The economic costs and

benefits of Airbnb
No reason for local policymakers to let Airbnb
bypass tax or regulatory obligations
Report • By Josh Bivens • January 30, 2019

Summary: Analysis shows that the costs of Airbnb expansion to renters and local
jurisdictions likely exceed the benefits to travelers and property owners. Thus there is no
reason policymakers should reverse long-standing regulatory decisions simply to
accommodate the rise of a single company.

• Washington, DC View this report at epi.org/157766

 SECTIONS
Updated March 26, 2019
1. Summary • 1

Summary
2. Overview of the
economics of Airbnb
•3
“The sharing economy” refers to a constellation of (mostly)
Silicon Valley–based companies that use the internet as 3. Potential benefits of
their primary interface with consumers as they sell or rent Airbnb introduction
services. Because this term is “vague and may be a and expansion in U.S.
marketing strategy” (AP 2019), we refer to these firms less cities • 6
poetically but more precisely as “internet-based service 4. Potential costs of
firms” (IBSFs). Airbnb introduction
and expansion • 13
Economic policy discussions about IBSFs have become
quite heated and are too often engaged at high levels of 5. Conclusion: Airbnb
abstraction. To their proponents, IBSFs are using should have to play by
technological advances to bring needed innovation to the same rules as
stagnant sectors of the economy, increasing the quality of other lodging
goods and services, and providing typical American providers • 19
families with more options for earning income; these
features are often cited as reasons why IBSFs should be About the author • 21
excused from the rules and regulations applying to their Endnotes • 23
more traditional competitors. To skeptics, IBSFs mostly References • 24
represent attempts by rich capital owners and venture
capitalists to profit by flouting regulations and disguising
their actions as innovation.

The debates about whether and how to regulate IBSFs

often involve theories about their economic costs and
benefits. This report aims to inform the debate by testing
those theories. Specifically, it assesses the potential
economic costs and benefits of the expansion of one of
the most well-known of the IBSFs: the rental business
Airbnb.

Airbnb, founded in 2008, makes money by charging

guests and hosts for short-term rental stays in private
homes or apartments booked through the Airbnb website.
It started in prototype in San Francisco and expanded
rapidly, and is now operating in hundreds of cities around
the world. Airbnb is frequently depicted as a boon for
travelers looking for lower-cost or nontraditional
accommodations, and for homeowners looking to expand
their income stream. But in many local markets, the arrival
and expansion of Airbnb is raising questions about its
potential negative impacts on local housing costs, quality

1
of life in residential neighborhoods, employment quality in the hospitality industry, and
local governments’ ability to enforce municipal codes and collect appropriate taxes.

In our cost-benefit analysis, we find:

The economic costs Airbnb imposes likely outweigh the benefits. While the
introduction and expansion of Airbnb into U.S. cities and cities around the world
carries large potential economic benefits and costs, the costs to renters and local
jurisdictions likely exceed the benefits to travelers and property owners.
Airbnb might, as claimed, suppress the growth of travel accommodation costs, but
these costs are not a first-order problem for American families. The largest and
best-documented potential benefit of Airbnb expansion is the increased supply of
travel accommodations, which could benefit travelers by making travel more
affordable. There is evidence that Airbnb increases the supply of short-term travel
accommodations and slightly lowers prices. But there is little evidence that the high
price of travel accommodations is a pressing economic problem in the United States:
The price of travel accommodations in the U.S. has not risen particularly fast in recent
years, nor are travel costs a significant share of American family budgets.
Rising housing costs are a key problem for American families, and evidence
suggests that the presence of Airbnb raises local housing costs. The largest and
best-documented potential cost of Airbnb expansion is the reduced supply of housing
as properties shift from serving local residents to serving Airbnb travelers, which hurts
local residents by raising housing costs. There is evidence this cost is real:
Because housing demand is relatively inelastic (people’s demand for somewhere
to live doesn’t decline when prices increase), even small changes in housing
supply (like those caused by converting long-term rental properties to Airbnb
units) can cause significant price increases. High-quality studies indicate that
Airbnb introduction and expansion in New York City, for example, may have
raised average rents by nearly $400 annually for city residents.
The rising cost of housing is a key problem for American families. Housing costs
have risen significantly faster than overall prices (and the price of short-term
travel accommodations) since 2000, and housing accounts for a significant share
(more than 15 percent) of overall household consumption expenditures.
The potential benefit of increased tourism supporting city economies is much
smaller than commonly advertised. There is little evidence that cities with an
increasing supply of short-term Airbnb rental accommodations are seeing a large
increase in travelers. Instead, accommodations supplied via Airbnb seem to be a
nearly pure substitution for other forms of accommodation. Two surveys indicate that
only 2 to 4 percent of those using Airbnb say that they would not have taken the trip
were Airbnb rentals unavailable.
Studies claiming that Airbnb is supporting a lot of economic activity often vastly
overstate the effect because they fail to account for the fact that much of this
spending would have been done anyway by travelers staying in hotels or other
alternative accommodations absent the Airbnb option.

2
 Property owners do benefit from Airbnb’s capacity to lower the transaction costs of
operating short-term rentals, but the beneficiaries are disproportionately white and
high-wealth households. Wealth from property ownership is skewed, with higher-
wealth and white households holding a disproportionate share of housing wealth
overall—and an even more disproportionate share of housing wealth from nonprimary
residences because they are much more likely to own nonprimary residential property
(such as multi-unit Airbnb rentals).
The shift from traditional hotels to Airbnb lodging leads to less-reliable tax
payments to cities. Several large American cities with a large Airbnb presence rely
heavily on lodging taxes. Airbnb has largely blocked the ability of these cities to
transparently collect lodging taxes on Airbnb rentals that are equivalent to lodging
taxes on hotel rooms. One study found that the voluntary agreements Airbnb has
struck with state and local governments “[undermine] tax fairness, transparency, and
the rule of law.”
City residents likely suffer when Airbnb circumvents zoning laws that ban lodging
businesses from residential neighborhoods. The status quo of zoning regulations in
cities reflects a broad presumption that short-term travelers likely impose greater
externalities on long-term residents than do other long-term residents. Externalities
are economic costs that are borne by people not directly engaged in a transaction. In
the case of neighbors on a street with short-term renters, externalities include noise
and stress on neighborhood infrastructure like trash pickup. These externalities are
why hotels are clustered away from residential areas. Many Airbnb rental units are in
violation of local zoning regulations, and there is the strong possibility that these units
are indeed imposing large costs on neighbors.
Because Airbnb is clearly a business competing with hotel lodging, it should be
subject to the same taxation regime as hotels. In regard to zoning regulations, there
is no empirical evidence that the net benefits of Airbnb introduction and expansion
are so large that policymakers should reverse long-standing regulatory decisions
simply to accommodate the rise of a single company.

