"A Faustian Bargain: Global Cities, Transnational Capital, and the Short-term Housing Market"

Short term rentals - A faustian deal with the devil


A Faustian Bargain: Global Cities, Transnational Capital, and the Short-termHousing Market

  1. Less than a decade ago, the city of Lisbon was a symbol of the devastation of theEurozone crisis. After accepting a bailout from the EU and IMF in 2011, thePortuguese government adopted a series of reforms, including deregulation and public sector cuts. The subsequent election brought to power a Socialist-Communist coalition that reversed the austerity measures while adopting incentives to attract foreign investment in the housing market, including tax breaks and the relaxation of existing regulations protecting tenants. Foreign capital flooded the housing market, and residential buildings were converted into short-term rentals for tourists and expatriates, with rent increases and displacement following. Contributing to the debates emerging from the global capitalism school, this article draws on interdisciplinary perspectives in critical urban studies to provide analysis of the financialization of the housing market and strategies of accumulation linked to technology-driven short-term rentals in accelerating the closing of the rent gap. In doing so, it asserts that these developments have been driven by a transnational capitalist class that benefits from the arbitrage between poorer and richer economies in a process that transfers wealth from the former to the latter. Moreover, the case of Lisbon is not unique. The deregulation of housing markets in cities and popular tourist destinations around the world has led to the hollowing out of city centers as residents are displaced to the periphery and dispossessed of the right to the city, providing another example of accumulation by dispossession, as theorized by David Harvey.

This paper provides an explanation for the AirBnB platform phenomenon in Lisbon and Portugal, which was a conscious effort by politicians to attract foreign investment necessary to help restore the Portugal economy in the 2010 time period. But, implemented without any controls, the benefit to the economy has come at a substantial price.

Even though there was not the same encouragement by local governments in California, there was sufficient freedom in the real estate market here and little or no effort to put in controls on the platforms. As a result, we in San Diego and in particular Mission Beach have seen the same negative economic impacts on residents, although I think here the majority of the effort to curtail the proliferation of short term rentals in residential neighborhoods focused on the nuisance aspect. There are now 16,000 properties in San Diego used as short term rentals with over fifty percent of the total dwelling units in Mission Beach used for this purpose.

Todd Gloria, currently running for mayor was on the City Council during the period when something could have been done, but he did nothing. I think he is a smart enough person that he knew exactly what he was doing when he side-stepped the issue back then.

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