market was sizzling. Yet he doubts that he will return to the short-term market.

“You apply common sense to it,” he said. “It’s like if you invest in a share and it collapses, you’re very loath to go back in again and get burned twice.”

This is not to say that the return of former Airbnb listings to the rental market will solve Dublin’s housing crunch.

“The underlying shortage of rental accommodation is probably at least 50,000 and closer to 70,000 or 80,000 based on trends over the last couple of decades,” said Mr. Lyons, the economics professor.

Credit…Ruth Connolly for The New York Times

“My concern,” he added, “would be that a politician could look at this and go, ‘Oh, problem solved: Airbnb has collapsed, the European market has collapsed, we’ve got all these rental properties over and job done.’”

For one thing, while rents in Dublin have fallen since the coronavirus struck, the drop-off over all was marginal, and recent months have even seen a slight uptick.

“The underlying shortage of rental accommodation in Dublin is very acute,” Mr. Lyons wrote in the report for Daft.ie. And many landlords are wary of locking in losses for the long term.

“If you lower your rent now, the rent you set in one, three and 10 years will reflect the cut you make today,” Mr. Lyons wrote. “So, however open landlords might be to haggling ‘at the door’ and offering a month or two free rent at the start to sweeten the deal, they may be very reluctant to flag in an ad that they are indeed cutting their rent.”

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The Trump campaign celebrated a growth record that Democrats downplayed.

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The White House celebrated economic growth numbers for the third quarter released on Thursday, even as Joseph R. Biden Jr.’s presidential campaign sought to throw cold water on the report — the last major data release leading up to the Nov. 3 election — and warned that the economic recovery was losing steam.

The economy grew at a record pace last quarter, but the upswing was a partial bounce-back after an enormous decline and left the economy smaller than it was before the pandemic. The White House took no notice of those glum caveats.

“This record economic growth is absolute validation of President Trump’s policies, which create jobs and opportunities for Americans in every corner of the country,” Mr. Trump’s re-election campaign said in a statement, highlighting a rebound of 33.1 percent at an annualized rate. Mr. Trump heralded the data on Twitter, posting that he was “so glad” that the number had come out before Election Day.

The annualized rate that the White House emphasized extrapolates growth numbers as if the current pace held up for a year, and risks overstating big swings. Because the economy’s growth has been so volatile amid the pandemic, economists have urged focusing on quarterly numbers.

Those showed a 7.4 percent gain in the third quarter. That rebound, by far the biggest since reliable statistics began after World War II, still leaves the economy short of its pre-pandemic levels. The pace of recovery has also slowed, and now coronavirus cases are rising again across much of the United States, raising the prospect of further pullback.

“The recovery is stalling out, thanks to Trump’s refusal to have a serious plan to deal with Covid or to pass a new economic relief plan for workers, small businesses and communities,” Mr. Biden’s campaign said in a release ahead of Thursday’s report. The rebound was widely expected, and the campaign characterized it as “a partial return from a catastrophic hit.”

Economists have warned that the recovery could face serious roadblocks ahead. Temporary measures meant to shore up households and businesses — including unemployment insurance supplements and forgivable loans — have run dry. Swaths of the service sector remain shut down as the virus continues to spread, and job losses that were temporary are increasingly turning permanent.

“With coronavirus infections hitting a record high in recent days and any additional fiscal stimulus unlikely to arrive until, at the earliest, the start of next year, further progress will be much slower,” Paul Ashworth, chief United States economist at Capital Economics, wrote in a note following the report.

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Black and Hispanic workers, especially women, lag in the U.S. economic recovery.

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The surge in economic output in the third quarter set a record, but the recovery isn’t reaching everyone.

Economists have long warned that aggregate statistics like gross domestic product can obscure important differences beneath the surface. In the aftermath of the last recession, for example, G.D.P. returned to its previous level in early 2011, even as poverty rates remained high and the unemployment rate for Black Americans was above 15 percent.

Aggregate statistics could be even more misleading during the current crisis. The job losses in the initial months of the pandemic disproportionately struck low-wage service workers, many of them Black and Hispanic women. Service-sector jobs have been slow to return, while school closings are keeping many parents, especially mothers, from returning to work. Nearly half a million Hispanic women have left the labor force over the last three months.