Overview of the economics of Airbnb

Airbnb runs an online marketplace for short-term lodging rentals. It largely does not own
dwellings or real estate of its own; instead, it collects fees by acting as a broker between
those with dwellings to rent and those looking to book lodging.

The perception that Airbnb tries to foster is that its “hosts” are relatively typical
households looking to earn supplementary income by renting out rooms in their homes or
by renting out their entire residence when they’re away. Critics argue that Airbnb bookings
have become increasingly concentrated among a relatively small number of “hosts” that
are essentially miniature hotel companies.1

3
Potential economic benefits
At a broad level, the potential economic benefits and costs of Airbnb are relatively
straightforward.2

The key potential benefit is that property owners can diversify the potential streams of
revenue they generate from owning homes. Say, for example, that before Airbnb arrived in
a city, property owners setting up residential rental properties faced transaction costs so
high that it only made economic sense to secure relatively long-term leases. These
transaction costs incurred by property owners could include advertising for and screening
of tenants and finding alternative accommodations for themselves if they were renting
their own dwellings. But if the rise of internet-based service firms reduced these
transaction costs and made short-term rentals logistically feasible and affordable for the
first time, it could allow these property owners to diversify into short-term rentals as well as
long-term rentals.

Another potential benefit is the increased supply (and variety) of short-term rentals
available to travelers. This increased supply can restrain price growth for short-term
rentals and make traveling more affordable.

Finally, one well-advertised potential benefit of Airbnb is the extra economic activity that
might result if the rise of Airbnb spurs an increase in visitors to a city or town. Besides the
income generated by Airbnb property owners, income might be generated by these
visitors as they spend money at restaurants or in grocery stores or on other activities.

Potential costs
The single biggest potential cost imposed by Airbnb comes in the form of higher housing
costs for city residents if enough properties are converted from long-term housing to
short-term accommodations. If property owners take dwellings that were available for
long-term leases and convert them to short-term Airbnb listings, this increases the supply
of short-term rentals (hence driving down their price) but decreases the supply of long-
term housing, increasing housing costs for city residents. (We refer to all long-term costs of
shelter as “housing,” including rentals and owners’ equivalent rental costs.)

Another large potential city-specific cost of Airbnb expansion is the loss of tax revenue.
Many cities impose relatively steep taxes on short-term lodging, hoping to obtain revenue
from out-of-town travelers to spend on local residents. The most common and
straightforward of these revenue raisers is a tax on traditional hotel rooms. If Airbnb
expansion comes at the expense of traditional hotels, and if the apparatus for collecting
taxes from Airbnb or its hosts is less well-developed than the apparatus for collecting
taxes from traditional hotels, this could harm city revenues.

A further potential cost is the externalities that property rentals (of all kinds) impose on
neighbors, for example, noise and/or use of building facilities. Since hosts are often not
on-site with their renters, they do not bear the costs of these externalities and hence may
not factor them into rental decisions. Of course, one could argue that such externalities

4
are also incurred with long-term rentals not arranged through Airbnb. But if the expansion
of Airbnb increases total short- and long-term rental activity, or if short-term rentals impose
larger externalities than long-term rentals, then Airbnb expansion can increases these
externalities.

Finally, if Airbnb expansion comes at the expense of traditional hotels, it could have a
negative impact on employment. First, since some of the labor of maintaining Airbnb
lodgings is performed by the property owners themselves, the shift to Airbnb from
traditional hotels would actually reduce employment overall. Second, since the task of
cleaning and maintaining rooms and even greeting Airbnb renters is often done by third-
party management firms, the shift from the traditional hotel sector to Airbnb rentals could
degrade job quality.

The rest of this report evaluates the potential scope of each of these benefits and costs,
and ends with an overall assessment of the effect of Airbnb expansion.

5
Potential benefits of Airbnb
introduction and expansion in U.S.
cities
This section elaborates on the potential benefits identified in the previous section. For
each benefit, it assesses how likely the benefit is to emerge, provides empirical estimates
of the magnitude of the benefit, and discusses the likely distribution of the benefit.

Potential benefit one: Property owners can

diversify into short-term rentals
The most obvious benefit stemming from the creation and expansion of Airbnb accrues to
property owners who have units to rent. Owners of residential property have essentially
three options for earning a return on the property: They can live in the residence and
hence not have to pay rent elsewhere, they can rent it out to long-term residents, or they
can rent it out to short-term visitors.

If the only barrier to renting out residential property to short-term visitors were the
associated transaction costs, then in theory the creation and expansion of Airbnb could be
reducing these transaction costs and making short-term rental options more viable. It does
seem intuitive that transaction costs of screening and booking short-term renters would be
higher over the course of a year than such costs for renting to long-term residents (or the
costs of maintaining owner-occupied property). However, the potential benefits are only
the difference between what the property owner earned before the introduction of Airbnb
and what the property owners earned from short-term rentals booked through the Airbnb
platform.

These potential benefits are likely quite skewed to those with more wealth. While housing
is more widely held than most other assets, the total value of housing wealth is (like all
wealth) quite concentrated among white and high-income households. Further, because of
the myriad benefits of owning one’s own residence, it is likely that much of the benefit of
Airbnb’s introduction and expansion accrues to those with more than one property (one
for occupying and one or more for renting).3 The distribution of property wealth generated
by nonprimary residential real estate is even more concentrated than housing wealth
overall. Figure A shows, by wealth class, the distribution of housing wealth overall and of
housing wealth excluding owner-occupied housing.

This figure shows that the potential benefits of Airbnb introduction and expansion to
property owners are highly concentrated. To put it simply, any economic occurrence that
provides benefits proportional to owning property is one that will grant these benefits
disproportionately to the wealthy. In 2016, for example, 60.0 percent of primary housing
wealth (housing wealth in households’ primary residences) was held by the top 20 percent

6
Figure A Housing wealth—particularly wealth from owning a
nonprimary residence—is skewed
Share of total primary and nonprimary household housing wealth in the U.S.
economy held by each wealth class, 2016

100%
Primary
Nonprimary
75

50

25

0
Bottom Bottom Top 20 80th-90th 90th-95th 96th-99th Top 1
50 80 percent percent
percent percent

Note: Primary housing wealth is wealth from owner-occupied housing. Nonprimary housing wealth is
wealth from nonowner-occupied housing. The wealth classes depicted overlap, with the top 20 percent
broken down into households falling within the 80th to 90th, 90th to 95th, and 96th to 99th percentiles.
Source: Author’s analysis of microdata from the Federal Reserve Board Survey of Consumer Finances
(2016)

of households. (Not shown in the figure is that this share has increased by 5.4 percentage
points since 1989.) As we noted earlier, however, many Airbnb listings are actually owned
by households with multiple units to rent. Given this, Figure A also shows the share of
housing wealth from nonprimary residences held by various groups. This “nonprimary
housing wealth” is far more skewed. For example, the top 20 percent hold 90.1 percent of
this type of wealth.

