A Comprehensive Look at Short-Term Rentals

The report investigates the impacts of short-term rental services (STRs), such as Airbnb, Homeaway, etc., on the residential housing market and hotel/accommodation market in the city of Seattle, Washington. Our primary goal is to examine critiques against STRs to assess their empirical validity in a single case study. The paper utilizes data on from the American Housing Survey and Federal Financial Examination Council's Home Mortgage Disclosure Act Aggregate Reports as well as proprietary data from STR providers and the hotel industry for the city. First, we conduct simple Pearson's Product-Moment Correlation tests of STR listings with owner-occupancy, investment mortgage activity, and unit vacancy. We find positive correlation between STRs and owner-occupancy and find negative correlation between STRs and investment mortgage activity and unit vacancy. Second, we examine the spatial distribution of STR listings and their spatial pricing characteristics, comparing them with those of the local hotel market in an attempt to detect ‘demand creation' versus demand ‘market capture'. We use a Spatially Auto Regressive model to produce a standardized spatial dependence parameter, estimating both Full Maximum Likelihood and Bootstrap Errors for both the independent full samples of local block groups and the coincident small samples. In the second set of tests, we find a low degree of spatial coincidence, a greater degree of spatial diversity in STR listings (compared to hotels), and no conclusive evidence of market capture by STRs. Our conclusion is a clear lack of evidence supporting the critiques of STRs in the Seattle market. We argue there is initial evidence that STRs may support home ownership and that they serve fundamentally different segments of the accommodation market