Peer-To-Peer Rentals, Regulatory Policies, And Hosts’ Cost Pass-Throughs

ABSTRACT Peer-to-peer (P2P) rental markets have been shown to adversely impact the traditional hospitality industry and housing affordability, fueling the public demand for regulation. While localities around the globe have implemented policies to address these issues, little is known about how rental suppliers respond to those regulations. This study aims to empirically analyze the impact of such policy regulations on the prices charged by different types of rental suppliers. We employed a quasi-experimental research design based on an extensive dataset including more than 50,000 Airbnb listings to uncover the impact of a policy implemented in New Orleans, which introduced annual bring-to-market (BTM) costs through a mandatory licensing system while simultaneously banning listings from one city-center neighborhood. We find that, while non-commercial hosts completely pass their additional costs onto their consumers, irrespectively of demand and supply shifts, commercial hosts’ responses are more nuanced. Those with legalized listings located in the city center only partially pass on their costs to guests, while even decreasing their prices in the rest of the city. Our study contributes to the understanding of pricing in P2P rental markets and its effects. Further, it informs localities and supports policy analytics. With P2P renting remaining attractive in city parts where BTM costs can easily be passed through to consumers, this suggests that these regulatory policies fall short of reducing pressure on housing affordability in the city-center.