Short-Term Rentals and Local Housing

How platforms like Airbnb changed travel and what research finds about their effect on local rents and neighbourhoods.

Home-sharing platforms such as Airbnb, founded in 2008, let property owners rent rooms or entire homes to travellers for short stays. They have given travellers more choice and given hosts extra income. They have also sparked fierce debates in popular cities.

Benefits

Short-term rentals offer:

More options for travellers, including larger spaces for families and stays in neighbourhoods without hotels.
Extra income for hosts, who can rent a spare room or their home while away.
Spending in new areas, as visitors eat and shop in residential neighbourhoods.

The housing concern

The main criticism is that when entire homes are rented to tourists year-round, they are taken off the long-term rental market. This reduces housing supply for residents and may push up rents.

Research supports this concern, though the size of the effect varies. A study by Kyle Barron, Edward Kung and Davide Proserpio of the United States found that a 1 percent increase in Airbnb listings in a neighbourhood was associated with small increases in rents and house prices. The effects are larger in popular tourist areas where many homes are converted.

A building changes use

An apartment building in a historic city centre has 20 flats rented to local families. Over several years, owners discover they can earn more by renting to tourists by the night. Half the flats become holiday rentals. Fewer homes are available for residents, rents rise, and the neighbourhood's character changes, with suitcases replacing school bags on the stairs.

Regulation

Cities have responded in different ways:

Registration and licences for hosts.
Limits on the number of nights an entire home can be rented each year. London, for example, limits most entire-home short lets to 90 nights a year without planning permission.
Restrictions to primary residences, allowing people to rent only the home they live in.
Bans in certain areas: New York City introduced strict registration rules in 2023 that sharply cut short-term listings. Barcelona has announced plans to end tourist flat licences by 2028.

Balancing interests

Economists generally see short-term rentals as a way to use spare space more efficiently, but recognise the concern when they convert large numbers of long-term homes. Many suggest the deeper problem in expensive cities is a shortage of housing overall, which short-term rentals can worsen but did not create.

Thinking short-term rentals alone explain high rents

Short-term rentals can push rents up in popular areas, but housing costs in most cities depend much more on how many homes are built, interest rates, incomes and population growth. Limiting holiday rentals may help at the margin but will not solve a broader housing shortage.

Key takeaways

Short-term rentals give travellers more choice and hosts extra income.
Converting homes to holiday rentals reduces housing supply for residents.
Research finds modest effects on rents overall, larger in popular tourist areas.
Cities use licences, night limits and area bans to regulate short-term rentals.