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

The discussion paper titled "Short-Term Rental Bans and Housing Prices: Quasi-Experimental Evidence from Lisbon" was authored by Duarte Gonçalves, Susana Peralta, and João Pereira dos Santos. It is part of the IZA Discussion Paper Series, published by the Institute of Labor Economics, which focuses on labor market issues and provides evidence-based policy advice. This research examines the impact of short-term rental regulations on housing prices in Lisbon, a city experiencing significant growth in tourism and rental markets.

The paper analyses a zoning reform implemented in Lisbon in 2018, which banned new short-term rental registrations in specific areas. The intent was to curb the rising housing costs attributed to the influx of short-term rentals, primarily through platforms like Airbnb. By utilizing administrative data on rental registrations and real estate transactions, along with Airbnb listing information, the authors employed a difference-in-differences estimation method to assess the causal effects of this reform.

The study found a notable spike in housing registrations in the weeks leading up to the ban, suggesting that property owners rushed to register to maximize their investment opportunities. Following the implementation of the ban, real estate prices in the affected neighborhoods decreased by an average of 8%. Specifically, two-bedroom properties saw a significant price drop of 20%. This decline highlights the option value of short-term rentals as a critical determinant in housing demand.

The analysis indicated a slight decrease in the number of sold houses, although this effect was not statistically significant. The data suggests that the removal of short-term rental options could adversely affect the demand for housing, further complicating the housing market dynamics in Lisbon. The study emphasizes the heterogeneous effects of such regulations, particularly impacting more affordable housing options.

Despite the ban on new short-term rental licenses, the research found no immediate effects on the Airbnb market in terms of listings and pricing. This indicates that existing properties were registered before the ban took effect, suggesting that regulatory measures may not have as immediate an impact on the rental market as anticipated.

The findings bear significant implications for policymakers across Europe, particularly in cities facing similar challenges with short-term rentals and housing affordability. The results underscore the importance of considering the diverse effects of rental regulations on different types of properties and the need for tailored approaches to address the housing crisis while accommodating the tourism sector.

This research contributes to the growing literature on the effects of short-term rental regulations on housing markets. The evidence suggests that while such policies aim to stabilize housing prices, they can also have complex repercussions on various segments of the market. The study serves as a crucial reference for understanding the broader impacts of short-term rental bans and offers insights for future policy considerations in urban environments.