The impact of short-term rentals in housing and rent prices

Abstract

Lisbon’s housing market is currently experiencing a scaling price increase of properties and by consequence rents. It is well-established that this phenomenon is leading to a house unaffordability and displacement of residents from urban central areas. On the other hand, new house-building activities are giving a fresh face to old and vacant buildings and busting neighbourhoods economies. An upraise trend in tourism, and deductively high touristic accommodation demand, induced several homeowners and constructors to react to the demand, and convert residential houses into touristic lodging. Discussions about the accountability of the short-term rentals and home-sharing platforms in the housing market change, driven governmental intervention in traditional neighbourhoods. Due to these debates, the empirical question of this study is whether the short-term rentals activity increases the housing and rent prices. The effects of home- sharing rentals on housing market are detected by estimating house and rent prices as a function of number of listings in the city. An increase in housing prices of approximately 96 €/m2 and 0.16€/m2 in rents is estimated to be due to short-term rentals. Understanding this impact is fundamental to evaluate the necessity of regulation in this market, in order to create a balance between economic growth and quality of life of residents.