Beyond the Stay: How Short-Term Rentals Reshape Residential Real Estate Investment
Digital platforms of short-term rentals (STRs) such as Airbnb have significantly transformed how residential spaces are utilized. This study investigates the impact of STRs on residential real estate investment, a pivotal sector in any economy. In the United States, residential real estate boasts a valuation of approximately $107 trillion, representing about 81% of the total real estate market value. We conjecture that STRs may add significant value to residential properties, potentially influencing investor behavior. The impact is likely to vary among different investor types due to distinct preferences and investment strategies. Leveraging Airbnb’s “One Host, One Home” policy, we compile a unique dataset that integrates nationwide transaction-level data from Zillow with Airbnb listings, supplemented with detailed demographic and economic characteristics. We employ a quasi-experimental design to assess the policy’s effects on investment activities within the residential real estate sector. Our findings are three-fold: first, we observe a significant reduction in STR-focused investments and overall property transactions following the policy, with a decline of approximately 15%. Second, these impacts may be primarily driven by investors’ lowered revenue projections and the increased regulatory burden of managing STRs under the policy. Lastly, the effects of the policy were more pronounced among individual or local investors than among institutional or non-local investors. These results confirm our conjecture and underscore the substantial value that the STR option adds to residential properties. This research offers new, direct evidence of how STRs are reshaping residential real estate investment, presenting significant implications for stakeholders such as STR platforms, real estate investors, and policymakers.