Understanding the Impact of Short-Term Rentals on Housing Supply: Trends, Data, and Solutions

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Introduction: The Short-Term Rental Revolution and Housing Supply

Over the past decade, the rise of short-term rentals (STRs) through platforms like Airbnb, VRBO, and HomeAway has transformed housing markets around the world. While these platforms offer flexibility and income opportunities for property owners, concerns have emerged about their impact on the supply and affordability of long-term housing for residents. This article provides a comprehensive, data-driven analysis of the effects of STRs on housing supply, details regional and market variations, and offers practical guidance for navigating this evolving landscape.

How Short-Term Rentals Alter Housing Supply: Mechanisms and Outcomes

STRs may reduce the supply of long-term rentals by converting residential units into tourist accommodations. Multiple studies indicate that cities with higher STR activity experience reduced rental availability and rising rents, leading to the displacement of residents and increased housing competition [1] . For example, research in Arizona reveals that as STRs proliferated, the supply of affordable long-term rentals shrank, making it harder for locals to find housing [1] . Similar trends have been identified in major U.S. cities, where STR expansion correlates with decreased long-term rental stock.

Vacant units listed as STRs are counted in census vacancy rates, but they are typically unavailable to permanent renters, effectively reducing the pool of accessible housing [2] . In some locales, individual investors have acquired multiple properties specifically for short-term rental, further constraining local housing options.

Case Studies: Regional Variations and Local Impacts

The effects of STRs on housing supply vary significantly depending on location, regulatory environment, and market characteristics. For instance:

• In Flagstaff, Arizona , the lack of local regulation (following a 2016 state law) allowed STRs to expand rapidly, resulting in the ‘hollowing out’ of communities and pushing working families to the margins [2] .
• In Los Angeles County , studies found that implementing STR regulations led to a 3.6% reduction in home values and rents, with the most pronounced effects in tourist hotspots [4] .
• Colorado mountain counties faced housing pressures due to factors beyond STRs, such as lagging infrastructure for workforce housing and slow home construction, highlighting the need for nuanced analysis [4] .

These examples underscore the importance of context: STRs have a more pronounced impact in tourist-heavy areas, while other factors often play a larger role in broader housing shortages.

Photo by Jakub Żerdzicki on Unsplash

Statistical Insights: Growth, Demand, and Market Shifts

Recent data shows that the demand for STRs in small cities and rural areas grew by an average of 25%, while the supply of available listing nights increased by 32%, suggesting that market growth outpaced demand [5] . In large U.S. cities such as Boston, New York City, and Washington, D.C., STR listings saw occupancy rate increases of up to 37.5% [5] . Despite these trends, the overall effect on housing shortages and prices remains modest in many markets, with local regulations and other factors playing pivotal roles [4] .

According to industry surveys, nearly 50% of hosts rely on STR income to cover expenses, which may encourage property owners to shift units from long-term to short-term rental markets [5] . However, in resort/destination areas, occupancy rates have declined, indicating that the STR market is sensitive to local economic and tourism trends.

Long-Term Consequences: Affordability, Vacancy, and Social Fabric

Research from the Wharton School demonstrates that increased STR activity can push up rents in the long-term market and reduce the vacancy rate for long-term rentals, while raising vacancy rates in the short-term market [3] . In the long run, housing supply may respond, but this depends on land availability, construction costs, and regulatory policies.

In some communities, the proliferation of STRs has led to the erosion of neighborhood cohesion and the displacement of residents, particularly in areas where investors acquire multiple properties solely for short-term rental purposes [2] . These changes can fray the social fabric and create challenges for local governments striving to balance economic growth with housing stability.

Factors Beyond STRs: What Drives Housing Supply Shortages?

While STRs attract attention as a driver of housing supply issues, data indicates that other factors, such as construction costs, real estate values, and lack of buildable land, are the primary forces behind affordability problems [4] . Seasonal, recreational, or occasional-use housing units-often second homes or vacation properties-are rarely available for long-term rent, regardless of STR regulations. Historical census data can help communities discern whether these properties were ever part of the long-term rental market.

Actionable Strategies: Navigating Short-Term Rental Challenges

For property owners, investors, and local officials seeking to respond to STR impacts on housing supply, several practical steps are available:

1. Review Local Regulations: Check with your city or county government about current STR laws. Many municipalities have adopted or updated regulations to address housing availability concerns. If regulations are unclear, contact your local housing authority or city planning department for guidance. Use search terms like “short-term rental ordinance” and “local housing regulations” for your area.
2. Engage in Community Planning: Attend public meetings and participate in local housing forums to advocate for balanced STR regulations that protect community interests while permitting responsible property use.
3. Evaluate Investment Opportunities: If considering STR investment, research occupancy rates, local supply and demand trends, and regulatory risks. Sites like the U.S. Census Bureau provide data on housing types and vacancy rates. Search for “U.S. Census Housing Data” to access these resources.
4. Support Affordable Housing Initiatives: Collaborate with local nonprofits, housing agencies, and government programs focused on expanding affordable housing. To find programs, search for “affordable housing initiatives” plus your city or state.
5. Monitor Market Trends: Stay updated on STR market performance using reputable industry publications and academic studies. Verified sources such as university research centers and official housing statistics are essential for accurate analysis.

Potential Challenges and Solutions

Implementing fair and effective STR regulations can be challenging due to evolving laws, property rights disputes, and varied economic interests. Communities may face resistance from property owners and investors who rely on STR income. Solutions include transparent stakeholder engagement, data-driven policy development, and ongoing evaluation of regulatory outcomes. Where links to official resources cannot be verified, always use official agency names and recommended search terms to locate reliable information.

Alternative Approaches and Additional Guidance

For communities seeking solutions beyond regulation, alternative approaches include incentivizing the construction of new housing, repurposing underused buildings, and supporting mixed-use developments. Property owners may explore hybrid rental models that offer both short- and long-term leasing options to balance income and community needs.

If you are a renter or homeowner affected by STR market changes, consider contacting your local housing authority or advocacy groups for support. Search for “local housing assistance” or “housing advocacy organizations” in your area for more information.

Key Takeaways

Short-term rentals have a measurable impact on housing supply, especially in tourism-driven markets and popular urban centers. However, their overall effect is context-dependent and often overshadowed by broader economic and regulatory factors. Careful, data-driven community planning and engagement are essential to ensuring housing availability and affordability for all residents.

References

• [1] Bunn, A. (2022). The Effects of Short-Term Rentals on Housing in Rural Utah.
• [2] Shelterforce (2024). How Short-Term Rentals Affect Communities with Loose Restrictions.
• [3] Barron, K. et al. (2019). The Effect of Home-Sharing on House Prices and Rents.
• [4] Rent Responsibly (2022). Affordable housing vs. STRs: What does the data say?
• [5] DoorLoop (2023). Short-Term Rentals Statistics: Will The Market Thrive?