Figure B shows the distribution of housing wealth by race and ethnicity. Across racial
groups, more than 80 percent of wealth in one’s primary residence was held by white
households. African American households held just 6.5 percent of wealth in primary
residences, Hispanic households held 6.0 percent of this type of wealth, while households
of other races and ethnicities held 6.9 percent. Not shown is the change in the share of
wealth in primary residences held by racial and ethnic groups: Primary housing wealth
held by nonwhite households has risen a bit (by roughly 6 percentage points) since 1989.
As with the distribution by wealth class, the holdings of nonprimary housing wealth by race
and ethnicity are again even more skewed, with white households holding more than 86
percent of this type of wealth. African American households hold just 5.0 percent of
nonprimary housing wealth, Hispanic households hold 3.6 percent, and households of
other races and ethnicities hold 5.2 percent.

7
Figure B White households disproportionately benefit from
housing wealth
Share of total primary and nonprimary household housing wealth held, by race
and ethnicity

100%
Primary
Nonprimary

75

50

25

0
White Black Hispanic Other

Note: Primary housing wealth is wealth from owner-occupied housing. Nonprimary housing wealth is
wealth from nonowner-occupied housing. Hispanic means “Hispanic any race” and the race/ethnicity
categories are mutually exclusive.
Source: Author’s analysis of microdata from the Federal Reserve Board Survey of Consumer Finances
(2016)

In short, what Figures A and B show is that because wealth from residential properties that
can produce rental income is concentrated among the wealthy and white households,
giving property owners the unfettered option to choose Airbnb over long-term rental uses
of their property means conferring an enhanced option to predominantly wealthy and
white owners of housing wealth. (Appendix Table 1 provides the same analyses shown in
Figures A and B for the years 1989, 1998, and 2007, and for the most recent data year,
2016, as well as the change from 1989 to 2016.)

Finally, while Airbnb might make short-term rentals feasible for property owners by
reducing transaction costs through the technological efficiencies provided by Airbnb’s
internet-based platform, the company might also just make short-term rentals feasible by
creating a norm of ignoring regulations that bar short-term rentals. Short-term rentals are
effectively banned in many residential neighborhoods in the cities where Airbnb operates,
yet they have proliferated after the introduction of Airbnb.4 The regulations barring or
limiting short-term rentals were established to reduce the externalities associated with
commercial operations of certain kinds—including hotel operations—in residential
neighborhoods. Airbnb’s business model appears to depend significantly on skirting these
regulations and dodging competition from traditional hotel owners who are prohibited
from operating in these same neighborhoods. If the regulations banning short-term rentals
are baseless and serve no useful purpose, then subverting them could be seen as a

8
benefit of Airbnb. But allowing large corporations such as Airbnb to simply ignore
regulations—rather than trying to change them through democratic processes—is hardly
the basis of sound public policy.

Potential benefit two: Increased options and

price competition for travelers’ accommodations
Airbnb is essentially a positive supply shock to short-term accommodations. Like all
positive supply shocks, it should be expected to lower prices. There is some accumulating
evidence that Airbnb does exactly this. Zervas, Proserpio, and Byers (2017) examine the
effect of Airbnb expansion across cities in Texas. They find that each 10 percent increase
in the size of the Airbnb market results in a 0.4 percent decrease in hotel room revenue.
They find that most of this revenue decline is driven by price declines. Evidence of the
positive supply shock is particularly evident in the 10 American cities where Airbnb’s
presence is largest. Dogru, Mody, and Suess (2019) find a negative correlation between
Airbnb expansion and hotels’ average daily rates in the 10 U.S. cities with the largest
Airbnb presence.

Besides cost, the introduction and expansion of Airbnb could improve the perceived
quality of accommodations available. There is some limited evidence that this is the case:
a survey by doctoral candidate Daniel Adams Guttentag (2016) finds that “convenient
location” is one of the top reasons given by Airbnb guests when asked why they chose
the service. But the Guttentag 2016 survey also identifies “low cost” as the single most-
identified reason people give when asked why they chose Airbnb.

However, it should be stressed that this potential benefit of Airbnb introduction and
expansion is overwhelmingly a redistribution of welfare, not an increase in economywide
welfare. Very few people have claimed that Airbnb’s spread within a given city has led
developers to build more accommodations in the city overall. Instead, owners or third
parties have often turned long-term rental units into short-term lodging via Airbnb.

The question then becomes, “Has this redistribution of potential accommodations from the
long-term to the short-term market increased economic welfare overall?” One way that
Airbnb could be increasing economic welfare overall is if it were helping travelers deal
with rising travel accommodation costs.

By looking at trends in prices and spending in the short-term lodging sector, we can get a
commonsense check on whether high prices for short-term travel accommodations are a
pressing economic problem for ordinary American households. If the price of short-term
travel accommodations were rising rapidly, then presumably an increase in supply that
restrained price increases would be valuable (or at least more valuable than if these prices
were not showing any particularly trend). The two lines in Figure C show changes in the
consumer price index for travel accommodations compared with changes in the overall
price index for personal consumption expenditures (PCE). According to Figure C, in the
2010s, the price of short-term travel accommodations has grown faster than prices overall
only since 2014—this is the same year that ushered in the large-scale expansion of Airbnb.

9
Figure C The price of short-term travel accommodations has
increased slightly faster than prices overall, but only
in recent years
Price indices for short-term travel accommodations and overall personal
consumption expenditures (PCE), 2000–2016

150
Short-term accommodations
Overall consumer goods prices
140

130

120

110

100

90
2000 2005 2010 2015

Source: Author’s analysis of Bureau of Economic Analysis National Income and Product Accounts (NIPA)
Table 2.4.4.

So it certainly seems that the launch and growth of Airbnb was not solving any preexisting
price pressure—because it was operating and expanding well before recent years’ price
growth. (Further, it is possible that by substituting more strongly for a less-expensive slice
of the traditional hotel market—leisure travel as opposed to business travel, for
example—that Airbnb introduction might actually be associated with raising measured
short-term travel accommodation prices, through a composition effect.)

