The impact of Airbnb on residential property values and rents: Evidence from Portugal

The article "The impact of Airbnb on residential property values and rents: Evidence from Portugal," authored by Sofia F. Franco and Carlos Daniel Santos, was published in a reputable journal focusing on regional science and urban economics. The authors are affiliated with prominent academic institutions, including the University of California, Irvine, and Nova School of Business and Economics in Portugal. Their research addresses the pressing issue of housing affordability in the context of short-term rental platforms like Airbnb.

This research quantifies how Airbnb's short-term rentals affect housing affordability in Portugal. The authors find that a one percentage point increase in Airbnb's share within a municipality leads to an average increase of 3.7% in house prices. In major urban centers such as Lisbon and Porto, this effect is slightly lower, with a 1pp increase resulting in a 3.2% price increase. The findings highlight a pronounced impact in historical centers and tourist-attractive areas, where house prices surged by 24.3% in 2015 and 32.3% in early 2016 compared to pre-Airbnb expansion levels.

The study utilizes a comprehensive dataset of Airbnb listings alongside quarterly housing rents and prices from 106 municipalities in Portugal, spanning from 2012 to 2016. It reveals a significant rise in Airbnb listings, particularly after regulatory reforms in 2014 that simplified short-term rental processes. For instance, the number of Airbnb listings in Lisbon increased from 7,011 in June 2015 to 10,547 by May 2016.

The research underscores that while Airbnb offers new income streams for residents, it also contributes to the growing crisis of housing affordability. The study posits that the influx of short-term rentals restricts the availability of long-term housing options, thereby increasing costs for local residents. For instance, the average gross salary of €900 per month makes it increasingly difficult for locals to afford housing in central areas, leading to displacement to suburban regions.

The authors employ both instrumental variable regression and difference-in-differences approaches to assess the impact of Airbnb on housing costs. Their findings indicate that the rise in Airbnb listings correlates with increased housing prices, particularly in historic neighborhoods of Lisbon and Porto. The study also compares different civil parishes, revealing that areas with high tourist activity experience significantly higher price escalations.

The article contextualizes its findings within broader regulatory frameworks, noting that cities like Lisbon and Porto have implemented tourist taxes to mitigate the pressures of rising housing costs. The study argues for the need to design spatially targeted regulations to address these issues, as blanket policies may not effectively tackle the nuances of local markets.

In conclusion, while Airbnb has facilitated a new form of economic activity, its impact on residential property values and rents poses significant challenges for housing sustainability in urban areas. The research highlights the importance of striking a balance between fostering tourism and ensuring housing affordability for local residents, a pertinent issue for cities across Europe grappling with similar challenges.