The Effect of Short-Term Rentals on Residential Investment

44 Pages Posted: 8 Jul 2021 Last revised: 7 Nov 2021

See all articles by Ron Bekkerman

Ron Bekkerman

Cherre Inc

Maxime C. Cohen

Desautels Faculty of Management, McGill University

Edward Kung

California State University, Northridge - David Nazarian College of Business and Economics

John Maiden

Cherre Inc

Davide Proserpio

Marshall School of Business, University of Southern California

Date Written: August 23, 2021

Abstract

We provide new evidence that short-term rental (STR) platforms like Airbnb incentivize residential real estate investment. We exploit two complementary identification strategies. First, we use variation in the timing of STR regulations to estimate the effect of regulation on both Airbnb listings and residential permits. We find that over the first 12 months following the start of the regulation, STR regulations reduce Airbnb listings by 12.6% and residential permits by 13.8%. We estimate an elasticity of permits with respect to Airbnb listings of 0.832. Second, we show that residential permits decline discontinuously across jurisdictional boundaries in which one side of the boundary has a STR regulation and the other side does not. The effect is especially pronounced for accessory dwelling units, which decline by 16.5% across regulatory boundaries. Our results imply that STRs incentivize residential investment, and especially so for housing units that are well suited for short-term renting.

Suggested Citation

Bekkerman, Ron and Cohen, Maxime C. and Kung, Edward and Maiden, John and Proserpio, Davide, The Effect of Short-Term Rentals on Residential Investment (August 23, 2021). Available at SSRN: https://ssrn.com/abstract=3874207 or http://dx.doi.org/10.2139/ssrn.3874207

Ron Bekkerman

Cherre Inc

575 8th Ave
New York, NY 10018
United States

HOME PAGE: http://cherre.com/

Maxime C. Cohen

Desautels Faculty of Management, McGill University ( email )

1001 Sherbrooke St. W
Montreal, Quebec H3A 1G5
Canada

Edward Kung

California State University, Northridge - David Nazarian College of Business and Economics ( email )

Northridge, CA 91330
United States

John Maiden

Cherre Inc ( email )

575 8th Ave
New York, NY 10018
United States

HOME PAGE: http://cherre.com

Davide Proserpio (Contact Author)

Marshall School of Business, University of Southern California ( email )

701 Exposition Blvd
Los Angeles, CA Los Angeles 90089
United States

HOME PAGE: http://dadepro.github.io/

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