Dragging on multilisting: The reason why home-sharing platforms make long-term rental prices increase and how to fix it

Abstract

• The presence of home-sharing platforms is believed to create externalities for the inhabitants of cities and touristic hotspots via gentrification and touristification processes, due mainly to the increase of long-term rental prices. • Despite existing externalities, home-sharing platforms can help property owners to monetize their assets and provide visitors with a higher value-added accommodation proposal than that of regular accommodation providers. • We posit and demonstrate, for the city of madrid (Spain), that the presence of home-sharing platforms is not responsible for the rise of long-term rental prices at the city level, but it is at the touristic hotspots (city center in this case) level. • We show that the effect found in touristic hotspots can be mainly attributed to the presence of home-sharing platforms, where multilistings (investors offering a great number of properties) play a significant role. • Public institutions need to regulate home-sharing platform activity, paying attention to where (touristic hotspots) and who (multilistings) is mainly responsible for the externalities. Regulations must protect (i) the economic freedom of individuals wishing to monetize their assets and (ii) the democratization of travelling as a leisure activity provided by the sharing economy. Airbnb is the largest accommodation provider in the world. Its activity has lowered the cost of travelling, while providing owners of properties with a better way to monetize their idle assets. However, controversy has arisen due to the externalities created by home-sharing platforms, namely gentrification and touristification, that reduce livability of spaces affected by their activity. We look into the effect of Airbnb on long-term rental prices in the city of Madrid in 2019. We use Multilayer Perceptron (MLP) to analyze the data. Our findings indicate that, at the city level, long-term rental prices are mainly impacted by the distance of the district to the city center. This factor overrides the importance of the number of properties offered in home-sharing platforms. This speaks of long-term rental prices at the city level being governed by complex processes, in which the presence of home-sharing platforms is not the dominant one. However, if we look closely at touristic hotspots, we find that the concentration of properties offered in home-sharing platforms and specifically the presence of multilistings affect long-term rental prices importantly. Based on our findings, we propose a tax framework to deal with the externalities caused by the disruption of home-sharing platforms.