Potential benefit three: Travelers’ spending

boosts the economic prospects of cities
The lower prices and greater range of options made available by the introduction and
expansion of Airbnb could, in theory, induce a large increase in travel and spark economic
growth in destination cities. This is precisely the claim made in a report by NERA Economic
Consulting (NERA 2017), which says that Airbnb “supported” 730,000 jobs and $61 billion
in output globally, with roughly a quarter of this economic gain occurring in the United
States.

To be blunt about these claims, they are flatly implausible. They rest on the assumption
that all money spent by those renting Airbnb units is money that would not have been
spent in some alternative accommodations had Airbnb not existed.

10
Say, for example, that guests at Airbnb properties spent $10 million in New York City in
2016, including the money spent at restaurants and theaters and other attractions while
visiting the city. The rental payment these guests make is included in the NERA numbers,
but is expressed as extra income for Airbnb hosts. NERA then takes this entire $10 million
in spending (both nonaccommodation spending by visitors and the extra income going to
Airbnb hosts) and runs it through input–output models to generate multiplier effects that
yield their final numbers for output and employment supported in each city.

There are a number of problems with the NERA study. First, it is surprisingly opaque. It
does not provide overall global and U.S. spending numbers or break these numbers into
their components: nonaccommodation spending by Airbnb guests and income generated
for Airbnb hosts. It also does not report the assumed size of the multiplier. Rather, it
provides final numbers for global and U.S. output and employment that are functions of
primary spending flows multiplied by the effects of their input–output model. The study
states that it uses the well-known IMPLAN model, but IMPLAN can generate multipliers of
varying size: It would be valuable to know just how large NERA is assuming the multiplier
effects of this Airbnb-related spending is, just as a plausibility check.

Second, the study seems clearly written to maximize the perceived support Airbnb might
provide local economies—both now and into the future. For example, toward the end of
the report NERA provides several tables showing projected support for output and
employment for years after the study (from 2017 to 2025). These projected future
contributions to output and employment dwarf the contribution that is apparent in the
actual data analyzed by NERA. But these projections rely on overoptimistic assumptions
about Airbnb’s future growth. For example, NERA forecasts growth of 75 percent for
Airbnb arrivals in 2017,5 but another study (Molla 2017) suggests that these arrivals in fact
grew by closer to 25–50 percent, with growth rates particularly slowing in the U.S. and the
European Union.6

What is by far the most important weakness of the NERA analysis is its reliance on the
assumption that all spending done by travelers staying at Airbnb properties is spending
that would not have been done had Airbnb not existed. The possibility that Airbnb visitors
would still have visited a city even if Airbnb units were unavailable—by securing alternative
accommodations—is completely ruled out by the NERA analysis. This is obviously an
incorrect assumption. For example, it assumes that Airbnb and traditional hotels are not
seen as potential substitutes for each other in the minds of travelers. But research has
shown that they are quite close substitutes. Zervas, Proserpio, and Byers (2017) empirically
assess the effect of Airbnb’s expansion on the hotel industry in the state of Texas. In their
introduction, they write, “Our hypothesis is that some stays with Airbnb serve as a
substitute for certain hotel stays, thereby impacting hotel revenue….” In their discussions
and conclusions section, they summarize what their empirical investigation has found:
“Focusing on the case of Airbnb, a pioneer in shared accommodations, we estimate that
its entry into the Texas market has had a quantifiable negative impact on local hotel room
revenue.” Put simply, this result is completely inconsistent with the assumption that Airbnb
has no potential substitutes for those using its services. This in turn means that at least
some of the economic activity “supported” in local economies by spending done by
Airbnb guests is activity that would have been supported absent Airbnb, likely by these

11
same guests staying in traditional hotels or other accommodations.

As discussed in a previous section, Guttentag (2016) reports the findings of a survey of

Airbnb users. Among other questions, the survey explicitly asks how substitutable
travelers find Airbnb lodgings. The precise question is, “Thinking about your most recent
Airbnb stay—If Airbnb and other similar person-to-person paid accommodations services
(e.g., VRBO) did not exist, what type of accommodation would you have most likely used?”
Only 2 percent of Airbnb users responded to this question with the assertion that they
would not have taken the trip. The remaining 98 percent identified other lodging
possibilities that they would have used. In a similar survey that included some business
travelers, Morgan Stanley Research 2017 reports near-identical findings, with between 2
and 4 percent of respondents saying that they would not have undertaken a trip but for
the presence of Airbnb.7 In both the Morgan Stanley Research survey and the Guttentag
survey, roughly three-fourths of the respondents indicated that Airbnb was substituting for
a traditional hotel.

If the Guttentag 2016 and Morgan Stanley Research 2017 findings are correct, this implies
that NERA overstates the support Airbnb provides to local economies by somewhere
between 96 and 98 percent. It is possible that some flows of spending might support more
local spending when associated with Airbnb instead of traditional hotels—for example, one
could argue that income accruing to Airbnb hosts is more likely to be spent locally than
money paid to large hotel chains. However, the reverse is also true—for example, Airbnb
rentals are far more likely to come equipped with a kitchen, and so Airbnb lodgers might
be more likely to eat in rather than patronize restaurants.

Additionally, the local spillover spending associated with Airbnb expansion might not be
uniform across neighborhoods. Alyakoob and Rahman (2018) document a modest increase
in local restaurant spending associated with expanding Airbnb presence. Essentially,
restaurants located away from central hotel cores in cities are unlikely to attract many out-
of-town tourists. But if Airbnb penetration in outlying neighborhoods increases, restaurants
there might now be able to tap some of this tourist market. Alyakoob and Rahman find that
every 2 percent rise in Airbnb activity in a given neighborhood increases restaurant
employment in that neighborhood by 3 percent. Crucially, Alyakoob and Rahman make no
such calculation for potential employment-depressing effects of restaurants closer to
traditional hotels. Further, they find that the boost to restaurant employment given by
greater Airbnb activity does not occur in areas with a relatively high share of African
American residents.

Finally, given that the overwhelming share of jobs “supported” by Airbnb are jobs that
would have been supported by guests in some alternative accommodation, it seems likely
that even if there is a slight increase in spending associated with a slight (about 2 percent)
increase in visitors to a city due to Airbnb, there may well be a decline in jobs. We have
noted previously that it is quite possible that traditional hotels are a more labor-intensive
source of accommodation than are Airbnb listings. If, for example, Airbnb operators
employ fewer people to provide cleaning and concierge and security services, then each
dollar spent on Airbnb accommodations is likely to support less employment than each
dollar spent on traditional hotel accommodations.

