The Impact of Home Sharing on Housing Affordability : Evidence from Airbnb in Urban Cities in Europe

Housing affordability has been impacted by rising house prices in Europe and it is argued that home-sharing is making housing less affordable. The purpose of this thesis is to provide empirical evidence whether home sharing has a relationship on housing affordability by utilizing an extensive set of Airbnb listings data acquired from multiple European urban cities between the years of 2011and 2020. We conduct a panel data analysis using a fixed effects model to regress the relationship between the accumulated Airbnb supply and price-to-income ratio. The results display statistically insignificant results between the price-to-income ratio and the accumulated supply of Airbnb, implying that there is not enough statistical evidence to determine the relationship between short-term rental and European housing affordability. We unfold this relationship through analyzing transmission mechanisms such as supply reallocation, changes in demand and positive and negative externalities, and reassure the validity of our results through the use of comprehensive robustness tests. Additionally, we explore the agglomeration of the Airbnb listings by separating cities to further distinguish that the varying relationship depends on the size of the Airbnb market. We find that cities with high Airbnb supply have a positive relationship with the price-to-income ratio