Short-term Rentals

Does STR activity "remove from the [long-term rental] market" units? (alternately: does STR activity result in a net reduction of long-term rentals).

How does STR activity affect long-term rental rents? (Is is often assumed to be increasing rents, by reducing availability of units).

"Is Airbnb driving gentrification?" [Wachsmuth 2018].

Impact on long-term rental availability and rents

note from comment on Schmid & Swart [2018] article, by Tim McCormick 10/10/18 on Schmid's posting of it on Facebook:

"Data such as InsideAirbnb's may tell us for example how many partial or full units were listed, or perhaps rented, via Airbnb or other STR platforms or more than X days per year. How do we then use this to assess how some some policy change -- like say a complete prohibition on Airbnb or full-unit or non-owner-resident unit rentals --might alter the number of long-term rental apartments available on the market?

"This seems like a difficult estimate to make for multiple reasons. Some units might not be built if not for their STR revenue potential; many units would be left empty or used only personally/casually if not used for STR; any plausible policy change has only a certain rate of compliance and efficacy in changing the home owners' behavior; etc.

"On top of that, a big-picture view would consider and weigh the effect with other positive and negative impacts: for example STR revenues possibly raising home prices and rents by being priced into them; STR increasing visits to and spending in the city, and increasing tax revenues; STR creating negative impacts e.g. parking, altering the character of neighborhoods or buildings; STR facilitating more flexible living arrangements, utilizing otherwise unused dwelling space, or bring in income to help long-term residents afford their living costs; etc.

I"'ve looked at how the assessment of long-term rental impact is made in reports such as City/County of San Francisco's analyses of STR, or the report by David Wachsmuth from McGill University, about NYC (https://mcgill.ca/.../channels/attach/airbnb-report.pdf, commissioned by the Hotel Trades Council, AFL-CIO, but seems mostly to adapt a previous non-commissioned report about Canadian cities. These are self-published reports rather than peer-reviewed published studies).

"However, the reasoning I've seen hasn't seemed very convincing or data-tested. It may say, for example, that any unit rented STR more than 100 days a year would have been rented out long-term if STR were not allowed there. Or, the latter would happen any time the annual long-term rent would be greater than the STR rent for that many days. But no doubt many owners might prefer even occasional STR rental over full-time tenants, because they have other uses or preferences or future plans for the space. In places with stronger long-term tenant protections, like SF and NYC and many European cities, there are clear major disincentives to accepting long-term tenants who can acquire tenant rights for example being difficult to evict without cause or by changing rent. In the Bay Area I talked to many small owners who said they would never rent a unit to a long-term tenant because of the potential large risk and cost in vacating the unit later.

"There are so many hard-to-assess factors that you wonder how to model it, measure it, or find some natural-experiment situation to study. So I wonder how you and co-author might look at this, or how the sources cited have."

