Rental Supply Research Articles

Supply Skepticism or Supply Realism?

While Been et al. makes a strong case that new market‑rate supply can affect rents and prices, what is missing from the piece is sufficient context on who benefits, to what extent and whether market reforms and high‑end rental housing can adequately move the housing affordability needle for low‑income renters. At best, current research suggests new market‑rate rental supply slightly lowers the rate of rent increases for all, at worst it may also increase rents in the short‑run in lower quality housing occupied by lower‑income renters. While the authors critique “supply skepticism,” I call for a middle path of supply realism. Supply realism acknowledges the racist history of exclusionary housing policies, embraces zoning reforms while also being clear eyed about the limitations of zoning and other market reforms alone to achieve universal housing affordability.

Supplementary rental supply? The digital market for low-cost and informal housing in Sydney, Australia

This article examines real estate platforms and the data they generate to provide new insights into housing markets and practices, focusing on lower-cost and informal sectors, where building or rental regulations are often bypassed or contravened. We examine online listings advertised in Sydney, one of the most expensive cities in Australia and the world, compiling data from four dominant platforms – Realestate.com.au, Flatmates.com.au, Gumtree.com.au and Airbnb.com – each of which offers a particular type of rental accommodation. Using these datasets, we identify a typology of lower-cost and informal tenures and dwelling units, ranging from secondary dwellings and illegally subdivided apartments to shared accommodation and precarious rental agreements. Our study highlights a supplementary supply of rental housing, operating within the conventional private rental market, accessed and made visible via the platforms we examine. Applying a statistical regression approach, we examine relationships between concentrations of informal housing supply and socio-economic variables. The findings reveal intersections between digital platforms and evolving informal market practices and have implications for urban planning and housing policy.

Platform-Enabled Informality?

Problem, research strategy, and findings Digital platforms have transformed housing practices and enabled new markets to emerge. Here we report on a study in which we examined these practices and their implications for planning, focusing particularly on low-cost and informal rental accommodation. With reference to Australia’s three largest cities (Sydney, Melbourne, and Brisbane), we investigated the range and scale of accommodation types advertised on major commercial and peer-to-peer platforms Realestate.com.au, Flatmates.com.au, Gumtree.com.au, and Airbnb.com, identifying an informal housing typology comprising secondary dwelling units, share homes or rooms, and Airbnb-style holiday accommodation, much of which violates local regulation. We found that secondary dwellings and other irregular types of accommodation comprised more than 3% of Sydney’s rental vacancies and more than 10% of enumerated rental vacancies in Brisbane during the study period of August 2021. Informal tenures such as rooms in share homes or negotiated arrangements offered by property owners extended rental supply in Sydney and Melbourne by the equivalent of more than 16% over the same period, rising to almost 34% in Brisbane. These findings show that platforms have enabled property owners to market illegal rentals and unauthorized dwellings but also have helped lower-income earners access lower-cost accommodations. Planners must determine which practices support affordability without generating unacceptable risks for residents and neighborhoods. Takeaway for practice Platforms have enabled landlords to market informal and illegal rental accommodation while evading regulatory oversight. Using data exposed on these platforms, our study shows the important role played by this sector in serving lower-income renters but also the risks for tenants occupying substandard units or precarious tenures. Planners must address these risks in supporting diverse rental supply.

Airbnb and rental markets: Evidence from Berlin

We exploit the differential responses of Airbnb hosts to two distinct policy interventions in Berlin to shed light on the optimal design of policies targeting short-term rental platforms to mitigate rental market inflation. The first intervention, which affected commercial listings, significantly impacted long-term rental markets, unlike the second intervention, which mainly affected non-commercial listings. Leveraging these policy variations, we estimate the marginal impact of Airbnb on rental supply and rents. Each additional commercial Airbnb listing displaces 0.23 to 0.37 rental units and increases rent per square meter by 1.3 to 2.4 percent. This underscores the importance of targeting commercial listings when regulating short-term rental markets.

Mortgage interest deductions? Not a bad idea after all

Mortgage interest deductions and other homeownership subsidies are widely believed to be harmful because they redistribute resources from lower-income renters to higher-income homeowners. We argue that renters actually benefit from these policies in general equilibrium for two reasons. First, the rental supply curve is relatively inelastic, which means that rents fall when these policies reduce rental demand. Second, many renters spend most of their income on housing, and these renters gain substantially from rent decreases. We calibrate a quantitative model to match empirical evidence on these factors and show they are strong enough that subsidizing homeownership actually increases welfare.

WITHDRAWN - The theory of filtering in expanding affordable rental supply

This report has been withdrawn.

