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The Airbnb Rent-Premium and the Crowding-Out of Long-Term Rentals

Robert Hill (), Norbert Pfeifer () and Miriam Steurer ()
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Norbert Pfeifer: University of Graz, Austria
Miriam Steurer: University of Graz, Austria

No 2020-06, Graz Economics Papers from University of Graz, Department of Economics

Abstract: Concerns that Airbnb is crowding-out long-term rentals has led cities around the world to impose limits on the number of days properties may be let via short-term rental platforms. So far, cities set these limits without clear guidance. Using micro-level data for Sydney, we investigate how strict limits need to be to stop such crowding-out. Controlling for differences in location and physical characteristics using hedonic double prediction, matching, and endogenous switching models, we compute the cross-section distribution of Airbnb rent premia (i.e., how much more a landlord could earn per week on Airbnb than on the long-term rental market). Currently the New South-Wales government is considering a 180-day limit on Airbnb rentals in Sydney. Our calculations indicate that with this rule, 95 percent of tax compliant landlords - but only 1 percent of tax-evading landlords - would have an incentive to switch from Airbnb to the long-term rental market. Hence a 180-day limit will be effective if Airbnb hosts pay tax on their rental income, but largely ineffective otherwise.

Keywords: Airbnb rent-premium; regulating the sharing economy; hedonic prediction; characteristic matching; endogenous switching (search for similar items in EconPapers)
JEL-codes: C13 R31 (search for similar items in EconPapers)
Date: 2020-02
New Economics Papers: this item is included in nep-ure
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