“If we’re thinking that the economy is recovering completely and uniformly, that is simply not the case,” said Michelle Holder, an economist at John Jay College in New York. “This rebound is unevenly distributed along racial and gender lines.”

The G.D.P. report released Thursday doesn’t break down the data by race, sex or income. But other sources make the disparities clear. A pair of studies by researchers at the Urban Institute released this week found that Black and Hispanic adults were more likely to have lost jobs or income since March, and were twice as likely as white adults to experience food insecurity in September.

The financial impact of the pandemic hit many of the families that were least able to afford it, even as white-collar workers were largely spared, said Michael Karpman, an Urban Institute researcher and one of the studies’ authors.

“A lot of people who were already in a precarious position before the pandemic are now in worse shape, whereas people who were better off have generally been faring better financially,” he said.

Federal relief programs, such as expanded unemployment benefits, helped offset the damage for many families in the first months of the pandemic. But those programs have mostly ended, and talks to revive them have stalled in Washington. With virus cases surging in much of the country, Mr. Karpman warned, the economic toll could increase.

“There could be a lot more hardship coming up this winter if there’s not more relief from Congress, with the impact falling disproportionately on Black and Hispanic workers and their families,” he said.

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Ant Challenged Beijing and Prospered. Now It Toes the Line.

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As Jack Ma of Alibaba helped turn China into the world’s biggest e-commerce market over the past two decades, he was also vowing to pull off a more audacious transformation.

“If the banks don’t change, we’ll change the banks,” he said in 2008, decrying how hard it was for small businesses in China to borrow from government-run lenders.

“The financial industry needs disrupters,” he told People’s Daily, the official Communist Party newspaper, a few years later. His goal, he said, was to make banks and other state-owned enterprises “feel unwell.”

The scope of Mr. Ma’s success is becoming clearer. The vehicle for his financial-technology ambitions, an Alibaba spinoff called Ant Group, is preparing for the largest initial public offering on record. Ant is set to raise $34 billion by selling its shares to the public in Hong Kong and Shanghai, according to stock exchange documents released on Monday. After the listing, Ant would be worth around $310 billion, much more than many global banks.

The company is going public not as a scrappy upstart, but as a leviathan deeply dependent on the good will of the government Mr. Ma once relished prodding.

More than 730 million people use Ant’s Alipay app every month to pay for lunch, invest their savings and shop on credit. Yet Alipay’s size and importance have made it an inevitable target for China’s regulators, which have already brought its business to heel in certain areas.

These days, Ant talks mostly about creating partnerships with big banks, not disrupting or supplanting them. Several government-owned funds and institutions are Ant shareholders and stand to profit handsomely from the public offering.

The question now is how much higher Ant can fly without provoking the Chinese authorities into clipping its wings further.

Excitable investors see Ant as a buzzy internet innovator. The risk is that it becomes more like a heavily regulated “financial digital utility,” said Fraser Howie, the co-author of “Red Capitalism: The Fragile Financial Foundation of China’s Extraordinary Rise.”

“Utility stocks, as far as I remember, were not the ones to be seen as the most exciting,” Mr. Howie said.

Ant declined to comment, citing the quiet period demanded by regulators before its share sale.

The company has played give-and-take with Beijing for years. As smartphone payments became ubiquitous in China, Ant found itself managing huge piles of money in Alipay users’ virtual wallets. The central bank made it park those funds in special accounts where they would earn minimal interest.

After people piled into an easy-to-use investment fund inside Alipay, the government forced the fund to shed risk and lower returns. Regulators curbed a plan to use Alipay data as the basis for a credit-scoring system akin to Americans’ FICO scores.

China’s Supreme Court this summer capped interest rates for consumer loans, though it was unclear how the ceiling would apply to Ant. The central bank is preparing a new virtual currency that could compete against Alipay and another digital wallet, the messaging app WeChat, as an everyday payment tool.

Ant has learned ways of keeping the authorities on its side. Mr. Ma once boasted at the World Economic Forum in Davos, Switzerland, about never taking money from the Chinese government. Today, funds associated with China’s social security system, its sovereign wealth fund, a state-owned life insurance company and the national postal carrier hold stakes in Ant. The I.P.O. is likely to increase the value of their holdings considerably.