Bondi to Byron: divergent pathways in NSW’s Metropolitan and regional rental markets during the COVID-19 pandemic

ABSTRACT In this paper, we look to compare the differential responses of metropolitan and regional rental markets in the first 12 months post-pandemic in New South Wales, Australia’s most populous state. We employ descriptive statistics to analyse broad trends in both rental prices and transfers in and out of long-term rental supply through the short-term letting and property buyer markets. Moreover, we examine how these dynamics have played out at the local level using the contrasting case studies of Bondi in the eastern suburbs of Sydney and Byron Bay in the northern rivers of NSW. The results demonstrate that there have been distinctly separate responses to the pandemic across different geographical profiles, displaying cohort-level behaviours ranging from rental declines in inner-city areas to significant increases in high-price regional areas. Furthermore, a comparison of metro and regional markets highlights a strong and symmetrical association between short-term lettings activity and changes in long-term rental prices over the initial COVID-19 period. Finally, analysis of investor activity exhibits a highly reactive and geographically differentiated response to changes in rental yields. Ultimately, the findings of this study further the understanding of the contrasting responses at the local scale to the COVID-19 pandemic, the complex interplay between long- and short-term rental markets and help shed light on necessary future policy directions for NSW’s, and Australia’s, housing market.

Can landlords siphon housing allowances? New theory and evidence on housing allowance algorithms from a natural experiment

This paper provides new evidence on the incidence and theoretical predictions of housing allowances. It offers a comprehensive reexamination of allowance algorithms, to shed light on their objectives and impacts, while also addressing empirical modelling considerations and identifying limitations in literature. Notably, it offers readers a comparative analysis by investigating US vouchers as a reference point. Theoretically, I find housing allowances are typically neither a price nor income equivalent. Housing allowance schemes,mostly being universal in functional form across countries, manifest as personal subsidies inverse to resources i.e., some benefit amount minus income deduction. I discover that New Zealand's Accommodation Supplement (AS) manifests as a negative income and wealth tax benefit which, over time, is regressive to rents and incomes. Empirically, I estimate the effects of an increase in costs and demand for the AS on rents exploiting a panel of housing markets geocoded using census tracts at Area Unit (AU) level. The rent model extends, using Geographically Weighted Panel Regression (GWR) to control for any time-variant neighborhood spillover effects on rents. Costing NZ$ 5.225 billion over 2006–2013, AS for renters was not demand deterministic and had no significant direct impact on the revenues of low-income landlords. An increase in subsidy demand coincides with possible overcrowding whereas has no impact on increasing rental supply or a move into renting.

HETEROGENEITY, FRICTIONAL ASSIGNMENT, AND HOME‐OWNERSHIP

AbstractWe study the composition of the housing stock across ownership and rental markets in a dynamic model of frictional assignment. Houses are rented or sold to heterogeneous households that sort over quality. Due to matching frictions and an increasing ownership surplus, wealthy households tend to own and lower value housing tends to be rented, even without financial frictions or rental supply constraints. When calibrated to match key housing market features of the average U.S. city, the model is consistent with observed empirical relationships across cities. We study the model's implications for affordability, ownership, and the impact of progressive property taxation.

Technological innovations and preexisting markets: The interaction between Airbnb and New York’s hotel and housing markets

AbstractThis paper analyzes the interaction between Airbnb and two traditional markets in New York City, long‐term rentals and hotels, to investigate whether Airbnb is a substitute to either one. Using data from InsideAirbnb, the American Community Survey (ACS), Zillow Research, and the City Planning Primary Land Use Tax Lot Output (PLUTO), we estimate three different models: (i) a fixed effect panel data model relating the number of listings to the number of hotels and socioeconomic variables; (ii) hedonic price regressions relating long‐term rents to the number of Airbnb host listings and prices; and (iii) a simultaneous equation model of supply and demand for long‐term rentals where rental supply and demand are functions of Airbnb nightly rates. We find that: (i) the numbers of host listings and guest reviews are higher in neighborhoods with higher concentration of hotels; (ii) there is a positive relationship between long‐term rents and both the number of Airbnb listings and Airbnb rates; (iii) the supply‐and‐demand simultaneous equations model shows a negative relation between the supply of properties for rent and Airbnb nightly rates; and (iv) the supply‐and‐demand simultaneous equations model shows a positive relationship between the demand for rentals and Airbnb nightly rates. These results are consistent with Airbnb being a substitute to both hotels and long‐term housing rentals.

