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A Comprehensive Look at Short-Term Rentals: A Spatial Economic Analysis of Seattle

American Real Estate and Urban Economics Association. 2017 National Conference. Washington, DC.

21 Pages Posted: 4 Aug 2017  

Nestor Garza

Universidad del Norte

Christopher Hooton

Internet Association; George Washington University Institute of Public Policy

Date Written: 2017

Abstract

The report investigates the impacts of short-term rental services (STRs), such as Airbnb, Homeaway, etc., on the residential housing market and hotel/accommodation market in the city of Seattle, Washington. Our primary goal is to examine critiques against STRs to assess their empirical validity in a single case study. The paper utilizes data on from the American Housing Survey and Federal Financial Examination Council’s Home Mortgage Disclosure Act Aggregate Reports as well as proprietary data from STR providers and the hotel industry for the city. First, we conduct simple Pearson’s Product-Moment Correlation tests of STR listings with owner-occupancy, investment mortgage activity, and unit vacancy. We find positive correlation between STRs and owner-occupancy and find negative correlation between STRs and investment mortgage activity and unit vacancy. Second, we examine the spatial distribution of STR listings and their spatial pricing characteristics, comparing them with those of the local hotel market in an attempt to detect ‘demand creation’ versus demand ‘market capture’. We use a Spatially Auto Regressive model to produce a standardized spatial dependence parameter, estimating both Full Maximum Likelihood and Bootstrap Errors for both the independent full samples of local block groups and the coincident small samples. In the second set of tests, we find a low degree of spatial coincidence, a greater degree of spatial diversity in STR listings (compared to hotels), and no conclusive evidence of market capture by STRs. Our conclusion is a clear lack of evidence supporting the critiques of STRs in the Seattle market. We argue there is initial evidence that STRs may support home ownership and that they serve fundamentally different segments of the accommodation market.

Keywords: short-term rentals, home sharing, sharing economy

JEL Classification: R3, R31, R32, O1

Suggested Citation

Garza, Nestor and Hooton, Christopher, A Comprehensive Look at Short-Term Rentals: A Spatial Economic Analysis of Seattle (2017). American Real Estate and Urban Economics Association. 2017 National Conference. Washington, DC. . Available at SSRN: https://ssrn.com/abstract=3012732

Nestor Garza

Universidad del Norte ( email )

Km5 Via Puerto Colombia
Carrera 58 # 82-84 Apt 6B
Barranquilla, Atlantico
Colombia

Christopher Hooton (Contact Author)

Internet Association ( email )

1333 H Street NW
Washington, DC 20005
United States

HOME PAGE: http://https://internetassociation.org/

George Washington University Institute of Public Policy ( email )

2121 I Street NW
Washington, DC 20052
United States

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