12
We can gauge the employment effect with a hypothetical scenario that assumes that the
Guttentag 2016 and Morgan Stanley Research 2017 analyses are correct and that only 2 to
4 percent of the spending supported by Airbnb represents net new spending to a locality.
In this case, if even half of the overall spending “supported” by Airbnb is a pure
expenditure shift away from traditional hotels, and if traditional hotels are even 5 to 10
percent more labor-intensive than Airbnb units, then introducing Airbnb would actually
have a negative effect on employment.8

Even if one grants that 2 to 4 percent of the output supported by Airbnb in host cities is
net new spending, this spending is just a redistribution away from other, presumably less-
Airbnb-intensive, localities. Given that Airbnb has tended to grow in already rich and
desirable cities, it is unclear why inducing the transfer of even more economic activity
away from other cities toward thriving cities would ever be viewed as a positive policy
outcome.

In short, the results of the NERA study should be ignored by policymakers seeking an
accurate sense of the scale of Airbnb expansion costs and benefits.9

Potential costs of Airbnb introduction

and expansion
This section elaborates on the potential costs highlighted in the overview section. It
assesses the likely outcome of these costs, estimates their empirical heft, and assesses
the likely distribution of these costs.

Potential cost one: Long-term renters face rising

housing costs
The mirror image of Airbnb’s positive supply shock to short-term travel accommodations is
its negative supply shock to long-term housing options. Again, none of the literature
reviewed in this paper suggests that the introduction and expansion of Airbnb has spurred
more residential construction overall, so as more units become available to Airbnb
customers, this means that fewer potential housing units are available to long-term renters
or owner-occupiers in a city.

Earlier, we saw that price increases in short-term travel accommodations have been in line
with overall consumer price increases in recent years, suggesting that there is no obvious
shortage in short-term accommodations. (It is important to note that the tracking of short-
term travel accommodation prices and overall prices was tight well before Airbnb was
exerting any serious effect one way or the other on prices.) However, national prices of
long-term housing are rising faster than overall prices, suggesting a shortage of long-term
housing. Because of this above-inflation growth in long-term housing costs, any trend that
exacerbates this increase is more damaging than if these prices had been relatively flat in
recent years. Figure D shows inflation in the price indices for housing (long-term rentals as

13
Figure D Housing costs are rising faster than costs of
short-term accommodations or overall consumer
goods
Price indices for housing, short-term travel accommodations, and overall
personal consumption expenditures (PCE), 2000–2016

160
Housing
Short-term accommodations
Overall consumer goods prices
140

120

100

80
2000 2005 2010 2015

Note: The housing price index includes both long-term rentals as well as imputed rents for
owner-occupied housing.
Source: Author’s analysis of Bureau of Economic Analysis National Income and Product Accounts (NIPA)
Table 2.4.4

well as imputed rents for owner-occupied housing) and for short-term travel
accommodations, and in the overall personal consumption expenditures index. In recent
years, long-term housing price growth has clearly outpaced both overall price growth and
increases in the price of short-term travel accommodations. This recent rise in the inflation
rate of long-term housing, in fact, has become a much-discussed policy challenge that has
spurred much commentary and analysis over the past decade.

The fact that the cost of long-term housing has become a prime source of economic stress
for typical Americans should be considered when weighing the costs and benefits of
Airbnb’s introduction and expansion. Crucially, demand for housing is quite inelastic,
meaning that households have little ability to forgo housing when it becomes more
expensive. When demand is inelastic, even relatively small changes in housing supply can
cause significant changes in the cost of housing.10 This intuition is clearly validated in a
number of careful empirical studies looking precisely at the effect of Airbnb introduction
and expansion on housing costs.

According to these studies, Airbnb—though relatively new—is already having a

measurable effect on long-term housing supply and prices in some of the major cities
where it operates. For example, Merante and Horn (2016) examine the impact of Airbnb on
rental prices in Boston. The authors construct a rich data set by combining data on weekly

14
rental listings from online sources and data from Airbnb listings scraped from web pages.
They find that each 12 Airbnb listings per census tract leads to an increase in asking rents
of 0.4 percent. It is important to note that this is a finding of causation, not just correlation.
They put this finding in perspective as follows:

If Airbnb’s growth rate in 2015, 24%, continues for the next three years, assuming
constant mean rents and total number of housing units, Boston’s mean asking rents
in January 2019 would be as much as $178 per month higher than in the absence of
Airbnb activity. We further find evidence that Airbnb is increasing asking rents
through its suppression of the supply of rental units offered for rent. Specifically, a
one standard deviation increase in Airbnb listings [an average of 12 units per
census tract] relative to total housing units is correlated with a 5.9% decrease in the
number of rental units offered for rent. (Merante and Horn 2016)

Barron, Kung, and Proserpio (2018) undertake a similar exercise with different data. They
create a data set that combines Airbnb listings, home prices and rents from the online real
estate firm Zillow, and time-varying ZIP code characteristics (like median household
income and population) from the American Community Survey (ACS). To account for the
fact that rents and Airbnb listings might move together even if there is no causal
relationship (for example, if both are driven by the rising popularity of a given city), they
construct an instrumental variable to identify the causal effect of rising Airbnb listings on
rents. Using this instrument, they find that a 10 percent increase in Airbnb listings in a ZIP
code leads to a 0.42 percent increase in ZIP code rental prices and a 0.76 percent
increase in house prices. They also find that the increase in rents is larger in ZIP codes
with a larger share of nonowner-occupied housing. Finally, like Merante and Horn, they
find evidence that Airbnb listings are correlated with a rise in landlords shifting away from
long-term and toward short-term rental operations.

Sheppard and Udell (2018) also undertake a similar exercise, looking within
neighborhoods of New York City. Their key finding is that a doubling of Airbnb activity
within a tight geographic zone surrounding a home sale is associated with a 6 to 11
percent increase in sales prices. Their coefficient values are quite close to those from
Barron, Kung, and Proserpio (2018).11

Wachsmuth et al. (2018) apply the regression results identified by Barron, Kung, and
Proserpio (2018) to the large increase in Airbnb rentals in New York City. They find a 1.4
percent increase in NYC rents from 2015 to 2017 due to Airbnb’s expansion in that city. For
the median NYC renter, this implies a $384 annual increase in rent from 2015 to 2017 due
to Airbnb’s expansion over that time.

