Airbnb Release of Latent Economic Value and Return to Equilibrium

We empirically consider Airbnb’s effect on a new variable in Short Term Rental (STR) research, second homes, employing a model pre-Airbnb diffusion (2009), and post-Airbnb diffusion (2019). In doing so we test our hypothesis that second home use will be converted to short-term rentals with the advent of Airbnb. We do so through a natural experiment examining housing stock. We create a schema to segregate tourist and non-tourist counties based on economic variables and deploy these in our research framework observing a shock to housing supply. Notably, we observe a structural change in the use of second homes resulting in the release of previously latent stock for economic gain. We also expand the level of analysis in short term rental studies by examining data outside of major metropolitan areas, focusing on the State of Colorado’s 64 counties. We employ linear regression models on a panel data set for the years 2014 through 2019 to examine the effects of Airbnb at this new level of analysis. We confirm an increase in rents and home values found in previous studies of large metropolitan areas but observe a diminishing effect over the years 2014 to 2019 in our sample. This potential return to equilibrium after the initial disruptive innovation of Airbnb a decade earlier warrants further observation to understand the antecedents which may include natural market saturation or improved regulatory stratagems