References

Barron, Kyle and Kung, Edward and Proserpio, Davide. “The Sharing Economy and Housing Affordability: Evidence from Airbnb.” (March 29, 2018). https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3006832.
Abstract:
"We assess the impact of home-sharing on residential house prices and rents. Using a dataset of Airbnb listings from the entire United States and an instrumental variables estimation strategy, we find that a 1% increase in Airbnb listings leads to a 0.018% increase in rents and a 0.026% increase in house prices at the median owner-occupancy rate zip code. The effect is moderated by the share of owner-occupiers, a result consistent with absentee landlords reallocating their homes from the long-term rental market to the short-term rental market. A simple model rationalizes these findings."
City and County of San Francisco, Office of the Controller, Office of Economic Analysis. [2015]. "Amending the Regulation of Short-Term Residential Rentals: Economic Impact Report." May 18th, 2015.
https://sfcontroller.org/sites/default/files/FileCenter/Documents/6458-150295_economic_impact_final.pdf?documentid=6457.
Farronato, Chiara, and Andrey Fradkin. [2018]. “The Welfare Effects of Peer Entry in the Accommodation Market: The Case of Airbnb.” NBER Working Paper No. 24361. Issued in February 2018, Revised in March 2018.
http://www.nber.org/papers/w24361.
Abstract:
We study the effects of enabling peer supply through Airbnb in the accommodation industry. We present a model of competition between flexible and dedicated sellers - peer hosts and hotels - who provide differentiated products. We estimate this model using data from major US cities and quantify the welfare effects of Airbnb on travelers, hosts, and hotels. The welfare gains are concentrated in locations (New York) and times (New Years Eve) when hotels are capacity constrained. This occurs because peer hosts are responsive to market conditions, expand supply as hotels fill up, and keep hotel prices down as a result.
Lee, Dayne. [2016]. "How Airbnb Short-Term Rentals Exacerbate Los Angeles’s Affordable Housing Crisis: Analysis and Policy Recommendations." Harvard Law & Policy Review, 2016. http://harvardlpr.com/wp-content/uploads/2016/02/10.1_10_Lee.pdf.
Merante, Mark, and Keren Mertens Horn. [2016]. "Is Home Sharing Driving Up Rents? Evidence from Airbnb in Boston." Working Paper, University of Massachusetts Boston, Department of Economics, March 2016.
http://repec.umb.edu/RePEc/files/2016_03.pdf.
from Introduction:
"We provide the first rigorous empirical investigation of how Airbnb is affecting the rental market, focusing on Boston, a city where rents have been growing recently at an average of 5% annually and are among the highest in the nation.
"Second, we conduct this investigation by combining two new sources of big data: weekly rental listings, available only recently as a result of the shift of rental listings to the internet, and data on Airbnb listings made available through web scraping technology. Third, we take advantage of the frequency of the observations available from these large data sets to use a fixed effects model to control for unobserved variables allowing for the calculation of precise estimates of the impacts of Airbnb on rents. The characteristics of Airbnb listings in Boston provide some evidence supporting both sides of the Airbnb debate. For instance, our analysis shows that in Boston on October 5, 2015, 82% of hosts had only one simultaneous listing on Airbnb, suggesting that most Airbnb hosts are occupants seeking extra income by occasionally renting out their own homes.
"Ultimately, our analysis supports the contention that home sharing is increasing rents by decreasing the supply of units available to potential residents....We show that a one standard deviation increase in Airbnb listings relative to the total number of housing units in a census tract, at the mean 12 Airbnb listings per tract, is associated with an increase in asking rents of 0.4%. For those census tracts in the highest decile of Airbnb listings relative to total housing units, this increase in asking rents ranges from 1.3% to 3.1%, which equates at the citywide mean monthly asking rent to an increase of as much as $93. If Airbnb’s growth rate in 2015, 24%, continues for the next three years, assuming constant mean rents and total number of housing units, Boston’s mean asking rents in January 2019 would be as much as $178/month higher than in the absence of Airbnb activity. "
Schmid, Thacher, and Cornelius Swart. "Illegal Airbnbs Could Take 1,500 Rentals Off Market." Portland Mercury, October 11, 2018. https://www.portlandmercury.com/news/2018/10/11/23548145/illegal-airbnbs-could-take-1500-rentals-off-market.
Excerpt:
"In 2014, Portland also began requiring permits for Airbnb rentals—which the city called “accessory” short-term rentals—within residences containing up to five bedrooms. These permits require that hosts live in the unit they rent out via Airbnb (or any other short-term rental service) for at least 270 days of the year. That means hosts technically can’t rent out more than one residence at a time.
"Currently, data from industry watchdogs indicate that as many as half of all Portland Airbnbs—conservatively, more than 1,500 units—still violate the city’s 270-day rule.
Stulberg, Ariel. "Airbnb Probably Isn’t Driving Rents Up Much, At Least Not Yet.” FiveThirtyEight, August 24, 2016.
https://fivethirtyeight.com/features/airbnb-probably-isnt-driving-rents-up-much-at-least-not-yet/.
discusses a FiveThirtyEight analysis based on data from Airdna.
Wachsmuch, David, et al. [2018]. “The High Cost of Short-Term Rentals in New York City.” Urban Politics and Governance research group (UPGO), School of Urban Planning, McGill University. January 30, 2018.
http://www.sharebetter.org/wp-content/uploads/2018/01/High-Cost-Short-Term-Rentals.pdf.
"This report was commissioned by the Hotel Trades Council, AFL-CIO, and is cosponsored by a number of New York City community, housing and tenant advocacy organizations."
from Executive Summary:
"This report provides a comprehensive analysis of Airbnb activity in New York City and the surrounding region in the last three years (September 2014 - August 2017). Relying on new methodologies to analyze big data,
we set out to answer four questions:
1. Where is Airbnb activity located in New York, and how is it changing?
2. Who makes money from Airbnb in New York?
3. How much housing has Airbnb removed from the market in New York?
4. Is Airbnb driving gentrification in New York?
Key Findings (excerpts):
• 13,500 Units of Lost Housing: Airbnb has removed between 7,000 and 13,500 units of housing from New York City’s long-term rental market, including 12,200 frequently rented entire-home listings that were available for rent 120 days or more and 5,600 entire-home listings available for rent 240 days or more.
• $380 More in Rent: By reducing housing supply, Airbnb has increased the median long-term rent in New York City by 1.4% over the last three years, resulting in a $380 rent increase for the median New York tenant looking for an apartment this year.
Zervas, Georgias; Proserpio, Davide; Byers, John W. [2016]. “The Rise of the Sharing Economy: Estimating the Impact of Airbnb on the Hotel Industry.” Working paper. Last revised: November 18, 2016. First draft: December 14, 2013.
http://people.bu.edu/zg/publications/airbnb.pdf.
Abstract:
"Peer-to-peer markets, collectively known as the sharing economy, have emerged as alternative suppliers of goods and services traditionally provided by long-established industries. We explore the economic impact of the sharing economy on incumbent firms by studying the case of Airbnb, a prominent platform for short-term accommodations. We analyze Airbnb's entry into the state of Texas, and quantify its impact on the Texas hotel industry over the subsequent decade. We estimate that in Austin, where Airbnb supply is highest, the causal impact on hotel revenue is in the 8-10% range; moreover, the impact is non-uniform, with lower-priced hotels and those hotels not catering to business travelers being the most affected. The impact manifests itself primarily through less aggressive hotel room pricing, an impact that benefits all consumers, not just participants in the sharing economy. The price response is especially pronounced during periods of peak demand, such as SXSW, and is due to a differentiating feature of peer-to-peer platforms enabling instantaneous supply to scale to meet demand."