While the rapid spread of short-term rentals is linked to the rise in property and rental prices and tourism services in some areas, the perception of most residents regarding the sustainability of their neighborhoods does not show a significant deterioration due to the rise in tourism.
This is the result of a recent case study published by the European Commission’s Joint Research Centre for Paris, Milan, and Rome, investigating the impact of short-term rentals on housing costs and the residents’ perception of sustainability in these cities.
Short-term rentals can enhance the tourism offer by diversifying accommodation options and revitalizing less touristy or neglected areas of cities. This benefits local businesses and helps attract new residents. In recent years, however, their spread has raised concerns about affordable housing and the wider impact on communities.
In particular, concerns are raised about the possible link between short-term rentals and phenomena such as:
- The increase in house prices and rents (increased by 47% and 18% between 2010 and 2022, respectively, according to Eurostat)
- The demand for housing exceeds the supply
- A possible decrease in long-term rentals, in favor of short-term ones
- The increasing influence of speculators, investors, and mass tourism on the real estate markets of urban centers
- The deterioration of the viability of neighborhoods and higher costs, leading residents to abandon neighborhoods with an increasingly greater tourist orientation.
How does it affect property prices in the three cities
In terms of housing prices, the spread of short-term rentals is associated with higher initial property sales prices in Milan, and to a lesser extent in Rome, as well as higher rents. That is, in areas where there is more Airbnb activity, owners ask for more money both for the sale and for the rental of properties. This suggests that property values ??are higher in areas with more Airbnb activity.
Regarding the correlation of the presence of Airbnb with transaction prices. While in Milan, short-term rentals are generally associated with higher transaction prices, the Rome market seems to be associated with greater volatility than the presence of Airbnb as the correlation between short-term rentals and transaction prices is less significant.
In Paris, on the other hand, the presence of short-term rentals does not seem to have a significant impact on housing prices. Of course, as in Milan, their presence seems to pose challenges and lead to market adjustments, as it is associated with higher prices for medium-sized homes and lower prices for smaller and larger homes.
Trend towards “oversupply” of tourist services in urban centers
In addition, the increase in short-term rentals is associated with a shift of neighborhoods towards more tourist services and a decrease in services serving residents, especially in the central areas of Milan and Paris. The trend is particularly noticeable in the central areas, where the majority of Airbnb accommodations are located.
Milan shows a similar distribution of services aimed at residents and tourists throughout the city. However, tourist services seem to be developing faster (period 2014-2023).
In Paris, tourist services have increased between 2018 and 2023, while services for residents have either remained stable or decreased slightly, especially in the “hypercenter” area.
Social cohesion is not affected
In terms of sustainability, more than half of the residents in Milan and Rome (survey of a sample of 200 residents in tourist areas of the cities, 2nd half of 2023) said that the area in which they live has become more touristic, which is also reflected in the service offer.
While the perception of short-term housing is generally negative, this does not seem to affect the overall sense of belonging and social cohesion. Respondents in Paris seem to be mostly neutral towards short-term rentals. Furthermore, short-term rentals in the three cities do not lead to a tendency to move to other neighborhoods.
