The Rise of Short-Term Rentals: Impact on Local Housing Markets

Short-term rentals (STRs), also known as vacation rentals or Airbnbs, have become increasingly popular in recent years. In 2021, STRs accounted for an estimated 17% of all U.S. travel bookings, and this number is expected to continue to grow in the years to come.

While STRs can offer a convenient and affordable option for travelers, they can also have a significant impact on local housing markets. In some cases, STRs have been blamed for driving up housing costs and displacing long-term residents.

This article will explore the impact of STRs on local housing markets, including the potential benefits and risks. We will also discuss the policy options that cities and towns can consider to manage the growth of STRs.

The Benefits of STRs

STRs can provide a number of benefits for local communities, including:

• Increased tourism revenue
• Boosted economic activity
• More affordable housing options
• Greater community engagement

Let’s take a closer look at each of these benefits.

Increased tourism revenue

STRs can attract visitors to a community, which can lead to increased tourism revenue. In a study of 10 U.S. cities, researchers found that STRs generated an average of \$2.4 million in additional tourism revenue per year.

Boosted economic activity

STRs can also boost economic activity in a community by supporting local businesses. Visitors who stay in STRs are more likely to eat at local restaurants, shop at local stores, and use local services. In a study of 10 U.S. cities, researchers found that STRs generated an average of \$1.3 million in additional economic activity per year.

More affordable housing options

STRs can provide more affordable housing options for residents, especially in high-cost housing markets. In a study of 10 U.S. cities, researchers found that STRs led to a decrease in rental prices by an average of \$100 per month.

Greater community engagement

STRs can also help to promote greater community engagement. Visitors who stay in STRs are more likely to interact with local residents and learn about the community. This can lead to increased social cohesion and a stronger sense of community.

The Risks of STRs

While STRs can provide a number of benefits for local communities, they can also pose a number of risks, including:

• Increased housing costs
• Displacement of long-term residents
• Reduced housing supply
• Increased traffic congestion
• Noise and nuisance complaints

Let’s take a closer look at each of these risks.

Increased housing costs

One of the biggest concerns about STRs is that they can lead to increased housing costs. This is because STRs can compete with long-term rentals for housing stock, driving up prices. In a study of 10 U.S. cities, researchers found that STRs were associated with an increase in rental prices by an average of \$100 per month.

Displacement of long-term residents

Another concern about STRs is that they can displace long-term residents. This is because STRs can be more profitable than long-term rentals, which can lead to landlords converting long-term rentals into STRs. In a study of 10 U.S. cities, researchers found that STRs were associated with a decrease in the number of long-term rental units by an average of 1.5%.

Reduced housing supply

STRs can also reduce the housing supply in a community. This is because STRs are often used as second homes or vacation homes, which means