The effect of short-term rentals on house prices and residential mobility: evidence from Madrid

Abstract This paper studies the effects of Airbnb on residential mobility and housing prices in Madrid between 2010 and 2018. To identify causal effects, I exploit a neighborhood-year panel and a shift-share instrumental variable strategy based on spatial variation in tourist attractiveness and the rapid expansion of the platform. I find that an increase of 100 entire-home Airbnb listings in a neighborhood reduces annual residential inflows by approximately 50 individuals (2% of the mean), has no significant effect on outflows, and increases housing prices by 2%. A causal mediation analysis suggests that the effect of Airbnb on residential inflows operates primarily through its impact on housing prices. Consistent with this mechanism, the reduction in inflows is concentrated among individuals without a college degree. Overall, these findings imply that short-term rental platforms shape neighborhood dynamics not only through housing prices but also by affecting residential mobility patterns.