Several European cities have introduced “caps” to regulate short-term rentals in response to the rise of home-sharing platforms like Airbnb. But are these measures doing more harm than good? A new study of short-term rental regulations in Berlin, Hamburg and Munich suggests Sonja Gensler, Nadine Riedel and Andrea Schneider Explore how daily time limits impact residents, hosts, guests, and platform providers.
As urban areas face housing shortages and community disruption, regulators have turned to measures such as “day caps,” which limit the number of days a property can be rented out on platforms like Airbnb. In a new study, we examine three major German cities that have implemented day caps to mitigate the negative impacts of short-term rentals. Our analysis yields four key findings.
Targeted and non-targeted hosts have left Airbnb.
The first finding was a significant decrease in Airbnb listings and bookings. This affected both targeted hosts (hosts who frequently rent out their properties) and non-targeted hosts who did not rent out their properties frequently before the regulation. Bookings for occasional hosts decreased by between 26.27% and 51.89%, depending on the city we focused on. Targeted hosts experienced a similar decrease.
The impact of short-term rental regulations on target hosts is fairly straightforward, but the decrease in the number of booking nights and the number of active properties for non-target hosts is more surprising. The occasional negative response from hosts is partly due to a decrease in expectations about future short-term rental revenue potential. In addition, the registration costs and non-monetary burdens of regulations may have occasionally prompted hosts to exit the market.
Little impact on the long-term rental market
Second, contrary to expectations, the regulation had little effect on availability and prices in the long-term rental market, suggesting that the expected benefits of this policy may have been overestimated.
Even if, unrealistically, all the exits from the short-term rental market, including the occasional non-targeted Airbnb property, increased the number of properties used for long-term housing purposes one-to-one, the total increase would still be small relative to the city’s housing demand. The effects of the studied short-term rental regulations and long-term rental prices are minimal.
Lack of enforcement power
Third, we found that while some targeted hosts left the market in response to the regulations, the average number of nights booked by the remaining hosts did not change significantly after the day limit was implemented. This observation suggests that targeted hosts who remained in the market were not complying with the short-term rental regulations and were renting their properties for more days than allowed. In fact, a significant number of hosts were not compliant, highlighting the difficulty of enforcement and the effectiveness of these rules.
Figure 1: Annual distribution of booking days per accommodation in Munich (2017, 2018, 2019)
Note: See the authors’ attached paper for further details. Journal of the Academy of Marketing Science.
For example, the distribution of booking days in Munich is remarkably similar in 2017, 2018, and 2019, before short-term rentals were capped at 56 days per year (see Figure 1). While the number of active Airbnb listings in Munich declined in 2019, listings with booking days of less than 56 days were largely eliminated from the market. As a result, the share of noncompliant listings increased to 46.6%.
Negative net welfare effect
Finally, these regulations have had mixed effects on different groups, with minimal benefits for local residents and significant disadvantages for hosts, guests, and platform providers.
Our findings paint a complex picture of the short-term rental landscape. On the one hand, residents report little or no improvement in their long-term housing situation, which challenges the primary goal of the regulation to protect resident well-being and housing availability.
On the other hand, guests face slightly higher prices and fewer choices, which reduces the appeal of platforms like Airbnb. Hosts are hit hard by the loss of income (9.02% to 46.30% depending on the city in question). Since short-term rental platforms participate in hosts’ earnings through a commission system, the decrease in host revenue due to regulation directly translates into a decrease in platform revenue, challenging the business model of home sharing platforms.
Current regulatory approaches to short-term rentals require significant reevaluation, as the overall welfare impact of day caps is likely to be negative. Simple day caps do not adequately balance community needs, housing availability, and economic opportunity. As cities continue to navigate the challenges of the sharing economy, the well-being of multiple stakeholders—residents, hosts, guests, and platform providers—must be considered to ensure sustainable urban development and the future of the sharing economy.
For further details, please see the authors’ attached paper. Journal of the Academy of Marketing Science (co-authored with Patrick Gauß and Michael Kortenhaus).
Note: This article presents the views of the author and does not necessarily reflect the position of EUROPP (European Politics and Policy) or the London School of Economics. Source of featured image: pixelbliss / Shutterstock.com
