Housing versus home sharing: the causal impact of short-term rental regulation on residential rents

What is the relationship between short-term rental (STR) activity, STR regulations and residential rents? Using the staggered introduction of principal-residence restrictions in Canadian urban areas, we estimate the causal impact of STRs on rents in a time-varying difference-in-differences model. We find that principal-residence regulations that reduce STR activity cause rents to decline in subsequent years, demonstrating that STR activity increases rents. Additional analyses show that these effects propagate across neighbouring jurisdictions, consistent with adjustments in metropolitan housing markets rather than purely localised policy impacts. Further descriptive analysis decomposes this impact into separate supply, demand and rental price stickiness channels.