The effect of policy regulations in the short-term rental platform market on long-term rental prices: A case study of Airbnb in Sydney

This paper examines the impact of short-term rental platforms on long-term rental prices in Sydney, focusing on the time before and after the announcement and implementation of Short-Term Rental Accommodation (STRA) laws. Using a difference-in-differences (DiD) regression model, we find significant effects on long-term rental prices, explained by the before and after effects of the introduction of the STRA laws, controlling for neighborhood and housing market variables. Results show that the introduction of STRA laws is associated with a 2.73–3.55% increase in long-term rental prices. Additionally, each additional Airbnb per square kilometer increase was found to significantly raise rental prices by 0.02%. Other significant factors include the positive impact of the total number of rental bonds, which with a 1% increased has raised rents by 0.185–0.21%, and the local crime rate, which reduces rents by 0.033–0.042%. Our findings suggest that the STRA laws have negatively impacted the rental market, causing rents to rise. Although these regulations were intended to manage the effects of short-term rentals, they have in effect led to higher long-term rental prices, worsening housing affordability in Sydney. This effect can be attributed to the STRA laws restricting the number of days for which a short-term rental can be hired, instead of the number of dwellings, which leads to more dwellings moving out of the long-term rental market into the short-term market. Our findings emphasize the need for more balanced policies that ensure the benefits of short-term rental platforms do not come at the expense of affordable housing for residents in the long-term rental market.