Potential cost two: Local government tax

collections fall
For the localities making policy decisions regarding the expansion of Airbnb, perhaps the
single biggest consideration is fiscal. Across the United States, total lodging taxes are
significant: For the 150 largest cities, the all-in lodging tax rate (including state, county, and

15
city taxes) averaged more than 13 percent (Hazinski, Davis, and Kremer 2018). The
temptation for any given locality to set relatively high lodging tax rates (particularly when
compared with overall sales tax rates) seems clear—city residents pay little of the lodging
tax but still enjoy the benefits funded by the tax. For a number of cities, the total revenue
collected is substantial. In 2016, for example, New York City and Las Vegas each collected
well over $500 million in lodging taxes, and San Francisco collected just under $400
million.

It seems odd to exclude Airbnb stays from the lodging tax, yet the tax treatment of Airbnb
rentals is inconsistent and incomplete. The company has entered into a number of tax
agreements with state and local governments and is clearly trying to build the impression
that it wants to help these governments collect taxes. Yet a number of tax experts argue
that Airbnb’s efforts to collect and remit lodging taxes (as well as other taxes) have been
wholly insufficient.

A description in Schiller and Davis 2017 of the state of Airbnb’s tax agreements as of early
2017 highlights the patchy, voluntary nature of the tax regime that Airbnb faces:

Airbnb, whose operations in some instances may violate traditional local zoning and
rental ordinances, has sought to legitimize its business by negotiating agreements
with cities under which it will collect local sales and lodging taxes. “Working
together, platforms like Airbnb can help governments collect millions of dollars in
hotel and tourist tax revenue at little cost to them,” the company stated in a “policy
tool chest” it offered in late 2016.

Overall, by Airbnb’s count, the company is collecting sales, hotel, or other taxes in
26 states and the District of Columbia (DC) as of March 1, 2017. State-level taxes are
collected in 18 of those states. Among this group, some or all local-level taxes are
also being collected in every state except Connecticut, which lacks local lodging
taxes. In the remaining eight states, Airbnb collects a patchwork of local taxes but
no state taxes. In three states—Alaska, Maryland, and New Jersey—Airbnb’s tax
collection is limited to a single locality (Anchorage, Montgomery County, and Jersey
City, respectively). The company has dramatically expanded its tax collection
practices in recent years and appears poised to continue its expansion in the
months and years ahead. Airbnb recently announced that it will soon begin
collecting state lodging taxes in Maine, for instance.

Dan Bucks, a former director of the Montana Department of Revenue and former executive
director of the Multistate Tax Commission, wrote a report assessing the tax agreements
that Airbnb has struck with state and local governments in different parts of the country.
His central finding is that these agreements “[undermine] tax fairness, transparency, and
the rule of law” (Bucks 2017).

Bucks examines 12 of the Airbnb tax agreements from across the country that had been
made public by mid-2017. He describes them as follows:

Airbnb devises and presents to tax agencies what are typically ten to twelve-page
documents covering back-tax forgiveness, prospective payments, information

16
 access and multiple other terms that produce, as this report documents, serious
negative consequences for society. Airbnb labels these documents as “voluntary
collection agreements,” which they most assuredly are not. These Airbnb-drafted
documents do not guarantee the proper collection of taxes due. They block tax
agencies from verifying the accuracy of Airbnb payments. Airbnb may be seeking
to superficially to liken these documents to the high quality “voluntary disclosure
agreements” that states use to bring non-compliant taxpayers into full conformity
with the law. However, these documents profoundly undermine sound tax
administration and the rule of law. For these and other reasons detailed below, we
will not use Airbnb’s misleading label for these documents but will refer to them
objectively as “Airbnb agreements.” (Bucks 2017)

The most specific criticism Bucks makes is that these agreements have largely been kept
secret from the public, in clear contrast to other “voluntary disclosure agreements.” This
secrecy, combined with agreements to “cede substantial control of the payment and audit
processes to Airbnb,” make it impossible for tax authorities to ensure proper payment of
lodging taxes. Bucks also argues that these agreements between Airbnb and state and
local governments provide large benefits to third parties (Airbnb hosts) who are not
signatories and are not obligated to provide anything in exchange for these benefits.

In 2016, an analysis from AlltheRooms.com forecast that Airbnb’s failure to ensure the full
payment of lodging taxes was on track to cost subnational governments a combined $440
million in revenue unless policymakers moved to guarantee proper payment. Of the total,
$110 million in lost revenue was for New York City alone. In October 2016, shortly after the
AlltheRooms.com analysis was released, New York City passed restrictions on Airbnb
advertisements for rentals of less than 30 days when an owner is not present. While these
restrictions may have stemmed the loss of revenue relative to the AlltheRooms.com
projection, the analysis that predated the restrictions highlight how the unregulated
expansion of Airbnb, and its cannibalization of traditional hotel business market share,
could still have large fiscal implications for New York and other cities.

Finally, even if Airbnb were to fully comply with the local jurisdiction’s tax system on
lodgings and pay the same tax rate per dollar earned as traditional hotels, there likely
would still be some small fiscal losses stemming from Airbnb’s expansion. The primary
appeal of Airbnb to most travelers is lower-price accommodations, so even if the same tax
rate were paid on Airbnb rentals as is paid on hotel rooms, the lower Airbnb prices would
lead to less tax revenue accruing to local governments.

Potential cost three: Externalities inflicted on

neighbors
When owners do not reside in their residential property, this can lead to externalities
imposed on the property’s neighbors. If absentee owners, for example, do not face the
cost of noise or stress on the neighborhood’s infrastructure (capacity for garbage pickup,
for example), then they will have less incentive to make sure that their renters are
respectful of neighbors or to prevent an excessive number of people from occupying their

17
property.

These externalities could be worse when the renters in question are short term. Long-term
renters really do have some incentive to care about the neighborhood’s long-run comity
and infrastructure, whereas short-term renters may have little to no such incentive. Further,
some Airbnb hosts are renters themselves who are subletting a long-term rental property
to short-term travelers, which may further shield the ultimate property owners from bearing
the costs faced by immediate neighbors. In cities where the spread of Airbnb has become
a political issue, hundreds (if not thousands) of complaints have been made in this
regard.12

The potential for such externalities has been broadly recognized for a long time and was a
consideration leading to the prevalence of zoning laws that ban short-term travel
accommodations in residential neighborhoods. There is a reason, for example, why Times
Square in New York City is a cluster of hotels while the Upper East Side is largely a less
noisy cluster of residential dwellings. There is of course no reason why such past zoning
decisions need to be completely sacrosanct and never changed, but these decisions were
made for a reason, and changes to them should be subject to democratic debate.

