Short-Term Rental Bans and Housing Prices: Quasi-Experimental Evidence from Lisbon

This discussion paper, "Short-Term Rental Bans and Housing Prices: Quasi-Experimental Evidence from Lisbon," is published by the IZA Institute of Labor Economics, an independent research institute focused on labor economics and policy advice. The authors, Duarte Gonçalves, Susana Peralta, and João Pereira dos Santos, aim to analyze the impact of a 2018 zoning reform in Lisbon that banned new short-term rental registrations in certain areas of the city.

Portugal experienced a significant boom in short-term rentals, particularly through platforms like Airbnb, which contributed to a dramatic increase in housing prices. Between 2016 and 2019, the median real estate price per square meter in Lisbon surged from €1,886 to €3,245, representing an increase of over 70%. The city hosted more than 16 million foreign tourists in 2019, highlighting the growing demand for short-term accommodations.

The paper investigates the causal impact of the 2018 zoning reform that banned new short-term rental licenses in designated areas of Lisbon. The authors utilized administrative data on rental registries and real estate transactions, complemented by Airbnb data. Their analysis revealed a spike in housing registrations just before the implementation of the ban, suggesting an urgent response from property owners to register their units.

The study found that the ban led to an average decrease in real estate prices by 8%, with two-bedroom apartments experiencing a significant drop of 20%. This indicates that the potential for short-term rental income was a crucial factor in real estate demand in the affected neighborhoods. The research highlights the heterogeneous effects across property types, which may contribute to the backlash against short-term rentals due to their role in driving up housing unaffordability.

The analysis indicates a decrease in the number of sold houses in the treated neighborhoods, although some results were not statistically significant. The findings suggest that the option to rent out properties on a short-term basis is an important determinant of housing demand. The authors also documented no spillover effects on short-term rental licenses or the real estate market in control neighborhoods, indicating that the ban's impact was localized.

Interestingly, the research found no immediate effects on Airbnb listings or prices following the ban. This observation implies that the anticipated demand for short-term rentals remained stable, at least in the short run, even as new registrations were halted. The absence of significant changes in Airbnb listings suggests that the existing supply may have met market demand, at least temporarily.

The findings of this study provide essential insights for policymakers considering similar regulations in other European cities facing housing affordability challenges. The authors emphasize that prolonged discussions regarding zoning regulations can undermine their intended effects. This research contributes to a growing body of literature exploring the complex relationship between short-term rental regulations and local housing markets.