Is Sharing Really Caring? The Effect of Airbnb on the Affordability of Housing

We examine the impact of peer-to-peer (P2P) short-term rentals on housing affordability. Using a simple model we illustrate that, although growth in the short-term rental market leads to higher housing prices, home-sharing profits can offset increased housing costs. That is, we show the net effect of the rise of platforms like Airbnb on housing affordability is theoretically ambiguous. To address this ambiguity empirically, we leverage city-level registration requirements that substantially increase the cost of hosting on Airbnb to estimate the effect of policy enforcement on the Airbnb market and the corresponding effects on home prices and foreclosures. Using data on Airbnb listings and transactions from the San Francisco and Chicago metro areas, we find that enforcing registration requirements on Airbnb listings within the city limits of Chicago and San Francisco reduces Airbnb supply and bookings by 40% relative to untreated areas within the two metros. We also find substantial heterogeneity in these effects, with the largest shocks experienced by zip codes with the highest per-capita density of Airbnb listings. Using the same identification strategy with transaction-level data from Zillow on home sales and foreclosures, we find that home prices decline by roughly 10% in the most Airbnb-dense zip codes while foreclosures in these same zip codes increase by almost 20%. These findings suggest that, while growth in P2P short-term rental markets increases housing prices, it may also improve individuals' ability to avoid negative financial outcomes like foreclosure