The Airbnb rent premium and the crowding-out of long-term rentals

• Published in: Journal of housing economics Vol. 61; p. 101935
• Main Authors: Hill, Robert J., Pfeifer, Norbert, Steurer, Miriam
• Format: Journal Article
• Language: English
• Published: Elsevier Inc 01.09.2023
• Subjects: Airbnb rent premium; Day limits on airbnb rentals; Hedonic prediction; Housing market; Regulating the sharing economy; R31; Airbnb rent premium; C21; C43; L85; Z32; Hedonic prediction; Day limits on airbnb rentals; Regulating the sharing economy; R52; Housing market
• ISSN: 1051-1377; 1096-0791
• DOI: 10.1016/j.jhe.2023.101935

Concerns about crowding out of long-term rentals have led many cities to impose limits on the days that properties can be let via Airbnb or similar platforms in a given year. However, so far, there has been little research into the effect of such measures. Using micro-level data on long-term rental and Airbnb contracts for Sydney, Australia, we first estimate how much more landlords can earn on Airbnb compared to the long-term rental market. We use three different methods to control for differences in the quality of Airbnb and long-term rentals (hedonic regression, switching model, and matching approach) and find that, on average the weekly Airbnb rent is nearly double that in the long-term market. This Airbnb rent premium reflects the higher costs borne by Airbnb landlords. Consistent with a spatial equilibrium, landlords require a higher Airbnb rent premium in postcodes with a higher average time since the last review (a proxy for the Airbnb vacancy rate). Similarly, we find that Airbnb rent premia and time-since-last-review are lower in cheaper postcodes. It is therefore important to recognize that the impact of day restrictions is likely to be felt more in the cheaper rather than more touristic areas of a city. •The weekly rent on Airbnb is nearly double that of the long-term rentals.•Hedonic regression, switching and matching models all provide similar results.•More expensive and touristic postcodes have higher Airbnb rent premia.•More expensive and touristic postcodes have higher vacancy rates.•Day limits on Airbnb rentals affect cheaper regions more than touristic ones.