Airbnb and VRBO: the impact of short-term tourist rentals on residential property pricing

The contemporary phenomenon of Airbnb, VRBO and peer-to-peer home sharing markets has generated considerable controversy regarding positive and negative community impacts. Our study examines the economic motives and costs of short-term rental properties. Using home sales data from the City of Isle of Palms, SC, we find short-term rental properties sell at a price premium relative to long-term rentals and owner-occupied properties providing confirmatory evidence for why residential property owners select into short-term residential property operation. We also find no pricing impact associated with proximity to short-term rental properties indicating homebuyers are not concerned with the perceived community nuisances. The positive economic return accruing to short-term rental properties suggests the short-term rental marketplace will continue to develop as a strategic competitor to traditional tourist lodging operators.