Are Short-Term Rentals Still Driving Up Housing Costs?

Real Estate
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Once seen as a side hustle or vacation perk, short-term rentals have reshaped entire housing markets. In tourist-heavy cities and quiet towns alike, homes have been pulled off the long-term market and flipped into nightly stays. For years, the result was clear: tighter supply and higher prices for everyone else. But now, with shifting travel habits, stricter local rules, and cooling markets, a new question is emerging—has the short-term rental impact peaked, or is it still quietly reshaping where and how Americans can afford to live?

The Connection Between Short-Term Rentals and Housing Costs

Short-Term Rentals and Housing Costs
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When a property owner decides to rent a home to vacationers instead of local residents, that home is effectively taken off the long-term housing market. With fewer homes available for people who live and work in the area, the basic law of supply and demand kicks in: reduced housing supply can lead to higher prices for the remaining homes. This phenomenon has been dubbed the “Airbnb effect” by some, referring to the largest short-term rental platform.

How It Works

In markets with high demand for housing, any removal of supply puts upward pressure on prices. For example, a New York City analysis found that for each 1% of housing units in a neighborhood converted to Airbnb, neighborhood rents went up by about 1.6%. Citywide, roughly 9% of rent increases from 2009 to 2016 were attributed to the growth of Airbnbs.

Urban vs. Rural Impact

In urban neighborhoods, especially those popular with tourists, the impact can be very visible. Local tenants may find more homes on Airbnb than for rent. In small towns and vacation destinations, the effect can be even stronger. These places often have limited housing to begin with, so a surge of short-term rentals can “hollow out” the market for locals. The Airbnb effect is most potent in small communities – like mountain or beach towns – which have high home prices and limited ability to build more housing.

A Double-Edged Sword

Short-term rentals also bring benefits. They can boost local economies by attracting tourists who spend at restaurants, shops, and attractions. Homeowners earn income, and some say that without Airbnb they might struggle to pay their mortgage. These pros are often weighed against the cons of rising housing costs and community change.

What the Data Shows: Do Short-Term Rentals Raise Prices?

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Research reveals a mixed picture. Multiple studies indicate that short-term rentals do contribute to higher housing costs – but usually as one factor among many. They’re not the sole driver of price increases, but they can make a hot housing market even hotter.

A nationwide study by Oxford Economics (2019) found that the growth of short-term rentals accounted for only about 1% of U.S. home price appreciation from 2015 to 2018. In that period, home prices nationally surged due to many factors (low interest rates, rising incomes, construction lagging demand), and short-term rentals were a very small piece of the puzzle.

Another U.S.-wide analysis (Barron, Kung & Proserpio, 2021) estimated that the spread of Airbnb had caused about $1,800 in added value to the median house price and roughly $9 extra on a typical monthly rent. This translated to Airbnb accounting for approximately one-seventh of home price growth and one-fifth of rent growth in the average area studied.

A 2023 study by Oxford Economics in partnership with a vacation rental association found short-term rentals contributed just 0.4% of the total 32.7% rise in U.S. housing prices during the study period. This suggests that, at the macro level, short-term rentals have a modest impact on prices compared to big drivers like housing shortages, population growth, and economic conditions.

The Local Impact Can Be Significant

Local studies show the impact can be significant in tourism-heavy areas. In Boston, a study found that Airbnb’s expansion explained about 0.4% of a 5% annual rent increase – meaning it caused about 8% of the city’s rent inflation that year. In New Orleans, when the city banned many short-term rentals in certain neighborhoods, house prices fell by 30% in those areas (near the French Quarter).

The takeaway: Short-term rentals do push housing costs higher, especially in neighborhoods or towns that attract lots of visitors. Yet in most places they are not the primary cause of expensive housing. Structural issues – like too little construction, zoning limits on new homes, population growth, and rising incomes – play a much larger role in the long run.

Current Housing Trends: Prices Keep Climbing Amid Short Supply

To understand the context, let’s look at where housing prices and supply stand today. In recent years the U.S. housing market has been defined by high demand and limited supply.

Home Prices

Home Prices
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Despite higher mortgage rates cooling some buyer demand, home prices remain near record highs. Nationally, the median home price rose about 5.4% in 2024 compared to the year prior. This was the smallest annual increase in nearly a decade (showing some cooling), but it still meant prices went up. The reason? Inventory (homes for sale) is scarce. Many homeowners held off selling because they didn’t want to lose their low mortgage rates, so buyers competed for fewer listings.

Rents

The cost of renting also remains high. After a steep run-up in 2021 and 2022, rent growth slowed in 2023, but rents didn’t drop in most places. Single-family home rents were about 4.4% higher in late 2023 than a year earlier in the U.S., according to Zillow data. Vacancy rates stayed low (around 6% nationwide), meaning renters still face a market where there aren’t many open units.

Housing Availability and Vacation Homes

A striking statistic from the U.S. Census Bureau highlights the shortage of homes for locals in many communities: as of 2020, over 4.3 million homes nationwide were classified as “vacant seasonal” units, meaning they’re used only for part of the year. In 645 counties across America, more than half of all vacant homes are seasonal units – essentially second homes or short-term rentals, not available for locals to buy or rent full-time.

