Effects of Airbnb on the Housing Market: Evidence from London.

Abstract

The growth of Airbnb is likely to affect the local housing rental market by reducing the supply of properties. I combine data from Airbnb and Zoopla and examine how the price of individual houses evolves over time, as Airbnb penetrates the market in the area of Greater London. Leveraging the fact that properties with more than three bedrooms are less exposed to Airbnb, I use a difference-in-differences strategy by year and house type. I find that a 10-percent increase in the number of Airbnb properties in a ward increases real rents by 0.1 percent. The effect of Airbnb is highest in one-bedroom properties because these smaller properties are substitutes for hotel rooms, inducing landlords to shift supply from long-let rental market to Airbnb. The impact of Airbnb is heterogeneous, and areas that are more in demand by residents due to better quality schools show a more considerable increase in rents.