The Battle for Homes: How Does Home Sharing Disrupt Local Residential Markets?
62 Pages Posted: 20 Oct 2018 Last revised: 11 May 2020
Date Written: May 10, 2020
As cities debate regulations of Airbnb and other home-sharing services, we study the impacts of home sharing on local residential real estate markets. By leveraging a unique quasi-experiment on Airbnb—a platform policy that caps the number of properties a host can manage in a city, we present the first empirical evidence of the mechanism behind the disruption of home sharing on local residential markets. We find that rents in the long-term rental market and home values in the for-sale housing market both dropped after the platform policy and that the price-to-rent ratio stayed relatively constant. The reduction in rents and home values can be attributed to excess supply in local residential markets as a result of the platform policy. In addition, our estimates reveal that the platform policy further decreased rents and home values by about 0.06% - 0.08% if the density of policy-affected Airbnb properties in a market increased by 1%. In markets with the highest density of policy-affected Airbnb properties, the decrease was as high as 5%, an equivalent of over $720 savings in annual rent and $15,098 savings in house price. These findings are robust to a variety of tests and hold across multiple empirical specifications. Our research provides a timely response to the ongoing policy debate on regulating home sharing and has implications for various stakeholders in the home-sharing business.
Keywords: Home sharing, Residential markets, Housing affordability, Airbnb, Platform economics, Difference-in-differences, Synthetic control
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