While researchers have often noted the possibility that Airbnb may impose externalities on
the communities surrounding Airbnb units, we know of no empirical estimates of these
externalities. If these externalities were powerful enough in degrading the desirability of
neighborhoods, they could in theory lead to reduced rents and home prices. From the
evidence of the previous section, we know that Airbnb adoption in neighborhoods has
actually boosted rental and home prices. But this price boost doesn’t mean these
externalities don’t exist—it simply means that price-depressing externalities are offset by
the supply effect of moving properties out of the long-term rental market.

Miller (2016) makes an interesting (if likely too abstract) policy proposal for dealing with the
externalities associated with home rental via Airbnb. He proposes creating a market in
“transferable sharing rights,” in which, for example, each resident of a neighborhood
would be given the right to rent out one housing unit for one night. Most residents in a
neighborhood won’t want to rent out their home. But those who do want to rent out units
using Airbnb would want far more than the right to rent out these properties for just one
night. To obtain the right to rent out their properties for more nights, they would need to
purchase permits from their neighbors. The price it takes to obtain these permits would
provide a good indicator of the true costs of the externalities imposed by Airbnb. A city
that experimented with these tradeable sharing rights could provide very useful
information.

Potential cost four: Job quantity and quality

could suffer
We have noted already that when Airbnb enters and expands in a city, it shifts traveler
business from hotels to Airbnb, leading to downward price pressure for hotels. This shift
from traditional hotels to Airbnb properties also implies either a shift in jobs or a reduction

18
in jobs. As an example, take hotel cleaning workers. As more visitors to a city pick Airbnb
units over traditional hotel accommodations, the need for cleaning doesn’t go away.
Instead, it is either foisted on Airbnb proprietors, done by third-party cleaning services, or
left unmet and thus implicitly imposing costs on both travelers and the surrounding
neighborhood (think of improperly disposed-of trash).

Given that much of the growth of Airbnb in recent years has been driven by hosts with
multiple properties (which, when in a single location, are in effect mini hotels), it is not
surprising to see an emergence of cleaning services specifically serving Airbnb hosts.13
These new cleaning services may be less likely to offer decent wages relative to
traditional travel lodging; it may also be more difficult for workers to unionize in this
context. For example, in the 10 U.S. cities with a particularly large Airbnb presence
(including New York City, Los Angeles, and Chicago), combined unionization rates for
maids and cleaners in the hotel industry are nearly double the unionization rates of maids
and cleaners in other industries in the economy.14

In some sense, the shift in cleaning jobs from traditional hotels to cleaning services for
Airbnb hosts is likely analogous in its economic effects to what happens when traditional
hotels outsource their own cleaning staffs. Dube and Kaplan (2010) demonstrate large
negative wage effects stemming from this type of domestic outsourcing for janitors and
security guards. Their findings are reinforced by recent analysis of the German labor
market by Goldschmidt and Schmieder (2017), who find similar large negative effects of
domestic outsourcing on a range of occupations, including cleaners. While these studies
do not directly examine the effect of substituting in-house hotel cleaning jobs for Airbnb
cleaning jobs, they both track the effect of “fissuring” between the entity that uses and
pays for the service and the entity that manages the service providers. This fissuring has
been a key and troubling feature of the American labor market in recent decades, and it is
hard to see how the substitution of Airbnb for traditional hotels does not potentially
constitute another layer of this fissuring.15

This potential for Airbnb to degrade the quality of cleaning jobs is recognized even by the
company itself: Airbnb offers hosts the opportunity to advertise that they have taken the
“living wage pledge” by committing to pay a living wage to the cleaners and servicers of
their properties. It is not clear how commitment to this pledge is (or can be) enforced,
however.

Conclusion: Airbnb should have to play

by the same rules as other lodging
providers
The current policy debates sparked by the rise of Airbnb have largely concerned tax
collections and the emergence of “mini hotels” in residential neighborhoods. At its
inception, Airbnb advertised itself as a way for homeowners (or long-term renters) to rent
out a room in their primary residence, or as a way for people to rent out their dwellings for

19
Figure E Housing costs matter much more to household
budgets than short-term lodging costs
Shares of average household personal consumption expenditures devoted to
housing vs. short-term travel accommodations, 1979, 2000, and 2016

20%
Short-term accommodations
Housing
15.8%
14.9%
15 13.7%

10

0.6% 0.8% 1.0%

0
1979 2000 2016

Note: The housing price index includes both long-term rentals as well as imputed rents for
owner-occupied housing.
Source: Author’s analysis of Bureau of Economic Analysis National Income and Product Accounts (NIPA)
Table 2.5.5

short periods while they themselves are traveling. However, in recent years Airbnb listings
and revenues have become dominated by “multi-unit” renters—absentee property owners
with multiple dwellings who are essentially running small-scale lodging companies on an
ongoing basis.

This evolution of Airbnb into a parallel hotel industry raises questions about the
preferential treatment afforded to this rental company. These questions include, “Why isn’t
Airbnb required to ensure that lodging taxes are collected, as traditional hotels are?” And,
“Why is Airbnb allowed to offer short-term rentals in residential neighborhoods that are not
zoned for these uses, while traditional hotels are not allowed in these same
neighborhoods?”

While there are plenty of other considerations, the spread of Airbnb seems at its core to
be a shift of potential housing supply from the long-term residential housing market to the
market for short-term accommodations. This shift of supply can lower prices for travelers
but raise housing prices for long-term residents. This seems like a bad trade-off, simply
based on the share of long-term housing expenses versus short-term travel expenses in
average family budgets. Figure E presents the share of total personal consumption
expenditures accounted for by housing and by short-term travel accommodations. As the
figure shows, housing costs eat up far more of the average household’s budget, and rising
housing prices mean that long-term housing has grown more as a share of family budgets

20
than short-term travel accommodations.

This rising cost of housing has become a major economic stress for many American
households. Anything that threatens to exacerbate this stress should face close scrutiny. A
reasonable reading of the available evidence suggests that the costs imposed on renters’
budgets by Airbnb expansion substantially exceed the benefits to travelers. It is far from
clear that any other benefits stemming from the expansion of Airbnb could swamp the
costs it imposes on renters’ budgets.

There may be plenty wrong with the status quo in cities’ zoning decisions. But the proper
way to improve local zoning laws is not to simply let well-funded corporations ignore the
status quo and do what they want. As this report shows, there is little evidence that the net
benefit of accelerated Airbnb expansion is large enough to justify overturning previous
considerations that led to the regulatory status quo—in fact, the costs of further Airbnb
expansion seem likely to be at least as large, if not larger, than the benefits.

