An unregulated short-term rental market has been shown to increase the cost of housing in major cities, but a new study shows that targeted restrictions on Airbnb have a chilling effect on residential development.
The paper, titled “The Effect of Short-Term Rentals on Residential Investment” and co-authored by researchers at real estate data company Cherre, McGill University, University of Southern California and Cal State University, Fullerton, was published Wednesday in Harvard Business Review.
The the researchers found that in 15 U.S. cities that have passed laws restricting short-term rentals, including New York, Los Angeles, Boston, Denver, and Austin, new residential permits have declined in correlation with new Airbnb listings. Property values have lost about $ 3 billion per year in these markets, the researchers found, resulting in a loss of tax revenue of $ 40 million per year.
“We demonstrate that colocation increases residential investment by increasing the demand and value of residential housing,” the researchers wrote. “More specifically, we show that housing sharing regulations lead to lower house prices. “
Before restrictive legislation, a 1% increase in Airbnb listings resulted in an almost 0.8% increase in residential development permits in 15 cities, according to the study. But when the regulations were put in place, registrations fell 21% and permits fell 10%.
Regulations in cities across the country, aimed at limiting the effects of STRs reduced housing supply and rising rents and house prices amid an affordability crisis, lowered the cost of housing, but reduced city income and economic development in the process.
“That’s not to say unregulated growth is the answer,” the researchers wrote in HBR. “But our research shows that with the right policy approach, STRs can be used as a tool to encourage local real estate development and economic growth.”
The authors noted that housing affordability is a key factor to consider when drafting future restrictions, as is the community investment that would flow from increased income.
“Rather than applying blanket restrictions that hinder growth, we recommend creating targeted policies that meet local needs,” the researchers wrote. “As development spurs growth, policies could be implemented that set aside some of the resulting increased tax revenues to finance affordable housing for local residents. Likewise, to address gentrification issues, the total amount of space available for use of STRs could be capped at a percentage of available housing capacity, thus encouraging long-term housing development alongside STRs.
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