The design and effects of short-term rental regulation

Abstract

Socioeconomic disruptions of short-term rentals have instigated heated debates. Critics have accused short-term rental of various nuisance and gentrification; local governments around the world have imposed regulatory measures from outright ban to taxation on them. As the latest literature has pointed out a lack of studies on the effectiveness of such regulations, this paper attempts to formalize a general taxonomy which renders short-term rental regulations in different cities comparable for the assessment of their effectiveness. Following an investigation of seventeen American cities, six approaches to the regulation were identified. A quantitative measure called STR Friendliness was formed to draw hypotheses on the relationships between the regulation and relevant socioeconomic indicators. The paper hypothesizes that (1) the regulation has negative impacts on the proliferation of short-term rentals and housing occupation (2) but not necessarily on the increase in home prices and rents, and that (3) the regulation tends to be stricter in cities where the lodging industry contributes to the local economy to greater extents (4) as well as in cities where the criticism of short-term rentals as a cause of rent increase is louder regardless of the actual rent increase. These hypotheses will facilitate future empirical studies of the regulation.