About the author

Josh Bivens joined the Economic Policy Institute in 2002 and is currently EPI’s director of
research. His primary areas of research include macroeconomics, social insurance, and
globalization. He has authored or co-authored three books (including The State of Working
America, 12th Edition) while working at EPI, has edited another, and has written numerous
research papers, including for academic journals. He appears often in media outlets to
offer economic commentary and has testified several times before the U.S. Congress. He
earned his Ph.D. from The New School for Social Research.

21
Appendix Distribution of housing wealth (primary and nonprimary), by
Table 1
household characteristics
1989 1998 2007 2016 1989–2016 change

Primary residence

Bottom 50 percent 9.8% 14.3% 12.7% 10.4% 0.7%

Bottom 80 percent 45.4% 47.5% 44.0% 40.0% -5.4%

Top 20 percent 54.6% 52.5% 56.0% 60.0% 5.4%

80th–90th percentile 19.9% 17.9% 17.5% 18.6% -1.3%

90th–95th percentile 12.6% 11.6% 11.0% 13.9% 1.3%

96th–99th percentile 15.6% 15.0% 18.2% 16.8% 1.2%

Top 1 percent 6.5% 8.0% 9.3% 10.7% 4.3%

Nonprimary residential property

Bottom 50 percent 2.6% 4.3% 2.2% 1.6% -1.0%

Bottom 80 percent 16.8% 18.1% 13.9% 9.9% -6.9%

Top 20 percent 83.2% 81.9% 86.1% 90.1% 6.9%

80th–90th percentile 15.2% 16.8% 10.7% 12.6% -2.7%

90th–95th percentile 20.6% 15.5% 13.9% 14.9% -5.7%

96th–99th percentile 28.7% 28.7% 34.0% 29.6% 0.9%

Top 1 percent 18.6% 21.0% 27.5% 32.9% 14.3%

Primary residence
White, non-Hispanic 86.4% 87.5% 82.6% 80.6% -5.9%

Black, non-Hispanic 4.9% 5.0% 6.2% 6.5% 1.6%

Hispanic, any race 4.1% 3.7% 6.1% 6.0% 2.0%

Other 4.6% 3.7% 5.1% 6.9% 2.3%

Nonprimary residential property

White, non-Hispanic 87.3% 89.5% 84.2% 86.2% -1.1%

Black, non-Hispanic 4.3% 4.1% 4.1% 5.0% 0.7%

Hispanic, any race 3.1% 3.4% 6.7% 3.6% 0.5%

Other 5.3% 3.0% 5.0% 5.2% -0.1%

Note: Per the Survey of Consumer Finances definitions, primary housing wealth is the total value of the
primary residence of a household. Nonprimary housing wealth includes the value of all of other residential
real estate owned by the household, including one-to-four family structures, timeshares, and vacation
homes.
Source: Author’s analysis of microdata from the Federal Reserve Board Survey of Consumer Finances
(2016)

22
Endnotes
1. According to a recent report, “a significant—and rapidly growing—portion of Airbnb’s revenue in
major U.S. cities is driven by commercial operators who rent out more than one residential
property to short-term visitors” (CBRE 2017).

2. Horton and Zeckhauser (2016) provide a deep dive into the economics of internet-based service
firms. Slee (2017) provides an excellent popularization of some of the economic issues
surrounding IBSFs from a deeply critical perspective.

3. The most obvious benefit to living in housing that one owns is the tax treatment of mortgage
interest payments on owner-occupied property, which can be deducted from federal taxes.
Another benefit is that the implicit rental income earned by owner-occupiers is not taxed (the
money that owner-occupiers are saving by not having to pay rent elsewhere could be viewed as
implicit rental income).

4. Wachsmuth et al. (2018), for example, find that just under half of Airbnb listings in New York City
had likely taken illegal reservations.

5. “Arrivals” is a term referring to each stay in a unit, regardless of length of stay.

6. For example, Molla (2017) highlights more recent forecasts for 2017 indicating a large slowdown in
U.S. Airbnb expansion.

7. The range of 2 to 4 percent represents the range of findings across 2015, 2016, and 2017. The
value was 4 percent in 2015, 2 percent in 2016, and 3 percent in 2017.

8. The arithmetic on this is relatively straightforward. The NERA 2017 study asserts that Airbnb
supports $14 billion in spending and 130,000 jobs in the United States. This implies each $107,690
supports a job. Say that half of this spending is the direct cost of accommodations and that it
represents a pure expenditure shift away from traditional hotels. Assume further that traditional
hotels are 5 percent more labor-intensive—so each traditional hotel job is supported by $102,300
in spending (5 percent less than the ratio identified by Airbnb). This shift from traditional hotels to
Airbnb hence reduces employment by 3,400 jobs for each $7 billion in spending. Even if overall
spending were to rise by 2 percent due to Airbnb’s expansion, this would increase employment by
only roughly 2,600 jobs. The key insight here is that once one allows Airbnb to substitute for other
forms of accommodation, the link between output and employment might change significantly.

9. Airbnb itself has commissioned and reported on a number of studies claiming that the share of
guests who would not have taken the trip absent Airbnb is as high as 30 percent. Even this
number is far larger than the independent assessments of Guttentag (2016) and Morgan Stanley
Research (2017), but it does highlight just how outlandish the NERA assumption on this is.

10. In a review of housing markets, Albouy, Ehrlich, and Liu (2016) note that “Housing demand is
income and price inelastic.”

11. The geographic unit implicitly being examined by Sheppard and Udell (2018) is not intuitive. Their
observation is an individual home sale. They then track Airbnb listings within five different radii of
the sale: 150, 300, 500, 1,000, and 2,000 meters. They interact the number of Airbnb listings with
categorical variables for each of the five “buffer zones” defined by the radii and use this as an
explanatory variable predicting sales prices.

23
12. See Office of New York State Attorney General 2014.

13. Lawler (2014) notes that Airbnb was testing out dedicated cleaning services for its hosts as early
as 2014.

14. Unionization rates derive from the author’s analysis of data pooled from 2008–2017 from the
Outgoing Rotation Groups (ORG) of the Current Population Survey (CPS). Code and results are
available upon request. The 10 cities are Boston, Chicago, Los Angeles, Las Vegas, Miami, New
York City, San Diego, San Francisco, Seattle, and Washington, D.C. In these 10 cities, the
unionization rate for maids and cleaners was 23.2 percent in the traveler accommodation industry,
but 12.1 percent in all other industries.

15. See Weil 2017 for an overview of labor market fissuring.

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Errata
This report was updated March 26, 2019, to correct errors in the “Bottom 50
percent” rows in Appendix Table 1. These rows had incorrectly shown the
numbers for the top 50 percent instead of for the bottom 50 percent.

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