“That’s how the state gets its payoff,” Mr. Howie said. With Ant, he said, “the line between state-owned enterprise and private enterprise is highly, highly blurred.”

China, in less than two generations, went from having a state-planned financial system to being at the global vanguard of internet finance, with trillions of dollars in transactions being made on mobile devices each year. Alipay had a lot to do with it.

Alibaba created the service in the early 2000s to hold payments for online purchases in escrow. Its broader usefulness quickly became clear in a country that mostly missed out on the credit card era. Features were added and users piled in. It became impossible for regulators and banks not to see the app as a threat.

ImageAnt Group’s headquarters in Hangzhou, China.
Credit…Alex Plavevski/EPA, via Shutterstock

A big test came when Ant began making an offer to Alipay users: Park your money in a section of the app called Yu’ebao, which means “leftover treasure,” and we will pay you more than the low rates fixed by the government at banks.

People could invest as much or as little as they wanted, making them feel like they were putting their pocket change to use. Yu’ebao was a hit, becoming one of the world’s largest money market funds.

The banks were terrified. One commentator for a state broadcaster called the fund a “vampire” and a “parasite.”

Still, “all the main regulators remained unanimous in saying that this was a positive thing for the Chinese financial system,” said Martin Chorzempa, a research fellow at the Peterson Institute for International Economics in Washington.

“If you can’t actually reform the banks,” Mr. Chorzempa said, “you can inject more competition.”

But then came worries about shadowy, unregulated corners of finance and the dangers they posed to the wider economy. Today, Chinese regulators are tightening supervision of financial holding companies, Ant included. Beijing has kept close watch on the financial instruments that small lenders create out of their consumer loans and sell to investors. Such securities help Ant fund some of its lending. But they also amplify the blowup if too many of those loans aren’t repaid.

“Those kinds of derivative products are something the government is really concerned about,” said Tian X. Hou, founder of the research firm TH Data Capital. Given Ant’s size, she said, “the government should be concerned.”

The broader worry for China is about growing levels of household debt. Beijing wants to cultivate a consumer economy, but excessive borrowing could eventually weigh on people’s spending power. The names of two of Alipay’s popular credit functions, Huabei and Jiebei, are jaunty invitations to spend and borrow.

Huang Ling, 22, started using Huabei when she was in high school. At the time, she didn’t qualify for a credit card. With Huabei’s help, she bought a drone, a scooter, a laptop and more.

The credit line made her feel rich. It also made her realize that if she actually wanted to be rich, she had to get busy.

“Living beyond my means forced me to work harder,” Ms. Huang said.

First, she opened a clothing shop in her hometown, Nanchang, in southeastern China. Then she started an advertising company in the inland metropolis of Chongqing. When the business needed cash, she borrowed from Jiebei.

Online shopping became a way to soothe daily anxieties, and Ms. Huang sometimes racked up thousands of dollars in Huabei bills, which only made her even more anxious. When the pandemic slammed her business, she started falling behind on her payments. That cast her into a deep depression.

Finally, early this month, with her parents’ help, she paid off her debts and closed her Huabei and Jiebei accounts. She felt “elated,” she said.

China’s recent troubles with freewheeling online loan platforms have put the government under pressure to protect ordinary borrowers.

Ant is helped by the fact that its business lines up with many of the Chinese leadership’s priorities: encouraging entrepreneurship and financial inclusion, and expanding the middle class. This year, the company helped the eastern city of Hangzhou, where it is based, set up an early version of the government’s app-based system for dictating coronavirus quarantines.

Such coziness is bound to raise hackles overseas. In Washington, Chinese tech companies that are seen as close to the government are radioactive.

In January 2017, Eric Jing, then Ant’s chief executive, said the company aimed to be serving two billion users worldwide within a decade. Shortly after, Ant announced that it was acquiring the money transfer company MoneyGram to increase its U.S. footprint. By the following January, the deal was dead, thwarted by data security concerns.

More recently, top officials in the Trump administration have discussed whether to place Ant Group on the so-called entity list, which prohibits foreign companies from purchasing American products. Officials from the State Department have suggested that an interagency committee, which also includes officials from the departments of defense, commerce and energy, review Ant for the potential entity listing, according to three people familiar with the matter.

Ant does not talk much anymore about expanding in the United States.

Ana Swanson contributed reporting.

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