Home-rental platforms like Airbnb are often blamed for driving up housing costs, but new research from North Carolina State University’s Poole College of Management shows that enforcing tax collection on these rentals can help slow the rise in home prices. The study suggests that tax policy could play a role in controlling housing prices, especially in areas with many short-term rentals.
It’s well known that short-term rentals increase home prices because many hosts aren’t paying the taxes they owe. Unlike hotels, which are required to pay taxes on short-term stays, as many as 75% of Airbnb hosts may be avoiding these taxes. This makes short-term rentals more profitable and pushes up property prices, as more people buy homes specifically to rent them out on platforms like Airbnb. This increased demand makes housing more expensive for those looking to buy or rent long-term.
Reducing pressure
The researchers wanted to see if requiring platforms like Airbnb to collect taxes directly from hosts could help reduce this upward pressure on prices. They focused on Florida, a popular tourist destination with locally-imposed taxes, making it an ideal location for their study.
Between 2015 and 2019, 41 of Florida’s 67 counties entered into agreements with Airbnb to automatically collect taxes from hosts. The other counties left it up to the hosts to pay their own taxes. The study used data from all 67 counties to compare how housing costs—both property prices and rent—changed over time.
The results showed that while housing costs increased in every county, they rose 1.6% to 5.8% more in counties that did not have tax enforcement agreements with Airbnb. The impact was particularly noticeable with larger homes: prices for four-bedroom homes, for instance, rose more sharply than smaller properties.
In conclusion, the study found that enforcing tax collection from short-term rental platforms could help slow the rise in housing costs. This would not only ease pressure on renters and homebuyers but also ensure local governments receive the tax revenue they are owed, benefiting public services.
