Market Shifts in the Sharing Economy: The Impact of Airbnb on Housing Rentals

This paper examines the impact of Airbnb on the local rental housing market. Airbnb provides landlords an alternative opportunity to rent to short-term tourists, potentially causing some landlords to switch from long-term rentals, thereby affecting rental housing supply and affordability. Despite recent government regulations to address this concern, it remains unclear whether and what types of properties are switching. Combining Airbnb and American Housing Survey data, we estimate a structural model of property owners’ decisions and conduct counterfactual analyses to evaluate various regulations. We find that Airbnb mildly cannibalizes long-term rental supply. Cities where Airbnb is more popular experience a larger reduction in rental supply; however, these cities do not necessarily have a larger percentage of switchers. Interestingly, we find that affordable units are the major sources of both the negative and positive impacts of Airbnb, as they see a larger rental supply reduction and a larger market expansion effect. Although Airbnb harms local renters by reducing affordable rental supply, it also serves as a valuable income source for local hosts with affordable units. Policy makers need to trade off between local renters' affordable housing concerns and local economically disadvantaged hosts' income source needs. The counterfactual results suggest that imposing a linear tax is more desirable than limiting the number of days a property can be listed. We propose a new convex tax and show that it outperforms existing policies in terms of reducing cannibalization and alleviating social inequality. Finally, Airbnb and rent control can exacerbate each other's negative impacts.

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