Do Airbnb Properties Affect House Prices?

The growth of peer-to-peer markets has provided a mechanism through which private individuals can enter a market as small scale, often temporary, suppliers of a good or service. Companies that facilitate this type of supply have attracted controversy in cities around the world, with concerns regarding Uber and Airbnb in particular. Both companies have been subject to criticism for failing to pay taxes to local authorities and for avoiding regulatory oversight that constrains more traditional suppliers of these services. It is not surprising that these companies have been criticized by more traditional suppliers of short term accommodation or transportation as presenting unfair competition, and attempts have been made to ban provision of these services in several cities around the world. A central complaint concerning Airbnb focuses on the impact of short-term rental properties on the value of residential property. A report prepared by the Office of the Attorney General of the State of New York lists these impacts among a number of concerns: do Airbnb rentals provide a black market in unsafe hotels? Do short-term rentals make New York City less affordable? Is the influx of out-of-town visitors upsetting the quiet of longstanding residential neighborhoods? These concerns pose difficulties because they imply different impacts on the values of residential properties. If short-term rentals provided via Airbnb create a concentration of what are effectively unsafe hotels, upsetting quiet residential neighborhoods, they would generate a local concentration of externalities that might be expected to depress property values rather than make housing less affordable. Alternatively, if these externality effects are modest relative to the impacts of space diverted from providing housing for residents to providing short-term accommodation for visitors, then local concentration of Airbnb properties may increase house prices. Perhaps because of this confusion, it is possible to find divergent viewpoints expressed about the impacts of Airbnb in the popular press and in consultant reports, but (to our knowledge) no careful study that estimates the direct impact of Airbnb rental availability on house prices. This paper presents such a study in the context of New York City.