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The Effect of Short-Term Rentals on Residential Investment

Author

Listed:
  • Ron Bekkerman

    (Cherre, Inc, New York, New York 10018)

  • Maxime C. Cohen

    (Desautels Faculty of Management, McGill University, Montreal, Quebec H3A 0G4, Canada)

  • Edward Kung

    (David Nazarian College of Business and Economics, California State University, Northridge, California 91330)

  • John Maiden

    (Independent, Bloomfield, New Jersey 07003)

  • Davide Proserpio

    (Department of Marketing, Marshall School of Business, University of Southern California, Los Angeles, California 90089)

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 9.0% and residential permits by 11.0%. Second, we show that residential permits decline discontinuously across jurisdictional boundaries in which one side of the boundary has an STR regulation and the other side does not. The effect is especially striking 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

  • Ron Bekkerman & Maxime C. Cohen & Edward Kung & John Maiden & Davide Proserpio, 2023. "The Effect of Short-Term Rentals on Residential Investment," Marketing Science, INFORMS, vol. 42(4), pages 819-834, July.
    • Handle: RePEc:inm:ormksc:v:42:y:2023:i:4:p:819-834
    DOI: 10.1287/mksc.2022.1409
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    References listed on IDEAS

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    4. Koster, Hans R.A. & van Ommeren, Jos & Volkhausen, Nicolas, 2021. "Short-term rentals and the housing market: Quasi-experimental evidence from Airbnb in Los Angeles," Journal of Urban Economics, Elsevier, vol. 124(C).
    5. Kyle Barron & Edward Kung & Davide Proserpio, 2021. "The Effect of Home-Sharing on House Prices and Rents: Evidence from Airbnb," Marketing Science, INFORMS, vol. 40(1), pages 23-47, January.
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