The Impact of Airbnb on Residential Property Values and Rents: Evidence from Portugal

Abstract

Short-term rentals have facilitated the upraise trend in tourism growth in several cities around the world. However, concerns for the negative effects that such home-sharing platforms may have on the housing market and traditional markets have driven community groups and housing advocates to intensely react against them. Whether or not short-term rentals increase housing prices and rents for local residents is an empirical question. We quantify the causal effects of Airbnb's short-term rentals on urban housing affordability in Portugal by estimating quarterly housing rents and prices as a function of Airbnb concentration. We take advantage of the 2014 regulatory reform and employ a difference-in-differences (DiD) empirical strategy. We estimate an overall increase in property values of 34% and 10.9% for rents due to the short-term lease regulatory reform. We also find that these effects are particularly localized to the historical centers and areas attractive to tourists in the cities of Lisbon and Porto. A better understanding of the effects of short-term home rentals on housing markets and of the magnitude of its impact on residential property prices and rents are crucial information to determine whether it needs to be regulated and how proper regulation should be designed.

Keywords: Property Values, Airbnb, Short-term Rentals, Regulation

JEL Classification: R21, R31, Z32