The Battle for Homes: How Does Home Sharing Disrupt Local Residential Markets?

Management Science, forthcoming

63 Pages Posted: 20 Oct 2018 Last revised: 14 Feb 2022

See all articles by Wei Chen

Wei Chen

University of Arizona - Eller College of Management

Zaiyan Wei

Purdue University - Krannert School of Management

Karen Xie

University of Denver, Daniels College of Business

Date Written: February 2022

Abstract

As cities debate how to regulate Airbnb and other home-sharing services, we study the impacts of home sharing on local residential real estate markets. By accommodating transient travelers with short-term rental properties, home-sharing platforms have evolved as a major alternative channel that attracts the growing supply of residential properties. However, on the demand side of local residential markets, home-sharing platforms are not a viable option for residents. To demonstrate this dynamic between home sharing and local residential markets, we leverage a unique quasi-experiment on Airbnb—a platform policy that caps the number of properties a host can manage in a city—and find that the policy reduced rents (in the long-term rental markets) and home values (in the for-sale housing markets) by about 3% and did not affect the price-to-rent ratio. Consistent with the conjecture, we find that the policy impacts can be attributed to increased supply in local residential markets due to the policy. Quantitatively, our estimates suggest that, if the density of affected Airbnb properties is 1% higher in a market, the policy may further decrease rents and home values by about 0.03% - 0.06%, which is similar across each policy-affected city. Our empirical findings add to the debate about the impacts of home sharing on local residential markets with a novel data set and a unique identification strategy. Practically speaking, our research is a timely response to the debate on regulating home sharing and has implications for various stakeholders of the residential real estate markets.

Keywords: Home sharing, Residential markets, Housing affordability, Airbnb, Platform economics, Difference-in-differences, Synthetic control

Suggested Citation

Chen, Wei and Wei, Zaiyan and Xie, Karen, The Battle for Homes: How Does Home Sharing Disrupt Local Residential Markets? (February 2022). Management Science, forthcoming, Available at SSRN: https://ssrn.com/abstract=3257521 or http://dx.doi.org/10.2139/ssrn.3257521

Wei Chen

University of Arizona - Eller College of Management ( email )

McClelland Hall
P.O. Box 210108
Tucson, AZ 85721-0108
United States

Zaiyan Wei (Contact Author)

Purdue University - Krannert School of Management ( email )

100 Grant St
West Lafayette, IN 47907-2076
United States
(765) 494-5958 (Phone)

Karen Xie

University of Denver, Daniels College of Business ( email )

2101 S. University Blvd.
Denver, CO 80208
United States

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