Airbnb Takes Over Tel Aviv, and the Locals Are Restless

The city has one of the world’s highest penetration rates for the short-term rental service, which in turn contributes to a housing shortage and rising rents, with officials determined to rein it in

File photo: A group on a graffiti tour of Tel Aviv's Florentin neighborhood, May 26, 2017.
Moti Milrod

West Bank settlers have resented Airbnb’s decision in November to bar listings from the settlements. By contrast, in Tel Aviv the online short-term rental service is booming, but the city officials there and many Tel Aviv residents are determined to rein it in.

The phenomenal growth of Airbnb has shrunk the supply of longer-term rental apartments in Tel Aviv as owners opt for the more lucrative business of renting to foreign tourists rather than to long-term Israeli tenants. Not only are rents in the city rising, but so are home prices.

>> How Israel became one of the most expensive tourist destinations in the world

In the neighborhoods most popular with Airbnb renters — adjacent to the Jaffa flea market and in the area between the Kerem Hateimanim and Neve Tzedek neighborhoods — many residents lament how the character of their neighborhoods has changed amid a flood of tourists.

“Kerem Hateimanim is crowded and touristy now,” said Shahar, a 30-year-old who lived there until last year. “There’s no comparison between the number of people who are on the streets today and five years ago. The number of cafes, bars and restaurants that have opened in the area in the last two or three years shows that business owners also recognize the potential.”

Last week, Tel Aviv fired its first salvo in the war against Airbnb when it announced that apartments that are rented out for 90 days or more a year through Airbnb will now be taxed like four and five-star hotels rather that at the residential rate. For Airbnb landlords, it means that their municipal taxes (arnona) will jump three-fold, from the current average of 40 shekels ($10.90) per square meter.

“We’re trying to prevent any antagonism or opposition from residents toward tourism,” said Eytan Schwartz, who heads Tel Aviv Global, a municipally owned company that promotes the city as an international business and tourism center. "The mayor of Barcelona ran in the most recent election on a campaign of — we’ll clean Barcelona of tourism. We’re seeking a cure for the disease — creating a balance,” Schwartz added.

In fact Tel Aviv has a bigger Airbnb presence than does Barcelona, even though the capital of Catalonia is a much bigger tourist destination, according to a study conducted by Tel Aviv Global and Tel Aviv’s socioeconomic research center. Tel Aviv has one listing on Airbnb for every 25 residents compared with one in 78 for Barcelona. Amsterdam, another major destination for global travel, has one for every 45 residents.

“Tel Aviv has one of the highest average rates for Airbnb penetration in the world and in the last two years, we have seen it grow by crazy amounts, as if it was on steroids,” said Schwartz. “Airbnb apartments are a commodity that the city needs in order to meet the rapid growth in tourism, which will continue to grow in the coming years. The problem is that Airbnb apartments are turning into a business at the expense of residents,” he warned.

In part, the increase reflects the overall rise in foreign tourism to Israel — to record levels in the last few years — as well as a hotel shortage and high hotel room rates. But renting out apartments through Airbnb and other similar services is a very profitable business. And a business it is, with 41.5% of the city’s Airbnb listings controlled by just 7% of those renting out their properties.

Shahar, the former Kerem Hateimanim neighborhood resident, did it because it made more sense for his family, which owns the apartment he was living in, to rent it to tourists through Airbnb. “We realized that we could earn more on it than we could from renting it to [longer-term] tenants, that it would pay for me to rent a bigger place in another part of the city,” he explained. “So I moved.”

Figures compiled by the city show that the average charge per night in Tel Aviv on Airbnb is $186, but can range from $10 for a simple room in a home to $8,500 for an entire luxury apartment. Bloomberg says Tel Aviv is the world’s most expensive city anywhere for Airbnb rentals.

A survey conducted for TheMarker by Madlan, which collects comparative data on the Israel real estate market for prospective home buyers, found that the number of properties in seven of Tel Aviv’s most popular neighborhoods that were rented for more than 90 days a year jumped 60% in 2018. In Florentin, one of the seven, the number of such apartments grew from 685 in 2017 to 1,095 last year. But what’s good for Airbnb listers and tourists, but not necessarily for residents.

“The increase in the number of apartments that have gone commercial [on Airbnb] should worry the public. New construction in these areas is simply minimal. The number of properties available for long-term rental is shrinking,” said Madlan CEO Eitan Singer. “These properties are simply leaving the Israeli rental market. As long as the phenomenon continues, more and more neighborhoods will be for tourists only.”

Meantime, the presence of Airbnb is raising rents and may even be contributing to higher prices for the sale of homes, even in neighborhoods that until recently were not in demand. In the southern part of Florentin, for example, where the number of overnight stays at commercially rented Airbnb apartment rose 74% last year, rental rates for 2-3-room apartments to long-term climbed 15% to an average of 6,000 shekels a month, according to Madlan data.

With 8,500 to 9,500 properties actively available on Airbnb in a given month, Tel Aviv is the Airbnb capital of Israel. But the same phenomenon is occurring in other Israeli cities as well.

In Jerusalem, which is No. 2 with 2,800 active properties, Airbnb rentals have soared in the Ein Karem neighborhood from 8% of all rental properties in 2017 to 21% in 2018. In the Katamon neighborhood, it has gone from 12% to 26% of residential rental real estate.