Joint decision on wooden pallet lease pricing and purchase volume under recycling and reusing mode in the Chinese market

A closed-loop wooden pallet rental system was considered in this study, which involved a wooden pallet manufacturer, a wooden pallet leasing company, and several customers. To solve the joint optimization problem of pallet lease pricing and purchase volume under recycling and reusing mode, a mathematical model was constructed with the objective of maximizing the profit of pallet renters under deterministic and stochastic market demand. Meanwhile, comparative analyses were conducted on the optimal pricing, optimal order quantity, and expected profit under the two leasing modes of considering and not considering maintenance. On this basis, sensitivity analyses were performed on some parameters of the two modes. Results showed that pallet renters can adopt the maintenance strategy to increase profits by lowering the rental price appropriately regardless of the market demand. The wood pallet rental supply chain can be more efficient when the pallet residual value, recovery integrity rate, and utilization rate are higher and the out of stock cost and inventory holding cost are lower. Under the maintenance mode, a lower repairing price and higher reparability rate resulted in a more favorable maintenance mode.

Market Shifts in the Sharing Economy: The Impact of Airbnb on Housing Rentals

This paper examines the impact of Airbnb on the local rental housing market. Airbnb provides landlords an alternative opportunity to rent to short-term tourists, potentially leading some landlords to switch from long-term rentals and thereby, affecting rental housing supply and affordability. Despite recent government regulations to address this concern, it remains unclear how many and what types of properties are switching. Combining Airbnb and American Housing Survey data, we estimate a structural model of property owners’ decisions and conduct counterfactual analyses to evaluate various regulations. We find that Airbnb mildly cannibalizes the long-term rental supply. Cities where Airbnb is more popular experience a larger rental supply reduction, but they do not necessarily have a larger percentage of switchers. Affordable units are the major sources of both the negative and positive impacts of Airbnb. They cause a larger rental supply reduction, which harms local renters; they also create a larger market expansion effect, which benefits local hosts who own affordable units and may be less economically advantaged. Policy makers need to strike a balance between local renters’ affordable housing concerns and local hosts’ income source needs. We also find that imposing a linear tax is more desirable than limiting the number of days a property can be listed. We propose a new convex tax that imposes a higher tax on expensive units and show that it can outperform existing policies in terms of reducing cannibalization and alleviating social inequality. Finally, Airbnb and rent control can exacerbate each other’s negative impacts. This paper was accepted by Matt Shum, marketing. Supplemental Material: The data files and online appendix are available at https://doi.org/10.1287/mnsc.2021.4288 .

Comprehensive Effects of Short-Term Rental Platforms Across Hotel Types in U.S. and International Destinations

In recent years, short-term rental platforms in the lodging sector, including Airbnb, VRBO, and HomeAway, have received extensive attention and emerged as potentially alternative suppliers of services traditionally provided by established commercial accommodation providers, that is, hotels. Short-term rentals have dramatically increased the available supply of rooms for visitors to multiple international destinations, potentially siphoning demand away from hotels to short-term rental businesses. In a competitive market, an increase in supply with constant demand would negatively influence incumbent service providers. In this article, we examine the substitution effects of short-term rental supply on hotel performance in different cities around the world. Specifically, we comprehensively investigate the substitution effects of short-term rental supply on hotel performance based on hotel class, location type, and region. Furthermore, we segment the short-term rental supply based on its types of accommodations, that is, shared rooms, private rooms, and entire homes, and both examine and quantify the differential effects of these types of short-term rentals on different types of hotels. This study offers a comprehensive analysis regarding the impact of multiple short-term rental platforms on hotel performance and offers both conceptual and practical insights regarding the nature and extent of the effects that were identified.

Purpose-built rental housing and household formation among young adults in Canadian cities, 1991–2016

In recent decades, several Canadian cities have experienced a significant restructuring of their housing demand as young adult aspirations and expectations of maintaining independent households have been confronted by soaring housing costs, falling vacancy rates, and a rental supply system that is characterized by an overreliance on rental condominiums and other provisional forms of ‘secondary’ rental housing. The study presented in this paper focuses on intra-metropolitan variation in household formation among young adults and attempts to explain it from a macro perspective, emphasizing the importance of a community’s ‘primary’ or purpose-built rental sector. Following a review of the international literature on the impacts of housing supply and availability on household formation, panel regression models are estimated to examine the effects of changes in the relative supply and real cost of purpose-built rental housing on changes in young people’s household formation in Canadian metropolitan areas between 1991 and 2016. The results indicate that a 1% increase in the relative supply of purpose-built rental housing leads to 0.24% and 0.14% increases in the rates of family and non-family household formation of young adults. These estimates are generated using instrumental variables, controlling for potential simultaneity between household formation and purpose-built rental supply.

