Austin’s St. John neighborhood to host first 200-unit project
Airbnb is committing $250 million to fund below-market gap financing for affordable and mixed-income housing developments in the United States, the company announced Monday, with the first $6.4 million directed to a roughly 200-unit project in Austin, Texas.
The investment comes as Airbnb faces persistent criticism from cities and housing advocates that short-term rentals have contributed to rising housing costs in major cities. Chief Executive Brian Chesky said Airbnb has been “embroiled in lots of debates with cities about whether or not Airbnb is a contributor to housing becoming unaffordable” and that he had grown tired of watching the issue unfold.
“I’ve just lived in the crosshairs of the number one political issue in most major cities in America,” Chesky said in an interview. “And I can’t stare at the problem for much longer without Airbnb trying to offer up some solutions.” He added that while the program could benefit the company, “this is primarily not about Airbnb.”
Under the new Housing Accelerator program, Airbnb will distribute the $250 million to developers as gap financing for multifamily projects that face funding shortfalls, prioritizing affordable and mixed-income housing. The company said its returns will be below market rates and that it plans to reinvest the funds it recoups into additional projects. Developers will be able to apply through the program’s website.
Daniel Hornung, a former Biden administration official tapped to lead the initiative, said Airbnb’s investments are meant to be catalytic rather than comprehensive. “We want to make sure that our investments are catalytic and are demonstrating proof of concept about new models that can work,” Hornung said. “The goal of this is not at all to create more Airbnb supply.”
Individual Airbnb investments will generally represent about 10% of the capital for each project, with the company projecting the initial $250 million to translate into roughly $5 billion of housing capital over a decade as returns are recycled. The program will primarily focus on the United States, though Airbnb has not ruled out expanding to other markets.
In Austin, the company’s $6.4 million will support a roughly 200-unit affordable-housing development in the St. John neighborhood, a majority-minority area. The 20-acre site, formerly occupied by a Home Depot and a car dealership, was purchased by the city more than a decade ago with plans for government facilities that later stalled.
Austin City Council Member Chito Vela, whose district includes the project, said financing had grown uncertain as interest rates rose and rents softened. “Things were moving along pretty well until we started to see interest rates go up and started to see rents go down in Austin,” Vela said. “All of a sudden the financing got really wobbly.”
Airbnb chose Austin in part because state and city officials had revised regulations to encourage home construction, according to Hornung. Residents of the project’s affordable units will be prohibited from listing them on short-term rental platforms.
The investment lands as housing affordability has become a powerful political issue at the local and national level. Airbnb, which reported $2.5 billion in net income on $12.2 billion in revenue last year, has drawn particular scrutiny: critics argue that short-term rentals pull homes and apartments off the long-term market, and some cities have moved to heavily restrict the company’s operations. Chesky has pushed back, saying Airbnb units are a tiny fraction of the housing stock and that bans have not produced price declines.
Shaun Donovan, who served as Housing and Urban Development Secretary under President Obama and now leads the national nonprofit Enterprise Community Partners, said the run-up in interest rates has compounded financing gaps for affordable housing projects, which cannot pass higher costs on to renters.
“You’re not going to be able to charge more for the rents because it’s affordable housing,” Donovan said. “So every time the interest rates go up, it subtracts the amount of market-rate capital you’re able to attract for the deal, and it creates gaps that you have to go fill somewhere else.”
Estimates of the U.S. housing shortage vary widely, Donovan said, ranging from around two million units to as many as ten million. He said the type of funding Airbnb is providing can unlock significantly more capital for individual projects but that addressing the national shortfall will require tens of billions of dollars.
“You’re not going to solve this crisis with money alone,” Donovan said.
Beyond direct investment, the Housing Accelerator will support advocacy aimed at changing zoning, permitting, and building-code regulations and will create an open-source data set tracking housing policies. The program will also award $5 million through a competition for companies or nonprofits developing technology to streamline homebuilding.