Urban Areas: Airbnb in the City

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Cities have been grappling with short-term rentals for years. In popular tourist cities like New York, Los Angeles, San Francisco, Boston, and New Orleans, officials and residents have expressed concerns that Airbnb-style rentals are eating into the housing supply and driving up prices in certain neighborhoods.

The New York City Example

One vivid example is New York City, which historically had tens of thousands of Airbnb listings. By 2023, there were more than 25,000 active short-term rentals in New York City’s five boroughs. In response, NYC enacted Local Law 18 in September 2023, essentially a crackdown that banned most whole-apartment rentals for under 30 days.

Did this law fix NYC’s housing prices? After one year, the number of short stays in the city plummeted (thousands of illegal Airbnb listings vanished), but rents did not fall. As of late 2024, rent prices in New York remained near record highs and vacancy rates were extremely low – about as dire as before the ban. What the New York case shows is that simply removing short-term rentals doesn’t automatically translate into affordable housing – at least not quickly – especially if the overall housing shortage remains.

Other Urban Regulations

Other big cities have also put regulations in place: San Francisco requires hosts to register and limits out-of-town short rentals, Los Angeles disallows non-owner-occupied short rentals in many cases, Boston set strict rules and fees, and New Orleans tried a lottery system to cap the number of Airbnbs in each neighborhood.

These cities saw mixed results. San Francisco, for instance, saw a drop in Airbnb listings after enforcing registration (one estimate found listings fell by roughly 50-60% once strict rules and platform accountability were enacted). But similar to New York, housing prices in those cities remain very high – suggesting that short-term rental rules alone can’t cure decades-long affordability crises.

Neighborhood Impacts

In many urban neighborhoods, short-term rentals tend to cluster in already pricey, tourist-friendly areas. A city comptroller report in New York highlighted that about 20% of rent increases in some popular Manhattan neighborhoods could be attributed to the Airbnb boom. Meanwhile, other neighborhoods with few Airbnbs felt little effect. This means within a city, the impact of short-term rentals is very localized – intense in some pockets and negligible in others.

Small Towns and Vacation Areas: A Big Impact on a Small Market

Durango, Colorado
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In scenic small towns – ski resorts, beach communities, lake towns, and national park gateways – short-term rentals can have an outsized effect. These places often have limited housing stock to begin with and fewer new homes being built. When a significant number of houses are turned into vacation rentals, the locals may find themselves completely priced out.

Mountain and Lake Towns

Take the example of Durango, Colorado – a town of around 20,000 known for outdoor recreation. By the early 2010s, locals complained of an “Airbnb apocalypse” as more homes were rented to tourists, squeezing the housing supply. In 2014, Durango responded by banning short-term rentals in certain residential areas and capping them to 2% of housing citywide. As a result, Durango now reports that short-term rentals make up just 1.4% of its housing stock, and officials say “they just aren’t really an issue anymore.”

Beach Resorts

In places like the Jersey Shore, coastal Florida, or Hawaii, entire neighborhoods consist of vacation homes. Local workers (teachers, hospitality staff, etc.) often struggle to find year-round housing. In Hawaii, so many houses have been bought by out-of-towners and listed on Airbnb or as vacation homes that “few are left for Native Hawaiians,” as one report put it.

Regulations Show Results in Small Markets

Research confirms that the Airbnb effect tends to be strongest in small communities. In a small market, even a dozen houses switching to short-term rentals can noticeably tighten supply and boost prices.

Irvine, California, a suburban city in Southern California, went so far as to ban all short-term rentals under 30 days in 2018 and hired a private firm to catch violators. The result? The number of Airbnbs in Irvine was cut by more than half, and rents in the city actually dropped by around 2–3% (about $114 less per month on average) after the ban. This is one of the clearest pieces of evidence that removing short-term rentals can ease rent pressures locally.

In sum, in many resort towns and rural vacation spots, short-term rentals remain a major factor affecting housing prices and availability. These are the places where you’ll hear stories of workers living in cars or long commutes because so many homes in town are Airbnbs. The early evidence from these towns suggests that strict caps or bans on short-term rentals can help cool off home prices and rents at the local level.

Why Property Owners Choose Short-Term Rentals over Long-Term

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With all the concerns about affordability, one might wonder: Why do so many owners put their homes on Airbnb in the first place, instead of renting to a local or selling the property? There are several motivations driving this trend:

Higher Income Potential

The biggest reason is money. In popular areas, renting a home to vacationers can bring in significantly more income than a traditional year-long lease. For instance, a landlord might be able to charge a long-term tenant $2,000 a month, but by renting short-term, they could make that much in a week during peak season.

As travel rebounded after pandemic lockdowns, many landlords “shifted to short-term in pursuit of higher returns”. Even some institutional investors (large companies) started “scooping up masses of properties to rent out on Airbnb” once they saw the profits to be made.

