Regulating the Sharing Economy: The Effects of Day Caps on Short- and Long-Term Rental Markets and Stakeholder Outcomes

93 Pages Posted: 8 Apr 2022 Last revised: 30 Jan 2024

See all articles by Patrick Gauß

Patrick Gauß

University of Münster

Sonja Gensler

University of Muenster | Marketing Center Muenster

Michael Kortenhaus

University of Münster

Nadine Riedel

University of Münster

Andrea Schneider

Jonkoping University - Jonkoping International Business School (JIBS)

Date Written: January 30, 2024

Abstract

Home sharing platforms have experienced a rapid growth over the last decade. Following negative publicity, many cities have started regulating the short-term rental (STR) market. Regulations often involve a cap on the number of days a property can be rented out on a short-term basis. We draw on rich data for short-term rentals on Airbnb and for the long-term rental (LTR) market to examine the impact of STR regulations with a day cap on various stakeholders: hosts, guests, the platform provider, and local residents. Based on a difference-in-differences design, we document a sizable drop in Airbnb activity. Interestingly, not only targeted hosts (i.e., hosts with reservation days larger than the day cap), but also non-targeted hosts reduce their Airbnb activity. The reservation days of non-targeted hosts decrease between 26.27% and 51.89% depending on the treatment. Targeted hosts experience a similar decline. There is, nevertheless, significant non-compliance: more than one third of hosts do not comply with enacted STR regulations. Additional analyses show that few properties are redirected from STR to LTR use and that there is no significant drop in long-term rents. Drawing on a theoretical model, we tie the estimated effects to changes in stakeholders’ welfare: Regulations significantly reduce the welfare of hosts, guests, and the platform provider, with minimal gains for local residents. These results question the effectiveness and desirability of the studied STR regulations.

Keywords: sharing economy, quasi-experiments, public policy, Airbnb, regulations

JEL Classification: R21, R31, H31

Suggested Citation

Gauß, Patrick and Gensler, Sonja and Kortenhaus, Michael and Riedel, Nadine and Schneider, Andrea, Regulating the Sharing Economy: The Effects of Day Caps on Short- and Long-Term Rental Markets and Stakeholder Outcomes (January 30, 2024). Available at SSRN: https://ssrn.com/abstract=4068526 or http://dx.doi.org/10.2139/ssrn.4068526

Patrick Gauß

University of Münster ( email )

Universitätsstraße 14-16
Münster, 48143
Germany

Sonja Gensler

University of Muenster | Marketing Center Muenster ( email )

Am Stadtgraben 13-15
Muenster, 48143
Germany

Michael Kortenhaus

University of Münster ( email )

Universitätsstraße 14-16
Münster, 48143
Germany

Nadine Riedel

University of Münster ( email )

Universitätsstraße 14-16
Münster, 48143
Germany

Andrea Schneider (Contact Author)

Jonkoping University - Jonkoping International Business School (JIBS) ( email )

Jönköping, 55111
Sweden

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