Private Equity Firm TPG Pilots Acquisitions Strategy For Airbnb Hosting

TPG has bought about a dozen houses in Florida, but this story is a twist on the recent run of private equity acquisitions for single-family rentals. TPG will be turning the properties into short-term rentals, its first foray into that industry, according to The Wall Street Journal.

Florida is the test market, and TPG could purchase homes in other popular vacation destinations in the future. If the Florida pilot isn’t successful, the firm won't expand, a representative for TPG told the WSJ. 

The acquisitions continue private equity firms’ buying spree of single-family homes, though the vast majority of those houses are being rented out on traditional annual leases. Private equity acquisition of houses for short-term vacation rentals is rare.

TPG purchased nearly a dozen homes across Florida's desirable vacation spots like Pompano Beach and Fort Lauderdale. Its most recent was in the first quarter because TPG, like many investors, put buying more properties on hold earlier this year due to low supply and skyrocketing mortgage rates. Instead, TPG is renovating its homes to compete with hotel offerings. 

With updated homes accented with posh furniture and professional management from Kasa, TPG said it hopes to charge a premium over individual Airbnb landlords. 

Short-term rental demand surged in the early years of the pandemic, benefiting companies like Airbnb and Vrbo. In response, hotel brands like Wyndham and Hyatt are beefing up extended-stay projects, which made up 38% of hospitality construction in Q3.

Hotels could see even more competition if other investment firms follow TPG's strategy. In Miami, short-term rental projects are breaking ground specifically to attract investors, and business is booming to domestic and international buyers. 

However, the proliferation of single-family homes being used strictly for short-term rentals is garnering pushback, as it removes options for individuals and families looking for homes in their area. 

There are already more than 1,300 rental units for every 100,000 residents in Miami — the most per capita in the country. The removal of housing stock from circulation for long-term leases is one factor driving rent growth in the area, which has the eighth-highest rental rates in the U.S., forcing renters to pay a 15% premium. 

Because of this, short-term rentals have been scrutinized nationwide, leading to strict rules imposed by lawmakers. Denver put ordinances in place that restrict the number of short-term rentals in popular jurisdictions to regulate home prices for residents being priced out of their areas.

Philadelphia lawmakers are delisting illegal short-term rentals, with the Department of Licensing and Inspections saying it suspects nearly 85% of all units fall into this category. 

In New York City, Local Law 18 restricts Airbnb from collecting payments from short-term rentals that aren't registered with the city. The law resulted in a number of listings being taken offline, strengthening hotels in the market and having a hand in easing housing competition for buyers.