Airbnb during COVID-19 and what this tells us about Airbnb’s Impact on Rental Prices

This study assesses how an overall decline in Airbnb activity due to the COVID-19 pandemic has affected rental supply and prices in Sydney. Using a comprehensive record of Airbnb listings and rental sales data, we study how Airbnb activity and the rental market has changed during the COVID-19 pandemic. We find that in active Airbnb neighbourhoods, the supply of long-term rental stock has increased in response to reduced Airbnb activity, whereas rental supply has fallen in inactive Airbnb neighbourhoods. Our results indicate that rental prices have fallen proportionately with Airbnb activity, up to 7.1% in the most active Airbnb neighbourhoods.

A Theoretical Study on Conversion Rate of Jeonse Price to Monthly Rent for Housing - Focused on Rental Supply Costs -

A Theoretical Study on Conversion Rate of Jeonse Price to Monthly Rent for Housing - Focused on Rental Supply Costs -

The shifting geographies of digital intermediation: the effects of the COVID-19 pandemic on short-term rentals in Italian cities

The present paper investigates the impact of the Covid-19 pandemic on Airbnb's market and focuses on the crisis's effects on areas affected by digital intermediation. The study's goal is to analyse Airbnb geographies by focusing on short-term rental supply and demand at the intra-urban scale. Using historical data and by adopting a quantitative and spatial data-oriented approach, the work highlights the shifting geographies of digital intermediation. Results show that while the areas that have increased their supply are limited, a large, clustered and contiguous portion of the cities seems to have reversed the exponential growth trend of recent years. Finally, the study offers a reflection on the future of short-term rentals in the post-pandemic city. The case study refers to four Italian cities: Florence, Milan, Rome, and Naples.

Understanding the Share Housing Sector: A Geography of Group Housing Supply in Metropolitan Sydney

ABSTRACT Within the wider affordability crisis affecting major cities throughout the world, share housing has become increasingly important, potentially expanding capacity in the private rental sector. But share housing is difficult to monitor and research, embedded in various forms of tenancy and household arrangements within the wider housing system. Online rental platforms which increasingly enable and facilitate the share housing sector may also offer a critical window into its operation. This paper examines this possibility with reference to Sydney, Australia, drawing on listings scraped from share housing platform “Flatmates.com.au” to determine the scale and distribution of shared housing vacancies relative to the city’s wider housing market. Our findings demonstrate rising dependence on share housing as a source of lower-cost rental supply near employment and education but raise questions about share accommodation as a long-term housing solution.

Is ‘informal’ housing an affordability solution for expensive cities? Evidence from Sydney, Australia

Does ‘informal’ housing offer more affordable choices for low-income renters in expensive cities? This paper investigates this question with reference to Sydney, Australia, where planning reforms have sought to deregulate housing development including ‘informal’ and low cost market accommodation, in response to chronic housing affordability pressures. Examining rental advertisements, housing supply and affordability data, and through interviews with local government personnel, we find that informal secondary units and room rentals dominate Sydney’s lower cost market, but rents remain high relative to incomes. Further, and despite reforms to encourage new secondary dwellings and low cost rental supply, substandard and non-compliant housing persists, exposing tenants to serious risks. The findings suggest that in high cost cities such as Sydney, the informal sector occupies an important and unrecognised role in housing low-income renters, but that more systemic reforms beyond the planning system are needed to improve housing outcomes for disadvantaged groups.

Platform-mediated short-term rentals and gentrification in Madrid

Gentrification demands updated frameworks to assess the impact of some major global trends on the local populations’ access to housing. Short-term accommodation using digital platforms in previously gentrified central urban areas is playing a significant role in outlining a new wave of ‘transnational gentrification’ in a number of global cities. Having undergone classical patterns of gentrification over the last two decades, the central district of Madrid and its surroundings are showing patterns of a new wave of gentrification in a context of economic crisis, planetary rent gaps, increasing global tourism and an increase in rental prices in central areas that may be related to the emergence of short-term rentals – making Madrid a relevant case for depicting transnational gentrification in the Southern European capitals. Based on empirical data, this work explores the holiday rental supply in Madrid over three years (2015–2018), verifying a strong association between the growth in tourist arrivals, the settlement of new residents from wealthy economic backgrounds and increasing rental prices. Since this process is accompanied by deregulation of local rental contracts and the growth of transnational Real Estate Investment Trusts (REITs), even in some of the most vulnerable areas located beyond the M-30 ring road, this wave of gentrification has the potential to produce displacement and substitution of residents.