Effects of Airbnb on the housing market: Evidence from London.

London Airbnb supply


The growth of Airbnb is likely to affect local housing rental market by reducing the supply of homes. I combine data from Airbnb and Zoopla and examine how the price of individual houses evolve over time, as Airbnb penetrates the market in the area of Greater London. Leveraging the fact that houses with more than three bedrooms are less exposed to Airbnb, I use a difference-in-differences strategy, by year and house type. Because Airbnb penetration can be correlated with differential shocks on the housing supply side, I instrument Airbnb supply by ward-level aggregated reviews of Airbnb customers (as a demand shock for Airbnb in the area). I find that a 10-percent increase in the number of Airbnb properties in a ward increases real rents by 0.1 percent. Increases in Airbnb rentals have a stronger impact on rents in areas that are more in demand.