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" explores the substantial effect of short-term rental platforms, particularly Airbnb, on housing affordability in Portugal. Authored by Sofia F. Franco from the University of California, Irvine, and Carlos Daniel Santos from Nova School of Business and Economics, the study seeks to provide empirical evidence on how the increase in Airbnb listings impacts local housing markets. The publication is part of the Regional Science and Urban Economics journal, which focuses on urban development and policy analysis.

The research quantifies the relationship between Airbnb's presence and housing costs, revealing that a 1 percentage point (1pp) increase in a municipality's Airbnb share corresponds to an average 3.7% rise in residential property prices. Specifically, in Lisbon and Porto, a similar increase results in a 3.2% hike in housing prices. The analysis indicates that the most pronounced effects occur in historical centers and tourist-attractive areas, with prices in high-tourist parishes surging by 24.3% in 2015 and 32.3% in early 2016 compared to pre-Airbnb expansion levels.

The study highlights the rapid growth of Airbnb listings in Portugal, especially after 2014 when the regulatory framework became more permissive. By 2016, Lisbon had around 10,547 Airbnb listings, marking a 15% increase from the previous year. The trend aligns with a broader context of rising tourism in the country, with Lisbon averaging approximately 4.5 million tourists annually, creating intense competition for residential properties.

Critics argue that short-term rentals exacerbate affordability issues for locals by shifting long-term housing into the short-term rental market, leading to higher costs for residents. The findings suggest that the surge in Airbnb listings is closely tied to processes of gentrification, where long-time residents are often displaced by higher-income groups attracted by the renovated properties in historic neighborhoods.

In response to rising concerns over housing affordability and urban displacement, cities like Lisbon have begun implementing stricter regulations for short-term rentals. The 2014 regulatory reform simplified the process for property owners to enter the short-term rental market but raised alarms about the long-term availability of affordable housing. As cities grapple with balancing tourism and resident needs, the study emphasizes the importance of nuanced regulations that target specific areas rather than blanket policies.

The authors utilized a comprehensive dataset from Airbnb listings and housing transaction prices across 106 municipalities in Portugal, covering the years from 2012 to 2016. The research employs instrumental variable regression and difference-in-differences analysis to quantify the impact of Airbnb on housing prices and rents, revealing significant spatial heterogeneity in the effects across different neighborhoods.

The study concludes that while short-term rentals like Airbnb contribute to rising property values in attractive areas, they do not significantly impact long-term rental prices during the examined period. This nuanced understanding of the housing market dynamics can inform policymakers as they navigate the complexities of urban housing sustainability amidst growing tourism pressures. The evidence presented highlights the need for targeted regulatory interventions that can mitigate the adverse effects of short-term rentals on local communities.