Study Finds Airbnb Units Expanding Market But Re
Short-term housing markets have emerged as a way for homeowners to promote their properties to short-term tenants. This can lead some landlords to forgo long-term rentals and affect the supply and affordability of rental housing. Despite recent government regulations aimed at addressing this issue, it is not clear exactly how many and what types of properties are changing. A new study has combined data from Airbnb – the most popular platform for short-term rentals – and the U.S. Census to estimate a structural model of owner decisions and assess relevant regulations. The study found that the presence of Airbnb units in a community caused a slight decrease in the supply of long-term rental housing (i.e. switches), including affordable housing, which hurt local tenants. But it has also expanded the rental housing market, which can benefit low-income homeowners. The study authors propose a new tax to reduce change while maintaining the expansion of the rental market and to mitigate socially inequitable outcomes.
The study, carried out by researchers at Carnegie Mellon University (CMU) and LG CNS (an information technology consultancy), is forthcoming in Management science.
City regulators have launched various policies regarding short-term rentals, especially in cities where affordable housing is a concern. Some regulations limit the number of days a property can be listed for sale, while others apply a transitional occupancy tax to the listing price, similar to a hotel occupancy tax. By 2020, many US cities had imposed regulations on Airbnb, but it is unclear how this platform and these changes affected the rental housing market.
“The benefits of renting for owners can be seen directly from the prices and occupancy rates in the long-term market and on Airbnb,” notes Kannan Srinivasan, professor of management, marketing and information systems. at CMU’s Tepper School of Business, which co-authored the study. “But rental costs and their differences by demographics, properties and cities are unknown. Our study identified the underlying rental costs, including both tangible and intangible costs.
The study estimated a structural model of owners’ accommodation decisions (e.g. whether to rent in the long-term rental market or on Airbnb, and if they opt for Airbnb, how many days to rent? ). They used data from two sources to build a comprehensive list of properties potentially available in selected areas: 1) each property listed on Airbnb in nine representative metropolitan areas in 2015 and 2017, collected by AirDNA, a third-party company specializing in collection. data and and 2) the 2015 and 2017 American Housing Survey, a comprehensive national, longitudinal, and national housing survey administered by the US Census Bureau.
Examination of three sets of covariates: property characteristics, host demographics, and
Market characteristics: The researchers modeled the revenue-cost trade-offs of hosts to identify owners who have switched to short-term rentals. By building a structural model, they simulated a counterfactual scenario without Airbnb and compared it to the scenario where Airbnb was present. Their model also allowed them to assess the effectiveness of rental regulations.
The study found that Airbnb’s presence in a community slightly reduced the long-term rental supply, but also created a market expansion effect, with results varying by metropolitan area. Cities where Airbnb is more popular (e.g. Miami, New York, San Francisco) experienced a greater reduction in local rental supply, but did not necessarily have a higher percentage of owners who switched from renting. long term to Airbnb rentals.
Affordable housing has been the main source of both negative and positive impacts of Airbnb: the presence of Airbnb units has resulted in a greater reduction in rental supply, especially among affordable units, which has hurt local tenants . But Airbnb units also created a larger expansion effect in the affordable housing market, which benefited local hosts who owned affordable units and who may have been less economically advantaged. The study concludes that policymakers must strike a balance between the concerns of local tenants for affordable housing and the income needs of local hosts.
After evaluating the most commonly used regulations, the study authors suggest that it is more desirable to impose a linear tax on Airbnb owners than to limit the number of days a property can be listed. In particular, they are proposing a new convex tax which imposes a higher tax on expensive units while leaving cheaper units less taxed. The new tax could reduce change while maintaining market expansion, as well as reduce social inequalities. In practice, Airbnb has always feared that it would exacerbate income disparities, as the platform’s earnings are disproportionate to the wealthiest people. The new tax could reduce the fraction of total guest profits made by economically advantaged guests and help maintain social equality.
“To our knowledge, this is the first study to systematically and formally model host decisions and recover the underlying trade-offs,” says Hui Li, associate professor of marketing at CMU’s Tepper School of Business, who led the study. “This framework has allowed us to conduct counterfactual analyzes to identify the real changers and examine the impacts of policies.”
Among the study’s limitations, the authors note that the measures they examined do not capture all aspects of policy effects and recommend that other potential effects (e.g. studies.
Summary of an article in Management science, Market Shifts in the Sharing Economy: Airbnb’s Impact on Home Rentals by Li, H (Carnegie Mellon University), Kim, Y (LG CNS) and Srinivasan, K (Carnegie Mellon University). Copyright 2021. All rights reserved.
The title of the article
Market Shifts in the Sharing Economy: Airbnb’s Impact on Home Rentals
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