It’s well-known that one of the downsides of short-term rentals (STRs) is that they can reduce the availability of housing for long-term residents, thus driving up both rents and house prices for locals. In a previous study, we found that home-sharing through Airbnb alone is responsible for about 20% of the average annual increase in U.S. rents, leading many policymakers to take an understandably aggressive approach to regulating STRs. For example, New York City has made it outright illegal to rent an apartment for fewer than 30 days in most buildings.
Research: Restricting Airbnb Rentals Reduces Development
A new study found that in the three years after regulations were enacted, residential permit applications fell by an average of 10% in 15 U.S. cities.
November 17, 2021
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Summary.
Much has been written about the harm caused by short-term rental (STR) platforms such as Airbnb. By driving up demand for housing, these platforms can result in higher rents and house prices, thus potentially driving out long-time residents. However, the authors’ new research explores the upside of STRs, suggesting that they can also have a substantial, positive impact on communities’ long-term economic growth. Specifically, the authors find that people invest more in developing residential properties when demand for Airbnbs increases, and that restricting Airbnbs directly leads to less residential development, less growth in home prices, and thus less tax revenue for cities (to the tune of at least $40 million per year in the U.S.). While this is not to suggest that unregulated growth is the answer, these findings highlight the importance of a targeted approach to regulation that limits the short-term harm of STRs without eliminating their potential to spur long-term growth.