Does the room sharing business model disrupt housing markets? Empirical evidence of Airbnb in Taiwan

Abstract

Recent research interest has focused on the impact of the room sharing business model on housing markets. However, existing empirical evidence is limited and exclusively focuses on few large cities in the U.S. This study examines the effects of Airbnb on housing rental and sales prices using a unique large-scale dataset comprised of housing market transaction records and the number of Airbnb listings drawn from their website in Taiwan. We estimate a fixed effect model of housing rental and sales price equations and find that a one-standard deviation increase in the number of Airbnb listings raises house rental prices by 0.38%. This finding suggests that a substitution effect is present between Airbnb's short-term accommodation and the housing rental market. Moreover, a larger effect on rental price is found among Airbnb listings that offer an entire room or apartment. Additionally, since September 2017, multinational digital platform companies must comply with a new sales tax policy in Taiwan. We evaluate the effect of this tax policy using the difference-in-difference method and find a negative impact on the number of Airbnb listings and housing rental prices after its implementation. This study is the first to empirically assess the effectiveness of tax policy on regulating room sharing business models.