Flexibility and Personal Use

Unlike a long-term lease, short-term renting allows owners to use the property themselves part of the year. Many hosts are actually renting out second homes or vacation homes that they also enjoy occasionally. By doing short-term rentals, they can block off time for personal use.

Avoiding Long-Term Tenant Hassles

Being a landlord can come with challenges – from dealing with late rent to making repairs to navigating eviction laws if a tenant doesn’t pay. Some owners prefer the “easier” nature of short-term rentals, where stays are brief and governed by hospitality rules rather than landlord-tenant law.

Rising Home Values (Investment Hold)

In many cases, owners use short-term renting as a way to cover costs while waiting for property values to appreciate further. Rather than sell the home now, they rent it to tourists to generate income, betting that the home will be worth even more in a few years.

The Rise of Professional Hosts

A large share of the short-term rental market is now run by investors with multiple listings. A data analysis found that about two-thirds of U.S. Airbnb rentals are in the hands of hosts who manage more than one property. In fact, roughly 23% of Airbnb hosts have two or more entire homes or apartments listed – and those multi-property hosts account for 63% of all entire-home listings.

Are We Seeing an “Airbnb Bust” or a New Balance?

Lately, there’s been talk of an “Airbnbust” – essentially, the idea that the short-term rental gold rush is over and many hosts are now struggling. As the pandemic travel surge leveled off, some popular markets became oversaturated with vacation rentals.

Signs of a Softening Market

Recent data shows a softening of demand in 2023 compared to the frenzy of the prior two years. AirDNA, a leading analytics firm, reported that average occupancy – the percentage of nights booked – dropped about 1.2% year-over-year by late 2022. This indicates that supply growth was outpacing demand, leaving more nights unbooked.

In specific examples: In Phoenix and Austin – two boomtowns for Airbnbs – a study found that short-term rental profits plunged by more than 40% from May 2022 to May 2023. Another report noted Airbnb’s revenue per room dropped 6.4% in the Orlando area and 17% in the Joshua Tree, CA area in 2023.

But Not a Uniform Decline

However, it’s not a uniform decline everywhere. While certain over-saturated markets are cooling, overall demand for short-term rentals in the U.S. is still growing – just at a more normal pace. AirDNA projects demand will actually increase by about 10.7% in 2024, on top of the 6.7% growth seen in 2023.

Impact on Housing Markets

If some short-term rentals stop being profitable, owners might decide to sell those homes or rent them out long-term instead, which could add supply back to the local housing market. In areas hit by an Airbnb glut, a number of leveraged “Airbnb entrepreneurs” could indeed put their houses up for sale, potentially easing home prices.

On the other hand, in places where tourism remains strong and regulations aren’t too strict, short-term rentals will likely continue to thrive and draw properties away from local use. The industry may be reaching a new equilibrium: growth is stabilizing, and both regulators and the market itself are pumping the brakes on runaway expansion.

Looking Ahead: Predictions for the Short-Term Rental Market

Experts predict a few things:

More Regulations

Cities and counties will keep experimenting with rules to control short-term rentals. We may see more places adopting systems like Bozeman’s permit requirement or capping the total number of vacation rentals. If communities prioritize housing for locals, they have models now (like Irvine or Durango) to significantly rein in STRs.

Market Correction Benefits Locals

If the “Airbnb bust” narrative continues in saturated areas, more owners will convert units to long-term rentals or sell them. Already in late 2023, some popular destinations had an increase in long-term rental listings as small hosts gave up on vacation renting.

Steady Tourist Demand

Travel isn’t going away. Domestic tourism in the U.S. remains robust, and many travelers prefer the space and amenities of a short-term rental over a hotel, especially for families or longer stays. Airbnb’s CEO noted that demand and bookings were still rising every month in 2022 despite some hosts’ struggles, and 2023 saw record revenue for the platform.

Finding a Balance

So, is the short-term rental market still affecting local housing prices in the U.S.? The evidence shows that it certainly is – but the degree of effect varies widely by location and is moderated by other factors. In a high-demand city or a small tourist town, converting homes to Airbnbs can still push rents and prices higher for locals.

However, across the country as a whole, short-term rentals are only one factor among many influencing an already unaffordable housing market. The major drivers of expensive housing – undersupply of new homes, restrictive zoning, population shifts, and economic growth – continue to play the dominant role in rising prices.

Communities are recognizing that to keep housing attainable, they need to strike a balance. Many are now attempting to reclaim some of the housing stock by curbing short-term rentals, or at least taxing and registering them to fund affordable housing programs.

In the coming years, we can expect a more regulated short-term rental landscape. The hope among policymakers is that this will prevent the most egregious impacts on housing prices while still allowing homeowners to earn extra income and local economies to benefit from tourism. It’s a delicate balance: welcoming visitors and investment, but not at the expense of turning neighborhoods solely into tourist zones.

For now, the short-term rental market remains a powerful force in many local housing markets, one that hasn’t gone away by any means. Its influence is still felt in rent prices, in the number of homes available for local families, and in the debates at city council meetings. But with better data and growing awareness, cities and towns are no longer caught off guard by this force. They are actively responding – and early results show that smart policies can indeed temper the Airbnb effect on housing costs.

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