The Rise of the Home-Sharing Economy: The Impact of Airbnb on Real Estate Prices in Austin, Texas

Abstract

This study investigates the impact of Airbnb growth on rent and home sale prices in Austin, Texas from 2015-2023. Since its founding in 2008, Airbnb has emerged as a popular alternative to traditional accommodation offerings. However, its rise has concurrently raised concerns that short-term rental platforms like Airbnb exacerbate housing affordability crises by reducing long-term rental supply and increasing the purchase price of homes. Furthermore, the city of Austin has undergone rapid growth and demographic change in the past decade which has heightened concerns about housing affordability in the city. To assess the effects of Airbnb proliferation on Austin real estate prices, this study first combines Austin Airbnb, real estate, and demographic data. We then adopt two empirical strategies: i) a panel fixed-effects model to control for unobserved heterogeneity across zip codes over time, and ii) an instrumental variables model using proximity to tourist attractions and Google search trends as instruments to predict where Airbnb listings appear over time. The main results of this study imply that for the average Austin zip code, a 1% increase in Airbnb density leads to a 5.3% increase in rent prices and a 1.1% decrease in home sale prices, with the effect on home sale prices more pronounced in zip codes with high Airbnb activity.