DP13094 | Short-term rentals and the housing market: Quasi-experimental evidence from Airbnb in Los Angeles

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Online short-term housing rental platforms such as Airbnb have grown spectacularly in recent years. We focus on Santa Monica, surrounded by the City of Los Angeles, which has severely restricted short-term rentals of entire homes and apartments. We apply a panel regression-discontinuity design around Santa Monica's border. Its 2015 Home Sharing Ordinance (HSO) reduced listings by 70% and prices of single-family homes by 5.5%, with stronger effects in locations attractive to tourists. We do not find that the HSO affected prices of apartments, which points to the presence of substantial negative external effects of short-term rentals within apartment buildings. These results explain why particularly cities with a high share of renters and apartments tend to oppose Airbnb.