New study finds vacation rentals spur long-term housing construction

Vacation Rental House
Short-term they reduce affordable housing; long-term they spur housing growth.

A major new study has found vacation rental homes spur long-term development of new housing in cities that do not have strict vacation rental regulation.

The study concluded cities that restrict vacation rental properties stymie development, while those that have growing vacation rental markets see new and upgraded housing development grow faster.

The study, by a team of researchers led by Ron Bekkerman, chief technology officer of the AI-powered real estate data integration platform Cherre Inc., also suggested reduced regulation of vacation rental homes — called short-term rentals or STRs in the study — can be used to foster housing growth in distressed communities.

The study’s results were published Wednesday in Harvard Business Review, in an article titled, “Research: Restricting Airbnb Rentals Reduces Development.”

The findings were quickly hailed by Florida’s vacation rental property owners.

“We have seen whole neighborhoods transformed in run-down areas of St. Augustine, Daytona, Tampa, Jacksonville, etc. by STR investors taking the risks. This has been something that we have been saying for years,” said Denis Hanks, executive director of the Florida Alliance for Vacation Rentals, which has 1,400 members.

“It also elaborates how fair regulations play into the STR market and the local community growth over the long term. STRs can be leveraged as a tool to encourage local real estate development and economic growth,” Hanks added.

The study authors caution it defines a good side of the coin.

A previous 2019 study by two of the authors (Cal State-Northridge economics professor Edward Kung and University of Southern California marketing professor Davide Proserpio) looked at a bad side. The 2019 study, discussed in the new Harvard Review article, found vacation rental homes can, in the short-term, drive up both rental and housing prices and reduce affordable housing in a community, by taking stock out of the traditional market to make it available only for vacationers.

That had led the researchers to ask themselves this question: Could the immediate harm of services like Airbnb to the local economy be offset or even outweighed by the long-term increase in demand they create?

For the new study, the researchers said they looked at 2.9 million residential permit applications, 750,000 Airbnb listings, and 4 million residential sales transactions in 15 major metropolitan cities across the country. They also took a closer look at cities across Los Angeles County.

Among the findings:

— On average, a 1% increase in Airbnb listings led to a 0.769% increase in permit applications. The authors said that suggests “Airbnb can play a major role in supporting local real estate markets and thus boosting local tax bases. Given these findings, it follows that restricting STRs can have a significant, negative impact on local economic activity.”

— In Los Angeles County, neighborhoods in cities that had no vacation rental home regulations saw 9% more housing permit growth than did adjacent cities that had significant vacation rental home regulations. There also was a lot more activity for permits for accessory dwelling units — so-called mother-in-law suites.

— The authors concluded the cities that have significant vacation rental home regulations experienced a relative decrease of the 15 cities studied, STR restrictions reduced property values by a total of $2.8 billion and cost $40 million per year in tax revenues compared to cities that did not have significant regulations.

Scott Powers

Scott Powers is an Orlando-based political journalist with 30+ years’ experience, mostly at newspapers such as the Orlando Sentinel and the Columbus Dispatch. He covers local, state and federal politics and space news across much of Central Florida. His career earned numerous journalism awards for stories ranging from the Space Shuttle Columbia disaster to presidential elections to misplaced nuclear waste. He and his wife Connie have three grown children. Besides them, he’s into mystery and suspense books and movies, rock, blues, basketball, baseball, writing unpublished novels, and being amused. Email him at [email protected].


Florida Politics is a statewide, new media platform covering campaigns, elections, government, policy, and lobbying in Florida. This platform and all of its content are owned by Extensive Enterprises Media.

Publisher: Peter Schorsch @PeterSchorschFL

Contributors & reporters: Phil Ammann, Drew Dixon, Roseanne Dunkelberger, A.G. Gancarski, Anne Geggis, Ryan Nicol, Jacob Ogles, Cole Pepper, Gray Rohrer, Jesse Scheckner, Christine Sexton, Drew Wilson, and Mike Wright.

Email: [email protected]
Twitter: @PeterSchorschFL
Phone: (727) 642-3162
Address: 204 37th Avenue North #182
St. Petersburg, Florida 33704