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The effects of short-term rental regulation: Insights from Chicago

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  • Jin, Ginger Zhe
  • Wagman, Liad
  • Zhong, Mengyi

Abstract

We provide an in-depth study of short-term rental (STR) regulation in Chicago. While many municipalities choose between outright bans or laissez-faire strategies concerning STR activities, Chicago pioneered a middle-ground ordinance, enabling the market to exist with limitations and registrations, and imposing a new tax. We show that compared to three control cities, the number of active Airbnb listings in Chicago declined 16.4% in the two years after the ordinance, but this effect is only significant after the city began receiving detailed data feeds from STR platforms. We further demonstrate (i) localized reductions in burglaries near buildings that prohibit STR listings as part of a new capability of the ordinance, (ii) Airbnb revenues declined more in zip codes with above-median hotel revenues, and (iii) Chicago's middle ground approach generated different and nuanced effects on different STR stakeholders, including the city itself in terms of its STR tax revenues.

Suggested Citation

  • Jin, Ginger Zhe & Wagman, Liad & Zhong, Mengyi, 2024. "The effects of short-term rental regulation: Insights from Chicago," International Journal of Industrial Organization, Elsevier, vol. 96(C).
    • Handle: RePEc:eee:indorg:v:96:y:2024:i:c:s0167718724000420
    DOI: 10.1016/j.ijindorg.2024.103087
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    References listed on IDEAS

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    1. Maximilian Schäfer & Kevin Ducbao Tran, 2020. "Airbnb, Hotels, and Localized Competition," Discussion Papers of DIW Berlin 1889, DIW Berlin, German Institute for Economic Research.
    2. Nicole Gurran & Peter Phibbs, 2017. "When Tourists Move In: How Should Urban Planners Respond to Airbnb?," Journal of the American Planning Association, Taylor & Francis Journals, vol. 83(1), pages 80-92, January.
    3. Jin-Hyuk Kim & Tin Cheuk Leung & Liad Wagman, 2017. "Can Restricting Property Use Be Value Enhancing? Evidence from Short-Term Rental Regulation," Journal of Law and Economics, University of Chicago Press, vol. 60(2), pages 309-334.
    4. Shirley Nieuwland & Rianne van Melik, 2020. "Regulating Airbnb: how cities deal with perceived negative externalities of short-term rentals," Current Issues in Tourism, Taylor & Francis Journals, vol. 23(7), pages 811-825, April.
    5. Jian Jia & Liad Wagman, 2020. "Platform, Anonymity, and Illegal Actors: Evidence of Whac-a-Mole Enforcement from Airbnb," Journal of Law and Economics, University of Chicago Press, vol. 63(4), pages 729-761.
    6. Alberto Hidalgo & Massimo Riccaboni & Francisco J. Velázquez, 2022. "The Effect of Short-Term Rentals on Local Consumption Amenities: Evidence from Madrid," Working Papers 01/2022, IMT School for Advanced Studies Lucca, revised Jan 2022.
    7. Wei Chen & Zaiyan Wei & Karen Xie, 2023. "Regulating Professional Players in Peer-to-Peer Markets: Evidence from Airbnb," Management Science, INFORMS, vol. 69(5), pages 2893-2918, May.
    8. Garz, Marcel & Schneider, Andrea, 2023. "Data sharing and tax enforcement: Evidence from short-term rentals in Denmark," Regional Science and Urban Economics, Elsevier, vol. 101(C).
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    10. Callaway, Brantly & Sant’Anna, Pedro H.C., 2021. "Difference-in-Differences with multiple time periods," Journal of Econometrics, Elsevier, vol. 225(2), pages 200-230.
    11. Wencui Han & Xunyi Wang & Mehmet Eren Ahsen & Sunil Wattal, 2022. "The Societal Impact of Sharing Economy Platform Self-Regulations—An Empirical Investigation," Information Systems Research, INFORMS, vol. 33(4), pages 1303-1323, December.
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    Cited by:

    1. Seungbee Choi & Sunghwan Kim, 2024. "Impact of COVID-19 Pandemic on Airbnb Listings in New York City: Challenges and Opportunities for Urban Housing Sustainability," Sustainability, MDPI, vol. 16(20), pages 1-18, October.

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    More about this item

    Keywords

    Short-term-rental; Regulation; Digital platform; Airbnb; Data sharing;
    All these keywords.

    JEL classification:

    • K23 - Law and Economics - - Regulation and Business Law - - - Regulated Industries and Administrative Law
    • L51 - Industrial Organization - - Regulation and Industrial Policy - - - Economics of Regulation
    • L86 - Industrial Organization - - Industry Studies: Services - - - Information and Internet Services; Computer Software
    • R12 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - Size and Spatial Distributions of Regional Economic Activity; Interregional Trade (economic geography)
    • R31 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Real Estate Markets, Spatial Production Analysis, and Firm Location - - - Housing Supply and Markets

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