The Lives of Others: Impact of Formal and Informal Monitoring of the Short-term Rental Market in Barcelona

Abstract

The explosive growth of the sharing economy platforms (like Airbnb, Uber, etc) has heated the debate around the positive and negative ex- ternalities of these platforms. The positive externalities include the decrease of transactions and information costs, the better coordina- tion of supply and demand and the flexibility for users among others. On the hand, the negative externalities include precarious working conditions, traffic jam congestions, etc. Specifically, for the case of short-term rental platforms, citizens of highly touristic cities are heav- ily complaining about the increase of the long-term rental prices, the decrease of their quality of living (due to noise for example) and the gentrification that changes the nature of their neighbourhoods. Cities like Amsterdam, Paris, Berlin, and Barcelona have taken measures in order to minimise the network externalities of the short-term rental platforms. These measures include restrictions on the total amount of days an apartment can be rented during a year in the short-term rental market, or banning totally the offering of whole apartments. In the case of Barcelona, a special license since 2012 is needed to offer a whole apartment on a short-term rental platform like Airbnb. In July 2015, the newly elected local government led by an ex-activist against evictions, imposed a moratorium on the licenses, prohibiting the is- suing of new licenses for all tourist accommodation establishments so as to study, and in addition control, the growth of the short-term rental market. The moratorium was in force until March 2017 when a new regulation was introduced. The 2015 moratorium on licenses was accompanied with an enforcement mechanism, that included specific fines for the ones that rented their apartments illegally, the creation of a team of inspectors that are monitoring the illegal tourist accommo- dation activities and the implementation of a webpage through which Barcelonas citizens and visitors could report an illegally rented apart- ment. In this study, we try to measure the impact and effectiveness of those two monitoring processes, the formal one and the informal (crowdsourced) one. By implementing a diff-in-diff analysis, we first find a general negative impact of the moratorium on the supply of apartments in the Airbnb platform. Additionally, we find that the formal monitoring process affected mostly the professional hosts while the informal monitoring affected mostly the amateur ones.

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