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

Overview of the Study

The paper “Short‑Term Rental Bans and Housing Prices: Quasi‑Experimental Evidence from Lisbon” is a discussion paper (IZA DP No. 15706) authored by Duarte Gonçalves, Susana Peralta, and João Pereira dos Santos. It is published by the IZA – Institute of Labor Economics, an independent research institute known for rigorous labor‑market analysis and policy‑relevant work. The authors are affiliated with institutions such as Universitat Pompeu Fabra, Barcelona School of Economics, Nova School of Business and Economics, and the RWI – Leibniz Institute for Economic Research, reflecting a strong academic background in economics and urban studies.

Core Findings on Housing Prices

Using administrative data on short‑term rental registrations, real‑estate transactions, and Airbnb listings, the authors estimate that the 2018 zoning reform banning new short‑term rental licences in nine central Lisbon neighbourhoods reduced real‑estate prices by 8 % on average. The impact was especially pronounced for two‑bedroom apartments, whose prices fell by 20 % relative to control areas. The price decline materialised with a lag of two quarters after the ban’s implementation, indicating that the option value of short‑term rentals was capitalised into property values.

Heterogeneous Effects by Dwelling Type

The treatment effect varied across dwelling sizes. While one‑bedroom units experienced a modest price drop, two‑bedroom units showed the strongest response, losing roughly one‑fifth of their value. High‑end properties in the top quartile of the price distribution also faced larger declines, suggesting that short‑term rental profitability was concentrated among larger, more valuable homes.

Impact on Market Activity

The ban triggered a 46 % surge in the quarterly number of short‑term rental registrations in the treated neighbourhoods just before the law became binding, reflecting owners’ rush to lock in licences. After the ban, the number of house sales showed a modest, statistically insignificant decline, while the number of Airbnb listings and nightly prices remained essentially unchanged in the short run, indicating limited spill‑over to the broader tourist‑rental market.

Methodology and Identification Strategy

The authors exploit a quasi‑experimental design based on the spatial discontinuity of the ban. Treated neighbourhoods (Madragoa, Bairro Alto, Bica, Príncipe Real, Santa Catarina, São Paulo/Boavista/Conde Barão, Alfama, Mouraria, and Sé) are compared with control neighbourhoods that faced the same ban one year later or were never treated. Difference‑in‑differences regressions control for neighbourhood and quarter fixed effects, and robustness checks include political controls, alternative control groups, and clustering at both neighbourhood and civil‑parish levels.

Policy Implications for Sustainable Housing

The evidence suggests that short‑term rental restrictions can temper housing price inflation, particularly for mid‑size apartments that are most likely to be used for tourism. By reducing the option value of converting homes to holiday lets, such bans may help preserve long‑term rental stock and improve housing affordability—a key sustainability goal for European cities facing tourism‑driven price pressures. However, the limited impact on Airbnb listings indicates that short‑term rental markets may adapt in ways that do not immediately translate into lower tourist accommodation supply.

Additional Context and Data Sources

The study draws on two extensive administrative datasets: a registry of short‑term rental licences (covering all new registrations from 2015 to 2019) and a confidential real‑estate transaction database (Confidencial Imobiliário) providing quarterly sales volumes and prices. Airbnb data are sourced from Inside Airbnb, offering monthly listings and price information. The combination of these high‑frequency, granular sources strengthens the credibility of the causal estimates.

Conclusions

Overall, the Lisbon zoning reform provides robust quasi‑experimental evidence that curbing new short‑term rental licences can lead to measurable declines in housing prices, especially for two‑bedroom units and high‑value properties. While the policy did not immediately reduce Airbnb activity, it altered owners’ registration behaviour and lowered the capitalised value of rental flexibility, offering a potential tool for European policymakers seeking to balance tourism growth with sustainable, affordable housing.